By Laura Gunderson
Gov. John Kitzhaber strode into a press conference last week after yet another controversy over his fiancee's work. He had a solution:
First lady Cylvia Hayes won't serve a policy role in his administration. But after four years, it might be too late.
Kitzhaber is already enacting policies Hayes was paid to promote. The state is rolling out a new economic measure Hayes championed, for example, both as a paid consultant and his unpaid adviser.
What's more, an investigation by The Oregonian/OregonLive shows, the governor enabled Hayes to advance her paid work by allowing her access to his senior aides, his ceremonial office and state agency officials.
Kitzhaber said Friday that his office tried to draw a line between Hayes' roles as his policy adviser on clean energy and economic development, and as a paid consultant on those issues. But public records show Hayes regularly blurred that line -- sometimes with Kitzhaber at her side.
The upshot? Kitzhaber and Hayes are engulfed in a growing political storm that has severely damaged the governor's reputation and possibly his ability to lead right as the legislative session gets under way. And Oregon taxpayers could be on the hook for the first couple's shared agenda to the tune of hundreds of thousands of dollars.
"We have taken steps to draw a clear separation," Kitzhaber said at Friday's press conference, going on to refer to an ongoing review by the Oregon Government Ethics Commission.
"That was our intent. The Ethics Commission will make a determination of whether or not we were successful."
The commission is expected to vote March 13 whether to launch an investigation. The governor and first lady have hired personal civil attorneys for the ethics proceedings. The state attorney general's office is considering its own inquiry.
The Oregonian editorial board on Wednesday called for the governor to step down. Asked at last week's press conference whether he would consider resigning, Kitzhaber scoffed at the idea and said no.
Kitzhaber and Hayes declined interview requests for this story. The governor and Hayes also have yet to release dozens of ethics-related documents sought by The Oregonian/OregonLive since the controversy over Hayes' work erupted in October.
Allegations that Hayes used her public roles to benefit her Bend business, 3E Strategies, exploded in the weeks before Kitzhaber was elected to a historic fourth term. Side scandals on Hayes' 1997 green-card marriage and plans for a pot farm -- too far in the past for any legal consequences -- flared but subsided.
Hayes has mostly avoided public appearances since then, as more unflattering news rolled out.
Records obtained by The Oregonian/OregonLive in December, for example, showed Hayes had state workers care for her pets and arrange travel for her consulting work. Last week, questions boiled up again after Hayes disclosed that she had accepted $118,000 from a clean-energy group while also advising the governor on the topic.
That disclosure is what prompted Kitzhaber to announce she'd have no further policy role. But Kitzhaber has already launched several initiatives related to Hayes' work.
--The governor last year directed aides, agency heads and a newly hired expert to integrate a new tool to measure Oregon's economy -- the Genuine Progress Indicator, or GPI -- into state policy. The year before, Hayes accepted $25,000 from Demos, a New York advocacy group, to promote the measure. The GPI is set to take effect this year.
--Legislation on low-carbon fuel standards was among the first to be heard by lawmakers as the Legislature convened this week. Hayes promoted the standards along with other clean-energy issues during a two-year fellowship -- the one that paid her $118,000 -- as well as under a separate $40,000 contract with a different interest group.
--Kitzhaber's 2015-17 budget includes $200,000 for the Pacific Coast Collaborative, a partnership on climate issues among Oregon, Washington, California and British Columbia. Hayes accepted $60,000 from two nonprofits in 2013 to promote the group's work. Last year, Kitzhaber referred to the collaborative as a perfect place for him to further push the GPI.
Genuine progress indicator
The Genuine Progress Indicator offers the clearest example of how Hayes pushed a policy, with Kitzhaber's participation, from both her public and private roles.
The GPI, like Bhutan's famed "Gross National Happiness" index, rests on the notion that governments should measure citizens' well-being and environmental impacts, not just how many widgets they churn out.
Kitzhaber and Hayes' interest was stoked in April 2012, when GPI evangelist Robert Costanza invited them to attend classes he was teaching at Portland State University.
Also attending via conference call: Lew Daly, policy director at Demos, a New York-based advocacy group pushing for the measure nationwide. Soon, Hayes was attending GPI gatherings with Daly, including a global conference in Brazil, and holding meetings on the topic with senior state officials.
Hayes, as Kitzhaber's unpaid adviser on clean energy and economic development, jetted to Maryland that September to serve on a panel at Demos' first "GPI in the States" conference. A news release -- reflecting confusion about which hat she was wearing -- trumpeted the presence of "influential decision makers ... including Oregon's first lady Cylvia Hayes."
Hayes followed up with a lunch meeting on the measure in the governor's conference room with Kitzhaber's chief of staff and a key adviser helping craft a 10-year budget plan.
That 2012 meeting was one of a half-dozen Hayes held on the GPI with senior Kitzhaber aides and agency leaders in state-owned venues such as Mahonia Hall and the governor's ceremonial office at the Capitol. Two were during the months she was under contract with Demos, from June to November 2013.
The governor joined in at times. In February 2013, Daly gave a GPI presentation at Portland's World Trade Center to Kitzhaber, Hayes and senior state officials including state economist Mark McMullen and then-Chief Education Officer Rudy Crew.
Daly also wasn't shy about asking Hayes for inside information on Kitzhaber. He emailed Hayes a month later as he prepared for a GPI meeting with Massachusetts Gov. Deval Patrick's "metrics guy."
"Any good connections with gov K and gov P?" Daly asked.
Then came the first couple's infamous trip to Bhutan for a global GPI gathering. Kitzhaber drew scorn from Republicans who wondered whether the governor was pursuing serious policy or generating fodder for a "Portlandia" script.
