More bipartisan Frankfort "hanky panky"

When the Securities and Exchange investigation of Kentucky's pension plan pay-to-play scandal finally blows up in a few short years, state Rep. Mike Cherry's comment about the legislative coverup will look particularly silly.


Rather than ban the practice of "placement agent" middlemen wasting millions of public dollars in the moribund Kentucky Retirement Systems, the legislature just made them permanent fixtures in Frankfort's political swamp. 


Cherry, the House State Government Committee Chairman, spoke to the Frankfort State Journal about his bill, HB 300, which didn't ban the wasteful practice. Instead the bill requires them to register with the toothless Executive Branch Ethics Commission.


“Having them register as lobbyists precludes any hanky panky regarding contributions and the like,” Cherry said.


This is a completely absurd thing to say because registering them in this way doesn't even require them to report their placement agent income, much less preclude in any way the vast amounts of contribution hanky panky that now gets to continue with state sanction.


Former KRS Board of Trustees member Chris Tobe says the state pension system will require $600 million annual payments starting in about three years. Enabling this waste and corruption will loom much larger when that happens.


The problem is that our representatives in Frankfort should be taking steps to correct this mess. Covering it up will just make it harder to fix later.

Governing by Google Alert

The federal whistleblower in Kentucky's ongoing pension investment placement agent scandal learned earlier today from an email Google Alert that Governor Steve Beshear prefers covering up the issue rather than dealing with it.

Chris Tobe, the whistleblower, had to read on the internet today that he has been replaced on the Board of Trustees of the Kentucky Retirement Systems.

Several other members of the Board have been subpoenaed recently to testify to the Securities and Exchange Commission in their ongoing investigation of the placement agent scandal.

Tobe says the state pension system will run out of money in about three years, necessitating annual payments of $600 million dollars to be made from other revenue sources.

The legislature failed to draw any attention to this situation by allowing scandal-enabling legislation (HB 300) to fly past them last week. The deafening media silence on this issue would not be happening if a Republican were Governor. This fact makes it all the more troubling that no Frankfort Republican could be bothered to speak out on this at all.

Kentucky goes whole hog for ObamaCare

Whether the U.S. Supreme Court strikes down some or all of the federal health insurance law known as ObamaCare may not make much difference in Kentucky thanks to language slipped into the budget bill by Governor Steve Beshear and approved by majorities of the House and Senate.

The last fifteen pages of the just-passed Kentucky budget bill (HB 265) creates a small business health insurance subsidy program, adds new ObamaCare style regulations and empowers Kentucky bureaucrats to seek and accept federal money and implement new regulations without limit. With all that, who needs ObamaCare?

The worst part of the new language goes far beyond Kentucky's 1994 flirtation with HillaryCare which destroyed our individual health insurance market and fit perfectly with Governor Steve Beshear's desire to implement ObamaCare in Kentucky without legislative approval. The two most horrible aspects of this health care power grab is that it, first, actually got legislative approval and, second, that it could create havoc in both individual and group health insurance markets in Kentucky even if ObamaCare is repealed.

Section 7(2) in the ICARE enabling language reads as follows:

(2)           The provisions of this section shall not give rise to, nor be construed as giving rise to, enforceable legal rights for any party or an enforceable entitlement to benefits other than to the extent that such rights or entitlements exist pursuant to the administrative regulations of the executive director of insurance.

 That means the executive director of Kentucky's Department of Insurance just became your health care czar. If your legislator voted for this mess, you should ask him or her to explain why. Some of us tried to warn you (here and here and here).

Shut up and eat your talking points

The Lexington Herald Leader's news article called it a "compromise budget" but couldn't find anyone to quote who recognized that Kentucky's final budget agreement still spends more than we have.

The Louisville Courier Journal's news article quoted Rep. Stan Lee saying the budget spent too much money, which was good, but also called the budget "lean," which is at best inaccurate.

The Associated Press news article called the budget "lean," "bare-bones," and said it includes "sharp cuts," which it does not and also couldn't find anyone who noticed that spending exceeds revenue way too much for any unbiased observer to use any of these terms.

Meanwhile, we are two days past final agreement on the budget and one day past final passage by both chambers of the legislature and the bill is still not available online.

