Experts say probe of disgraced Oregon governor focusing on possible financial crimes

Legal experts say a subpoena used in a federal grand jury investigation into Oregon's fallen governor and his fiancée indicates that authorities are investigating possible violations of public corruption laws and financial crimes including wire or mail fraud, bribery and tax evasion. The subpoena was sent to the state's administrative agency on the same day Gov. John Kitzhaber announced his resignation.

"Typically you don't see this extensive of a subpoena unless it's a top-priority investigation," said Laurie Levenson, a former assistant U.S. attorney who teaches at Loyola Law School in Los Angeles. "It's a pretty extensive investigation. Given that this involves a governor, I would expect this is being supervised at the highest level" and includes the U.S. Department of Justice's Office of Public Integrity, the Internal Revenue Service and the FBI.

It may be that the grand jury reviews the material and finds no reason to bring charges, Levenson said. She noted that the authorities used a subpoena to collect records, not a search warrant that would have required a showing of probable cause. But Levenson added: "It's too early to say whether there will be charges, but none of this is good news for the governor."

Tung Yin, a professor at Lewis and Clark Law School in Oregon, said a state official, employee or representative is in violation of the federal theft or bribery law if he or she "embezzles, steals, obtains by fraud" government property or corruptly offers anything "with intent to influence or reward" someone in connection with business or government transactions. Mail or wire fraud would kick in if prosecutors could show the crime was played out through email or the postal service.

"The theory is that a public official owes the rights of honest service to the public," Yin said. The official breaches that duty if he or she gets a kickback or a bribe. If the governor was to be considered a conspirator, it would require an agreement to commit fraud, he said.

"The essence is, the governor would have to know what was going on," Yin said.

Kitzhaber, newly elected to an unprecedented fourth term as Oregon's governor, announced on Friday that his last day in office will be Wednesday, at which point Secretary of State Kate Brown will take over and assign her replacement.

Kitzhaber's resignation came amid a deepening scandal over allegations that fiancée Cylvia Hayes used the power of his office to land contracts for her green-energy consulting firm. It started with a probe by the Oregon Government Ethics Commission, followed by one by the state attorney general and peaked with a federal government subpoena served the same day Kitzhaber announced he was resigning.

The U.S. Congress' Committee on Oversight and Government Reform joined in on Friday with a letter to Kitzhaber demanding that he preserve all documents and communications related to the broken Cover Oregon program.

Kitzhaber and Hayes, as well as their lawyers, have not responded to numerous requests for comment. Kitzhaber's only response to the scandal was a lengthy resignation letter in which he emphatically stated that he did not break any laws or do anything "dishonest or dishonorable."

The federal investigation is being handled by Oregon Assistant U.S. Attorney Scott E. Bradford, who began his career with the Justice Department's tax division where he prosecuted tax, white-collar and money-laundering crimes. In recent years, he has secured convictions in cases ranging from embezzlement, to tax, investment and wire fraud. Both his office and the FBI declined comment on the investigation, saying it's important to conduct them "out of the public eye to ensure a fair process."

Rick Drooyan, a former assistant U.S. attorney who specialized in white-collar crime and now is a criminal defense lawyer, said the three-page subpoena reveals the focus of the investigation.

"They're looking into whether she used her relationship to cause him to take actions that would benefit her private consulting clients," Drooyan said. The subpoena demands records relating to contracts proposed and bids awarded to Hayes and her company, 3E Strategies, as well as records related to a list of 15 projects, initiatives and action plans that focus on climate and clean energy. It demands travel records, documents showing Hayes' use of state credit cards and the tax returns for Hayes and her company.

The subpoena also wants visitor logs to the governor's office and Mahonia Hall, the governor's mansion in Salem.

Hayes' biographical information for the National Governors Association describes her as "a policy adviser to Gov. John Kitzhaber on the issues of clean energy and economic development."

"The state has a lot of green-energy initiatives, and she's in a position to influence how the government views them -- and that could benefit the private clients who are paying her," Drooyan said.

The question is, Levenson said, "did he use his influence to help get her these deals? They're inextricably linked. That's what the subpoena suggests."

It's possible that Kitzhaber's defense could be he didn't have any personal involvement in Hayes' dealings, Levenson said.

In any event, it will likely be months before it is known whether Katzhaber or Hayes will face charges.

Drooyan said the case reminds him of the scandal surrounding former Virginia Gov. Bob McDonnell and his wife, Maureen. He was convicted last year on 11 public corruption counts that involved exchanging access to the power of his office for tens of thousands of dollars in loans and gifts. He was sentenced in January to two years in prison. Maureen McDonnell was convicted on nine counts and is scheduled to be sentenced Feb. 20.