The April 2013 meeting was the second in a series -- after Brazil -- organized by a coalition of organizations and governments pushing for worldwide use of the measure. Germany, a coalition leader, paid for Kitzhaber and Hayes' travel and lodging.
A picture from the gathering shows Kitzhaber, pen in hand, standing at an easel with scribbled graphs and bent pipe-cleaner models. The governor was leading a subcommittee he helped form focused on incorporating the GPI into business, according to meeting notes.
A few weeks later, on May 10, Hayes filed her first invoice with Demos for work promoting the GPI. (It's not clear why she filed an invoice before the contract's June 1 start date.)
The five-month, $25,000 contract called for Hayes to lobby for the GPI by playing "an active and strategic liaison role" among Demos, other stakeholders, business leaders and Oregon government representatives. She also agreed to "cultivate potential donors to support Demos' contributions in Oregon."
A later version -- after Kitzhaber's staff attorney, Liani Reeves, called Hayes to discuss the work -- dropped "Oregon" and changed the scope to nationwide. Daly did not return recent messages seeking comment, but he told The Oregonian late last year that he and Hayes tweaked the contract after recognizing that it could appear to present a conflict of interest. Still, the later contract dated July 16, 2013, didn't specifically exclude work in Oregon.
Kitzhaber didn't report Hayes' income from Demos on his own state disclosure forms, despite listing Hayes as a member of his household. Public officials are required to declare income and actual or potential conflicts of interest for themselves and household members.
At Friday's news conference, Kitzhaber said he had Hayes submit the contract to his office because he recognized a potential conflict. He didn't report the income, he said, because Demos had no legislative or administrative interest in his office. He also said it's not clear whether his fiancee is a member of his household.
Kitzhaber supported Demos, too -- and to be sure, Demos benefited. Demos' ability to attract donations and grants grows as more states adopt the GPI. Until Oregon joined, only Vermont and Maryland had GPI programs in the U.S. Adding a third state, and on the West Coast, is a big plum. Kitzhaber acknowledged that -- and his own role -- in a lengthy Q&A with him and Hayes posted on Demos' website. They take turns in the post, "Implementing GPI in Vermont, Maryland and Oregon, " addressing how to attract bipartisan support and ultimately sell the idea to the federal government.
"We have a working relationship between Oregon, Washington, California and British Columbia," Kitzhaber says in the post, referring to the Pacific Coast Collaborative. "If we can work with Washington, which is interested in this [the GPI], and bring California on board, we can get a critical mass."
The post was published in January 2014, weeks after Hayes' contract with Demos ended in November 2013.
Kitzhaber launches GPI
Kitzhazber is quick to defend his interest in the GPI, saying he's been interested in an alternative to the Gross State Product since he heard Robert Kennedy speak in the late 1960s.
Using a measure to gauge a policy's impact and guide budget decisions is nothing new. Oregon officials have done it for years. Leaders in other states are also interested in more nuanced ways to reflect residents' welfare.
But Kitzhaber chose the GPI from a menu of alternative measures. It's the one measure Hayes was paid to promote. It's the measure that helped her become a fixture at speaking engagements nationwide.
Kitzhaber brushed off most questions about the GPI at Friday's press event, saying it's an issue for the Ethics Commission or simply a case of him and Hayes sharing an interest.
"The fact that we have a convergence of interest does not seem to me to imply that if those issues show up in my administration that influence is necessarily the reason," he said. "I don't buy the basic premise." That may not have been clear to state employees.
David Allaway, a program analyst for the Department of Environmental Quality, recounted a May 2013 phone call from Hayes in an email to his boss, DEQ Director Dick Pedersen.
"Although it was officially in her capacity as a private contractor (3E Strategies), and not as the First Lady, the fact is she is the First Lady and some of this may get back to the Governor," Allaway wrote the day of the call. "She also mentioned a few relevant initiatives that the Governor's Office will be supporting or leading."
Allaway, who was already considering the GPI, told his boss the measure had weaknesses but that Hayes said she hoped Oregon would adopt it to guide policy and budget decisions.
That's exactly what happened.
In early 2014, weeks after Hayes' work for Demos ended, Kitzhaber scheduled a meeting on weaving the GPI into his budget and policy strategies. He invited Hayes; his new chief of staff, Mike Bonetto; and Michael Jordan, director of the Department of Administrative Services. "As we were putting the pieces together, the governor mentioned to me that Sean McGuire was available," Jordan said in a recent interview, referring to the official who created Maryland's GPI and who joined Hayes at GPI events Demos helped organize. Kitzhaber added that McGuire had recently moved to Oregon.
Jordan said Kitzhaber didn't insist on hiring McGuire, but Jordan went ahead and brought him on as a temporary, full-time official without seeking other candidates.
"He had a specialized skill set, and he was available in our own backyard," Jordan said. Now, state economists and others in Jordan's office have assisted McGuire with his work on the GPI.
McGuire's yearlong contract runs through June, Jordan said, and records show he'll earn about $65,000. Jordan said it's yet to be decided whether the state or an outside group will manage the measure in the years ahead. That, combined with money paid to those working on the low-carbon fuel standard and money for the Pacific Coast Collaborative, could mean Hayes' work is tied to costs that could easily total hundreds of thousands of dollars for taxpayers.
The governor's office has said it expects to unveil Oregon's GPI later this year on a web page state workers are creating.
Meanwhile, Hayes is still pursuing her interest in the GPI, as well. She wasn't at Friday's news conference, Kitzhaber said, because she was in Sweden on her own dime visiting friends.
Her next stop: Berlin, for the next GPI conference in the series that included Bhutan and Brazil.
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