Some "transparency." And what a disgraceful display of media bias at the conclusion of a three-month long disgraceful display of legislative arrogance and ineptitude. It would have been better to just skip the whole charade and have Governor Steve Beshear, Senate President David Williams and House Speaker Greg Stumbo issue a joint statement urging Kentuckians to shut up and eat their talking points.

Hold your wallet and your Constitution

As the clock runs out on Kentucky's legislative session, a brief encounter among budget negotiators Monday evening sheds light on the need for constant vigilance in protecting citizens from out of control politicians.

At 44:50 of this video, repeated Americans for Tax Reform pledge violator Rep. Bob Damron claimed that an unconstitutional spending provision he wanted in the budget wouldn't be a problem if no one actually fought it in court.

"It only is a problem if somebody challenges it," Damron claimed.

This is not only false, but dangerous and clearly emblematic of the mess our nation is in. The language Damron tried to get in the budget would let legislators create additional spending without going through the legal appropriations process.

In an era of huge public debt, structurally imbalanced budgets and enormous unfunded mandates allowing politicians like Damron to so casually dismiss the Constitution is something we can no longer afford to do.

Webb-Edgington strains at gnat, swallows camel

Kentucky 4th congressional candidate Alecia Webb-Edgington went on CN2 last week claiming that she had to vote against the House version of the state budget because of "fluff" in the bill. Asked to define the fluff, she explained that she couldn't vote for a budget that included a $14,500 appropriation for a curtain divider at a state park.

The amount of waste in both the House and Senate bills goes so far beyond $14k that it is incredible this example was all she could come up with.

I couldn't find the curtain divider in the Senate budget, but the last fifteen pages of both versions of HB 265, the executive branch budget, contain a framework for implementing ObamaCare in Kentucky through the Department of Insurance. That's a whole lot more than fourteen thousand dollars and much less useful than a curtain divider.

Also, both bills spend hundreds of millions of dollars we don't have and both do next to nothing to address the oncoming public employee pension system bankruptcy. Rep. Webb-Edgington should have to explain in greater detail how her incomplete lurch to the right on budget bills qualifies her to run for Congress.

Whether she votes for the final budget bill or not, Webb-Edgington missed a great chance to be a voice for fiscal reason before it is too late.

Kentucky Rep. John Tilley on drugs

CN2's Ryan Alessi asked Rep. John Tilley if this year's legislative session would be a success if the General Assembly passed several bills "cracking down" on drug abuse in Kentucky. Tilley said yes.

"I think so because considering the drug abuse problem, this scourge in Kentucky is the biggest problem we have period," Tilley said.

As someone who doesn't even like to take aspirin, much less anything hallucinogenic, I'm almost tempted to ask   for a hit of whatever Tilley is smoking. If the legislature does manage to pass a budget, it is certain they will do so without addressing the state's growing health care, debt and pension problems.

In fact, they seem poised to make them all worse.

The legislature has no apparent concern that Kentucky Retirement Systems should run out of money in three to five years or that bad health care regulation policy on both the state and federal levels or mismanagement in our public education system combine to cause problems that totally dwarf the public effect of a few people's substance abuse issues.

And again, if you want to start really addressing irresponsible drug use in Kentucky, then drug test welfare recipients.

Banner day for corruption in Frankfort

House and Senate leaders have worked out an agreement to keep surgical costs artificially high in Kentucky and to hinder recovery efforts of at least tens of millions of taxpayer dollars in the KRS placement agent scandal.

And you are very unlikely to read a word of it in the mainstream media.

Both HB 300 and HB 458 sailed through the Senate today. Both bills must go back to the House, but they will get quick approval there. The biggest problem with these bills is House and Senate leaders knew exactly what was in the bills and apparently none of the rank and file members bothered to understand or, perhaps, even read them.

HB 300 makes "placement agent" middlemen permanent fixtures in our already scandal-plagued pension system. The middlemen siphon off millons of dollars at a time from investment funds our elected officials should be protecting. Specifically, we should ban placement agents from our financial transactions, but instead we are writing them into the law as lobbyists who don't even have to report how much they are looting from us.

HB 458 keeps alive the seriously outdated and failed central planning of medical services scheme called "Certificate of Need." Governor Beshear is using the state's Certificate of Need program to implement ObamaCare. Senate President David Williams and House Speaker Greg Stumbo, by passing this bill, just made it easier for him to do that.

