Frankfort, KY - A blistering audit of executive expenses charged to Lexington Blue Grass Airport shows more than a half million dollars of questionable expenditures over the last three years by the airport's top management.
"There was a high level of trust placed in the executive director by the board. He clearly abused that trust," State Auditor of Public Accounts Crit Luallen said in a press conference about former Blue Grass Airport Executive Director Michael Gobb. "Because of that high level of trust there was not enough questioning on the part of the board."
Luallen said that almost two thirds of $766,076.49 in expenditures examined from Jan. 1, 2006 through Dec. 31 of last year proved to have inadequate documentation, questionable business purpose or no supporting documentation at all.
While she has forwarded the findings of her report to the Kentucky Attorney General's Office, the FBI and the US Attorney in Kentucky's Eastern District, Luallen said the information sent to law enforcement was limited to Gobb and his upper staff. "There was no indication that board members were involved in excessive spending or in purposely misspending of airport fundsÖ they did not employ effective oversight of all the activities of the airport that would have allowed them to detect these problems earlier," she said.
The level of involvement by upper staff and efforts to keep the amount of reporting to the board low, according to Luallen, would have made it difficult for the board to detect these misgivings under the auspices of their structure.
"I don't think we have ever seen an audit where so many different individuals were involved in the management of a public agency abused the trust with such arrogance and a lack of ethical standards. This was a situation where it wasn't just one individual, the executive director created a culture of wasteful spending that made it seem acceptable for the other staff to engage in that type of spending. They collaborated on that, there was complicity among the top staff to cover up much of the information that the board should have seen and known about.
"Once you have that kind of situation where you have more than one person who is willing to take advantage of the trust that is in place then it is very difficult for the existing policies to be affective," she said.
Many of the 22 findings in Luallen's report involve the level of oversight, or lack-there-of, by the board. But she was quick assure members of the airport board and other public boards that they are not to be hesitant to serve in such capacities. "I don't want this whole controversy to have a chilling effect on people who either serve on public boards today or who may be asked to serve on public boards in the future. Rather I hope that people will see this as a case study that can help boards understand what their roles should be and understand where their weaknesses might be," she said.
Boards rely on their staffs to bring fourth such problems, which did not occur in this case because the alleged malfeasance was so widespread, according to Luallen. "In this case, for example, the CFO could have and should have brought concerns forward to the board, but he in fact was cooperating with the executive director and was the beneficiary in many cases of the excessive spending and also of the personal benefits that were rewarded," she said.
The case of the Lexington Blue Grass Airport should be used as an example for other boards and Luallen encouraged anyone participating on a board to study the audit. "This report because of its completeness in dealing with every possible aspect of what went wrong and what can we do to keep it from happening again, ought to be a good text book for any public board to look at and learn from," she said.