The leader of a children's group home tried to leverage his ties to Gov. Katie Hobbs, telling one state child welfare official he would recommend Hobbs keep the official in his job — if the official approved higher pay for the contractor — newly released investigative documents say.
The Department of Child Safety director at the time, Mike Faust, rejected that offer, the records say.
The exchange was revealed in a letter that Arizona House Speaker Steve Montenegro sent to Attorney General Kris Mayes on Aug. 27. The letter took issue with Mayes' investigation that cleared the group home contractor, Sunshine Residential Homes, and Hobbs of wrongdoing. The letter also reveals some details of an investigation by the Arizona House of Representatives,
which has issued subpoenas as part of its inquiry.
But Mayes said in her response to Montenegro that while Faust told her investigators about the conversation, the head of Sunshine Residential denied making any such statement to Faust. Sunshine Residential CEO Simon Kottoor instead contended Faust was trying to keep his job in Hobbs' administration and made promises of his own.
The situation boiled down to a "he said, he said" dispute that would not be admissible in court, Mayes wrote.
The conflicting accounts of an explosive allegation illustrate the friction between multiple investigations of the same situation, and are the result of officials selectively releasing information from those probes. What is publicly available amounts to just a snapshot of the records that could confirm details of the encounter.
Mayes said on Aug. 21 after a more than two-year investigation that her office found no evidence of a quid pro quo, an agreement to trade favors, that would justify filing charges in the matter that has dogged Hobbs' administration and raised questions about who is influencing the Democratic governor's administration.
The investigation began after The Arizona Republic reported that Sunshine Residential received a special rate increase worth about $4 million a year from the Department of Child Safety in 2023 as its CEO was touting his connection to Hobbs. The company also contributed over $550,000 to support Hobbs and her party. The company had no history of funding political campaigns in the previous decade.
Arizona House Republicans began their own investigation of those connections in February, hiring a Trump-connected law firm. That investigation is ongoing, and House GOP spokesman Andrew Wilder declined to say more about when it might be completed. Wilder confirmed subpoenas had been issued.
Mayes' investigation has been under a microscope among figures on the right. Mayes and Hobbs are both Democrats, and both are facing GOP opponents in November who have sought to use the investigation against them.
Mayes and Montenegro spar over the case
The letter from Montenegro, a Goodyear Republican, says a seven-page memo released by Mayes' office summarizing her investigation suggested the Attorney General's Office "failed to pursue critical issues and reached conclusions that directly conflict with reliable evidence."
"Her memo said her office did not find ‘any evidence’ of potential bribery," Montenegro said in an Aug. 28 statement. "We now know that statement was not true. .... Her office knew about the allegation, investigated it, and chose not to include it in the memo she released to the public."
"The remaining question is whether those omissions were deliberate and whether her investigation was designed to give Governor Hobbs political cover before an election," Montenegro said.
Montenegro's letter does not include any mention of an interview with Kottoor. Sunshine Residential spokesperson Tommy McKone said the House did not request an interview with Kottoor.
Mayes' spokesperson, Richie Taylor, accused Montenegro of "cherry-picking evidence to push a partisan political narrative."
"He ignores the totality of the facts in this case, selectively omitting evidence that contradicts his assertions," Taylor said. "Whether that's deliberate, or simply a byproduct of an unserious 'investigation' being run by a partisan out-of-state law firm, is unclear."
The exchange with Faust
Montenegro's letter to Mayes sought her answers to several questions, contrasting what the attorney general concluded with what the House's investigators have found so far.
The letter says Kottoor offered something of value to Faust to influence his decision on the rate increase request. Faust led DCS from 2019 to early 2023, when he was replaced by Hobbs. He is now the city manager in Peoria.
Faust told the House's investigators that in the fall of 2022, as Hobbs' transition team was interviewing people to lead DCS, Kottoor said he would recommend Hobbs retain Faust if Faust approved the rate increase for Sunshine Residential. The letter says Faust "immediately" reported the incident to then-Deputy Director Robert Navarro, and high-ranking DCS official Alex Ong confirmed Navarro relayed the conversation to him. Publicly released records aren't clear on exactly when Faust told others of that conversation.