By keeping competition out of the health care industry, Williams and Stumbo are directly increasing your healthcare costs. But you don't have to thank them; the Kentucky Hospital Association already has.

How powerful is the industrial hemp issue?

There is no question that cultivation of industrial hemp has pockets of strong support in Kentucky, but the Republican primary for Kentucky's 17th state Senate district could show just how potent it has become.

Rick Hostetler, challenging Republican Senator Damon Thayer launched a new page on his web site chastising Thayer for a 2011 KET broadcast in which Thayer seemed to suggest that allowing farmers to grow hemp might lead to people taking hard drugs. See the page by clicking here.

Industrial hemp entered Kentucky Republican politics in the fall of 2010 when then-gubernatorial candidate Phil Moffett announced his support for hemp cultivation. He came in second in a three-way race in which both his opponents made anti-hemp statements similar to Thayer's.

Agriculture Commissioner Jamie Comer followed Moffett's pro-hemp statements in his successful 2011 campaign. Before long, nearly all of his opponents followed suit, including his Democratic general election opponent who publicly flip-flopped to a pro-hemp position.

By all indications, Senator Thayer has a very significant fundraising advantage over Hostetler. Industrial hemp advocates may or may not want to latch onto this race to gauge support for this free market issue, but it would be great to see it become a part of the discussion in 2012 and this looks like our only chance.  

Kentucky budget negotiators need Jed Clampett

On the old Beverly Hillbillies television program, when Jed Clampett's nephew Jethro would say or do something particularly stupid, an exasperated Jed would say "One of these days I gotta have a long talk with that boy." Too bad Jed isn't around to talk sense into Kentucky House Budget Chairman Rick Rand.

Kentucky's original budget document written by Gov. Beshear included nearly a billion dollars in new debt spelled out in the bill. The House reduced that debt by about a half and the Senate cut the amount of new debt by half again.

As Rep. Rand was explaining that he didn't want to agree to the Senate's changes, Rep. Stan Lee (R-Lexington) rose to ask a question on the bill.

"According to the newspaper, the Senate cut spending and cut the debt in its bill," Rep. Lee said. "If it's in the paper you know you can believe it. Is what the newspaper reported today correct about the Senate cutting spending and cutting the debt?"

Rand didn't take the bait, but he didn't answer the question accurately, either.

"We cut the debt by half when that bill passed the House," Rep. Rand said.

The answer he was looking for was "No."

We need to reduce spending and reduce Kentucky's debt, but overwhelming majorities in the House and Senate still count on most people not understanding the difference between a real cut and a cut in projected or requested growth. Besides that, the Senate did nothing to address the pension mess or the Governor's wish to implement ObamaCare administratively which the budget bill would allow him to do.

Rand Paul, Mitch McConnell need to see this

Kentucky Employees Retirement Systems is currently funded at 28%, less than any state fund in the country, KRS Trustee Chris Tobe said.

"Underfunding each year is like a hurricane devastating the pension," Tobe said. He predicts that within three to five years the pension system will require $600 million a year from the legislature just to make annual payments.

The lack of understanding in the legislature on this issue is made clear by the way House Bill 300 is flying through on its way to becoming law.

The problem is that both parties in both chambers of the legislature and much of the executive branch are caught up in a desire to keep this quiet. And the media blackout is at least somewhat understandable; if this were a Republican-only scandal there would already be a thousand news stories and editorials calling for blood.

As it is, there is zero chance of an Attorney General investigation. We need federal intervention quickly. The Securities and Exchange Commission is already looking into the placement agent problem just as the legislature is covering tracks with House Bill 300.

Tobe said requiring placement agents to register as executive branch lobbyists will actually make the problems worse.

He calls placement agents "looters" and says HB 300 "encourages looting with unlimited and undisclosed looting allowed as long as you sign in as a looter."


Senators Paul and McConnell have the biggest megaphones in the state. They should do us all a favor and use them to put a stop to this. 

Showdown coming on Certificate of Need?

House Bill 458 represents an attempt by the legislature to overturn a Kentucky court ruling in favor of freedom and competition in health care.

The bill sailed through the House in a form that would have shut down the same medical practices who fought successfully in court for their continued existence and to ensure the prohibition of any future such providers of surgical services outside of (much more expensive) hospitals.

