You don’t have to live in Pikeville to know there are problems with the Mountain Water District and Utility Management Group.

Regular readers of Page One have known for years that there’s a problem in the hills and it’s a classic case of good old boys and wasted money. Unfortunately, in this case, those wasted dollars are in the millions and we’re all left footing the bill.

Oh, and by good old boys, we’re obviously talking about State Representative W. Keith Hall, the gentleman pictured in the photograph at left. An alleged man of the cloth, no less.

Here’s a refresher on the mess, just in case you need it:

• Is Keith Hall In Potentially Unethical Hot Water? [June 25, 2009]
• Keith Hall Responds to News-Express Story [June 25, 2009]
• Oh Snap Monday! Keith Hall Outed by Stumbo [June 29, 2009]
• The Keith Hall Scandal Still Lives On [July 1, 2009]
• Fallout From the Keith Hall Scandal [June 2, 2009]
• Not Letting the Keith Hall Scandal Go [July 6, 2009]
• More Mountain Water Board Embarrassment? [July 10, 2009]
• Inaugural Golden B.S. Award Winners [August 13, 2009]
• It’s Time For Keith Hall to Come Clean [August 24, 2009]
• Rep. W. Keith Hall of Pike County Has a Past [August 27, 2009]

Quite an Eastern Kentucky embarrassment, to say the least. A real shame for the good people in the mountains who have been hoodwinked by these shysters for decades.

After all the stories above, on November 5, 2009, we learned that Crit Luallen was asked to audit the Water District. And whattya know? Luallen’s office is today releasing that audit of the infamous water and sewer public works group that finds Mountain Water District’s management contract with Utility Management Group had a detrimental impact on the MWD. It’s so bad that the audit has been referred to the Office of the Attorney General for investigation and to the Public Service Commission for review.

“When government privatizes such a basic service, it is critical to have strong oversight that requires transparency and accountability from the vendor,” Luallen said. “Our audit lays out numerous recommendations that can strengthen board oversight and better protect the taxpayers.”

The audit couldn’t come at a better time. The Appalachian News-Express has been focused on the latest water contract renewals the past few weeks. Hall, UMG and MWD have all been foaming at the mouth over the paper’s coverage. Now we know why. Rather than drone on for ages about the 73-page report, here are the highlights:

• UMG wasn’t obligated by contract to share its cost to operate the district with MWD and UMG has no annual audit of its books
• Despite state law giving the Auditor access to records of public works, when the Auditor requested cost information from UMG, they denied it, making it impossible to determine if MWD was saving money and if its current management fees are excessive
• Stronger board oversight of contracts could have prevented MWD from paying UMG a whopping $1.6 million in extra fees
• Contract language was added after awarding it to UMG that required payment of extra fees for every new customer beyond 1,000. That resulted in $1.34 million in additional fees paid between September 2006 and April 2009.
• MWD skirted procurement requirements, which allowed it to pay more than $171,000 for electrical services to a company owned by Keith Hall, who assisted in obtaining coal severance funds for the district that were used to pay for that very electrical work – that mess has been forwarded to the Legislative Branch Ethics Commission which is currently investigating Hall

How bout THAT? Keith Hall’s corrupt butt gets investigated for a special good old boy deal. A sweetheart no-bid contract that resulted in at least $171,000 (who knows how much other cash Hall pocketed? There’s no way to know until they hand over the documents) lining his pockets. Money he was directly responsible for securing in the legislature.

Trust me – you want to read the eight findings made by the audit and delve into the details of Hall’s corruption. Do all that after the jump…

In addition to the highlights, here are the eight findings made by the Auditor:

1. The MWD Board entered into a privatization contract with insufficient planning to determine the benefits to or financial impact on MWD
2. The Cost to Operate MWD Services Are Unknown Due to the Lack of Financial Information Provided by the Vendor
3. The Initial contract for management services had a detrimental impact on MWD, and the Board failed to act in a timely manner to address the issues
4. Irregularities were identified in the initial MWD contract for operations, management, and maintenance and the established contract bid process was not followed
5. UMG received payments for services not specified in the contract with MWD without approval by the MWD Board
6. Procurement requirements appear to have been circumvented, resulting in over $171,000 for services provided with no contract
7. MWD had not adopted a method to adequately track construction project payments
8. MWD did not comply with Kentucky’s Open Meetings Law when discussing the decision to contract out the operations of a public entity or the renegotiations of that contract

More on the Hall ethical lapse/corruption:

The only approval by the MWD Board of this vendor would have been through the monthly approval by the Board of payments scheduled to be made by MWD. A review of the Board meeting minutes reflect no discussion by the Board concerning any of the monthly payments, including payments made to BMM for this service. This indicates the Board had no active role in monitoring and overseeing the more than $171,000 paid to a vendor for a service provided without a competitive bidding process and no contract agreement between the two parties.

Another concern is the involvement of the State Representative to obtain coal severance funding for a service his company provided through a non-competitive process. While it is the entire Kentucky General Assembly that must approve a state budget bill, local legislators select the projects for their legislative districts that are to be included in the budget bill. This would allow the State Representative to work with the other legislators with districts in Pike County to seek funding for the project. Once the Representative was chosen to provide this service without a required competitive bidding process and no contract, it presents a strong perception of a conflict of interest.

It’s unbelievable, really. You should read every last bit of the audit for yourself. Click here (Warning: PDF Link) to download all 2.9 megabytes of it.

Who knew two years ago that we would eventually begin to see justice served? Watching what happens with Hall is key. Legislative leadership will need to act swiftly today if they want to be taken seriously. That means Hall will need to be removed from his Co-Chairmanship of the Energy Special Subcommittee and his Vice Chairmanship of the Natural Resources & Environment Committee. He admitted to auditors that he was aware of the financial threshold at which contract bidding would be required. Then he contradicted himself by saying he was unaware of the water district dealings. It’s par for the Hall course and it’s time for our legislative leaders to do something about it.

This is bad.