In an interview with The Republic, Faust confirmed that Kottoor made the offer, which Faust described as shocking. Did he take Kottoor's offer as a quid pro quo?
"How else would you take that?" Faust said, describing the situation as "he said you do something for me, and I'll do something for you."
"He said, 'Listen, she's coming to my office today for an event that we're hosting, and I'll put in a good word for her to keep you if you give me a rate increase,'" Faust said. "And I said, 'Excuse me? Are you asking what I think you're asking?' ... I said, 'Listen, you do what you think is right, I'm not changing my stance on a rate increase.'"
Faust and high-ranking DCS officials had repeatedly denied rate increase requests from Sunshine Residential and other group home providers, who were stretched thin by COVID-19-inflated costs. The denials were in keeping with the child welfare agency's goal of reducing the use of group homes.
Faust said Kottoor was a tough businessman who genuinely believed in and worked hard to help Arizona children.
"I have countless examples where I've seen him do the right thing," Faust said. "So that's why it shocked me when this happened."
Faust provided the same account to Mayes' investigators, Mayes' letter confirms. But Kottoor told a different story in an interview with Mayes' team, and has not been interviewed by the House investigators.
Mayes' letter says Montenegro appeared to "uncritically accept" Faust's version of events, while Montenegro contends she accepted Kottoor's version as true.
"Rather, Kottoor said that Faust had called him and said that 'he would like to stay as the director to continue in the DCS' and that Faust was 'recommending a congregate care rate increase,'" Mayes' Aug. 27 letter reads. Faust did interview to stay on in the Hobbs administration, but did not get the job.
McKone, the spokesperson for Sunshine Residential, said Kottoor stood by what he told investigators and that Faust said he would support the rate increase. That appears to be based on a December 2022 email, a copy of which was provided by McKone, in which Faust told Kottoor he could not provide increases without support from the incoming gubernatorial administration. Faust wrote that he would "commit to address provider cost concerns" with the new administration.
McKone said Kottoor "never recommended or advocated" that Faust stay on at DCS.
"Mr. Faust's allegation is far-fetched, politically motivated, and simply untrue," McKone said.
There were no witnesses to the conversation, only after-the-fact discussions that would be "hearsay and not corroborating evidence," Mayes' letter said. Mayes also said Faust's claim "suffered from credibility issues."
"Faust’s failure to immediately report what he believed was an explicit quid pro quo because he was trying to keep his job severely undermines his credibility," her letter said. "In other words, if true, he covered up what he believed could be a potential crime because he wanted to remain employed."
Her investigation concluded Faust and Kottoor both wanted something — Faust to keep his job, Kottoor to get a rate increase — and neither reported "what could have been a bribe, and both equivocated on its importance," her letter said.
Faust told The Republic that though he wanted to stay at DCS, he knew he would be fired — as is typical for agency directors when a new gubernatorial administration takes over.
"I have nothing to gain from this situation, so why would I fabricate this story?" he asked.
When will more details be made public?
Mayes has faced calls to release more records related to her investigation. Senate President Warren Petersen has said she should release "video interviews and transcripts" from her investigation, which he alleged was done to "protect her political ally." Petersen is Mayes' GOP opponent for attorney general.
The Republic has requested those documents as allowed by Arizona Public Records Law. Mayes' spokesperson said the office would make the records available after a legal review. That review would include any allowed redactions and consideration that some records, such as joint interviews, are part of an investigation that is ongoing by the Arizona Auditor General's Office and Maricopa County Attorney's Office, he said.
Montenegro said the House intends "to release records as soon as we are able, without compromising the integrity of the investigation."
Mayes defended the investigation that was led by her criminal division prosecutors when asked about the criticism on Aug. 26.
"When you go back and you look at all the investigations that we have done in this office, it probably ranks right up there in the top three in terms of the intensiveness, and the man and woman hours that we applied to it," she said.
Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669.
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This article originally appeared on Arizona Republic: Ex-DCS director says contractor used Hobbs ties in pay push | Exclusive