The Senate has now amended the bill to grandfather in those existing practices but to prohibit any new providers from lowering consumer prices and improving quality of service through competitive forces.

So now the question becomes: which chamber of the General Assembly believes in the ridiculous certificate of need process more, the House or the Senate?

In other words, if innovation in health care delivery is so dangerous we have to force doctors to do outpatient surgeries in hospitals rather than provide a less expensive alternative then why are exempting anyone from certificate of need? And if those exemptions don't actually put consumers at risk, then why don't we drop this overly burdensome regulation for all Kentuckians?

Keystone Kops ride in Kentucky

For the third year in a row, Kentucky is about to make a law banning synthetic marijuana.

I'll wait right here for a minute while that sinks in. Read the first sentence again if you have to.

Lead sponsor Rep. John Tilley, the House Judiciary chair, seems pretty sure that he finally has a bill that will work. But he is wrong again.

Look up synthetic marijuana on Amazon.com. It is readily available (as is allergy medicine) and inexpensive. The most Tilley's grand scheme will accomplish is to move retailers of synthetic marijuana onto the internet or out of the state. (Hint to lawmakers: that means less sales tax.)

And lest you think anyone will be made safer by this, consider that retailers usually live in or near the communities they serve and can be made to answer for bad or even dangerous products. It's much harder to hold an internet retailer accountable.

So if you want to cost Kentucky jobs and tax revenue and probably even put more people in harm's way, then go ahead. Knock yourself out and support HB 481 and tell your constituents you fought to make them safer.

It's just not true.

Cover-up is always worse (pension version)

The Senate budget committee today unanimously passed HB 300, the pension scandal cover-up bill. The bill now heads to the Senate floor.

Insufficient work by former state Auditor Crit Luallen paved the way for official Frankfort to continue hiding a kickback scheme run through investment middlemen call "placement agents," which has already cost state taxpayers potentially hundreds of millions of dollars.

HB 300 would further embed placement agents in the Kentucky Retirement Systems by making them register as lobbyists with the executive branch of state government, which requirement does not involve reporting their actual dollar amounts of compensation.

This would be a big step away from what needs to happen, which is a lawsuit to recover all the placement agent fees paid out by the state. Few people in official Frankfort want such scrutiny because then the placement agents will talk about how some of that money was funneled to politicians.

This issue will become much more of a front-burner concern in three to five years when the pension plans run out of money and the taxpayers are on the hook for massive new payments we can't afford.

Your representatives need to hear from you to realize that covering this garbage up will be a much greater crime than starting now the process of coming clean. It will be much more expensive, too.

Voting no on this one is hugely important. Passage of HB 300 will come back to haunt us all.

Kentucky lawmakers suffer from 'meth math'

The Kentucky state Senate is expected to pass a version of the budget bill this week only to go behind closed doors with House negotiators to work out another debt-stuffed fiscal "compromise."

Meanwhile, out in the open, they are attacking allergy sufferers in a clumsy attempt to do something about methamphetamine abuse.

In 2008, dentists testified about similarities between conditions they call "Mountain Dew mouth" and "meth mouth." A Kentucky lawmaker joked that the popular soft drink should be made illegal. It was a stupid joke, to be sure, but at least back then Kentucky's nanny staters were adding two and two and coming up with something remotely resembling four.

Presumably if they were looking at "Mountain Dew mouth" today, our big government friends in the House and Senate would attempt to ban toothbrushes.

Please call your representatives today and tell them to kill Senate Bill 3.

Frankfort will tax your allergies and colds

Kentucky's House Judiciary Committee just voted in favor of the Snot Tax. The bill now needs the approval of the full House and Governor Steve Beshear and then some users of allergy medicines will be forced to get a doctor's prescription for a little nasal relief. For now.

Supporters of the measure claim that it will stop the manufacture of methamphetamine in Kentucky, which it absolutely will not do. Then they will come back next year and tighten the bill's restrictions.

If you didn't get hit by this year's version of the bill, breathe easy while you can. But remember that this is how big government always expands -- by lulling most of the people to sleep in the belief their restrictions only hurt someone else. They know there is plenty of time to come back and zap you next year.

These are the people we trust to write our state budget in secret. Then after they pass it, we get to find out what is in it. What could possibly go wrong with that?

Time for another Kentucky tea party rally

Some Kentuckians may think the Obama administration alone is making healthcare unreasonably expensive. They would be wrong. House Bill 458 effectively prohibits doctors from saving their patients money by performing more outpatient surgeries outside of expensive hospitals. We can stop HB 458, but we need to move fast. Please make plans to attend a tea party rally and press conference focused on keeping healthcare costs down by introducing more competition to the system. It's Wednesday March 21 at 10:00 am ET at the Capitol Rotunda in Frankfort. The big government anti-capitalism types in both parties are ready for a fight on this one as their power is at stake. Your voice is desperately needed now. Please spread the word.

Is your representative talking about this?

Frankfort politicians in both political parties have turned a blind eye to rampant corruption in the Kentucky Retirement Systems for too long, costing Kentuckians many millions of dollars. Cleaning up the mess should be a key issue in the 2012 elections, state Senate candidate Don Butler said.

"House Bill 300 would further enrich the very people who are bleeding our state pension system dry by keeping 'placement agents' in every dark corner of our state capital when we don't need them and can't afford them," Butler said.

"We are giving huge sums of money to these crooks who should all be run out on a rail rather than be left alone to buy up politicians with our money." "It should be common sense for those who understand the issue that we don't need to spend millions on placement agents," Butler said. "At any rate, we shouldn't legitimize them as HB 300 does. It may be better politics to wait and see if my opponent votes for this and then blast him, but if we miss this chance to fix this problem, we may not be able to do it next year. Please call your senator and demand a 'no' vote on House Bill 300."

Butler faces incumbent Republican Senator David Givens in the May 22 GOP primary.

Independent counsel blisters Crit Luallen

A national leader in the field of forensic investigations in the money management industry is criticizing former Kentucky state Auditor Crit Luallen for botching a pre-election audit of the state pension system last summer in an ongoing scandal that appears to involve tens if not hundreds of millions of dollars in losses on her watch.

Edward Siedle of Benchmark Financial Services in West Palm Beach, Florida expressed shock that Luallen could miss obvious "red flag" signs of corruption at Kentucky Retirement Systems (KRS).

"The entire investment management contracting process at KRS appears suspect at this time," Siedle said.

He said her audit was "remarkable in its failure to adequately address the most obviously troubling issues surrounding use of placement agents at KRS."

Placement agents are salespeople who connect investment firms with big money clients like the KRS in return for unjustifiably large fees paid by the firms. Large institutional investors like KRS should have no problem at all in negotiating away entirely these placement agent fees which, Siedle said, are so improperly accounted for that we still don't know how much we have paid or are paying in excessive fees.

Siedle cited some of the circumstances behind the placement agent "pay-for-play" activities, which read like a modern day, high tech Bluegrass Conspiracy tale with the penny loafers and cocaine traded in for wingtips and the cold-sweat desperation of a big government apparatchik realizing the gravy train is about to hit the wall. The common denominator, of course, is the politicians too dumb and too crooked to speak up before it all comes crashing down.

The good news, as Siedle sees it, is that at least some of the improperly spent funds may be recoverable. First step, though, is to end the cover-up and to start getting everyone talking about where the money is.

In what amounts to an interesting side note but should be instructive nonetheless given any future political aspirations Luallen may have was her published assessment of who ultimately pays placement fees. Luallen said in her audit "it was also determined that the payment of placement agent fees by investment managers did not correlate to an increase in the management fees paid by KRS or reduce the funds available to pay benefits to retirees."

Simply put, if Luallen had the last word on this, the millions in squandered funds wouldn't be recoverable in court because the most powerful woman in Frankfort for the last two decades doesn't think we were overcharged at all as she apparently doesn't understand how service providers pass increased costs along to consumers.

That's the same kind of reasoning that has allowed the Obama Administration to say they are going to give away free health insurance by just making the insurance companies pay for it.

Kentucky's official GOP stumbles over Bob Leeper

Tea Party Republicans in Kentucky attempting to make their voices heard within the GOP have experienced a different kind of March Madness this year. Republican officials across the state trying to slam the door shut on tea partiers seem to expect that a movement built on ideas neglected by the party and fueled energy and creativity absent in too many of its campaigns and officials is now populated by people who can't read.