Arizona Senate tweaks alleged 'pay-to-play' probe of Gov. Katie Hobbs

And Sen. Jake Hoffman said Monday he has taken himself out of the inquiry into the link between the governor and Sunshine Residential because "the crooked political media'' has pointed out that his 1Ten LLC consulting firm is financially benefiting from more than $1.5 million in advertising placed by others to defeat the incumbent governor and get Republican Andy Biggs elected. Hoffman, like any other advertising firm, gets to keep a share of media buys.

What that most immediately means is that the scheduled Sept. 29 meeting of the Senate Government Committee, which Hoffman heads, has been canceled, as have been the subpoenas for the governor and others — at least for now.

No new date has been set.

The revised probe also means that the promised public hearings — and public questioning of Hobbs, Attorney General Kris Mayes, their staffs, and former employees of the Department of Public Safety — are likely to occur even as Arizonans are casting their ballots in the general election. Early voting starts Oct. 7.

Now, the revised probe will go to the Senate Appropriations Committee headed by Sen. David Farnsworth.

But the Mesa Republican is not exactly an uninvolved party.

At a news conference earlier this month, he said that a statement provided to the Senate by a former employee of the Department of Child Safety raises questions about why the agency twice increased the amount of money it was paying to Sunshine Residential to house foster children.

The firm has contributed $550,000 to Hobbs, her inaugural fund and the Arizona Democratic Party. It's that link between the governor and the company headed by Simon Kottoor that forms the basis of the Senate inquiry.

Farnsworth at the news conference said the employees' statement contradicts findings by Attorney General Kris Mayes, who said DCS provided the 60% increase in rates to Sunshine in 2023, after Hobbs was elected, because the state was at risk of losing the beds. The Senate inquiry is also looking into how Mayes handled her own probe. And she, too, has been subpoenaed.

Farnsworth also was at Hoffman's side a week ago when the Senate probe was first announced.

'Special counsel' to be hired

The other big change announced by Hoffman Monday is that the Senate is hiring former Supreme Court Justice Andrew Gould to serve as "special counsel'' to the Appropriations Committee on this matter.

Kim Quintero, publicist for Senate Republicans, said Gould will work with Farnsworth "to conduct a thorough review of the available information and determine the appropriate next steps.''

"His work may include reviewing records and speaking with relevant individuals as the process moves forward,'' she said in a prepared statement.

But Gould is no stranger to Republican politics.

After leaving the bench in 2021, he made an unsuccessful bid for attorney general, coming in third in a race won by Abe Hamadeh. And Hamadeh eventually lost the 2022 general election to Mayes.

More recently, Gould represented American Encore and the America First Policy Institute, groups with ties to Republican interests, in their lawsuit against Democratic Secretary of State Adrian Fontes over some rules he put into the state's Elections Procedures Manual. That resulted in the Court of Appeals striking some of what Fontes enacted as illegal.

Gould also filed suit in 2024 directly against Hobbs challenging two executive orders she issued designed to make registration and voting easier. That lawsuit eventually was dropped.

And Gould is still representing Senate President Warren Petersen and House Speaker Steve Montenegro, both Republicans, who are trying to reimpose restrictions on abortions despite voter approval in 2024 of Proposition 139, which enshrines a right of women to terminate a pregnancy into the Arizona Constitution.

Gould did not return messages seeking comment.

Critic: Move is political

The revisions and transfer of the probe is just more politics, said Michael Beyer, spokesman for the governor's reelection campaign.

``After political consultant Jake Hoffman was exposed for profiting from these shameless attacks on behalf of the Biggs campaign, partisan extremists are now scrambling to keep this taxpayer-funded sham alive,'' he said in a statement. Beyer said all this is a bid by Biggs and his allies to ``use every trick in the book'' to distract from the GOP candidate's own record.

Senate Democrats, for their part, are taking credit for Hoffman's decision -- assuming that Hoffman stepped aside on his own. They had sent an email Friday to Senate President Warren Petersen asking him to justify the probe by Hoffman, given his financial links to the Biggs campaign and the timing so close to the election.

``If you, in your position as Senate president, authorized the subpoena of a political rival, the people of Arizona deserve to know,'' wrote the four top Senate Democrats led by Senate Minority Leader Priya Sundareshan of Tucson. And they noted to Petersen that he also has a stake in the inquiry: It includes looking into the investigation conducted by Mayes whom Petersen is running against in November for attorney general.

``It seems clear, after reaching this morning's press release by Senate Republicans transferring this 'investigation to another committee, that our letter was received and read,'' the Democrats said in a separate release.

Quintero said Petersen had nothing to do with the probe, saying he ``empowers committee chairs to make decisions within their areas of responsibility. She also said Hoffman and Farnsworth both chose Gould to serve as special counsel.

As to the transfer from one committee to the other, Quintero said that was Hoffman's decision.

The background

Central to all this is the undisputed fact that David Lujan, appointed by Hobbs to be DCS director in 2023, agreed to boost what it was paying Sunshine to house foster children from $149 a day per bed to $195 and, finally, to $234.

What also is undisputed is that Sunshine gave $100,000 to Hobbs for her inaugural fund shortly after she was elected, making it the second largest contributor beyond the $250,000 provided by Arizona Public Service. Because the event did not cost that much, state law at the time allowed her to use the extra dollars for political purposes.

There were also three donations of $100,000 apiece to the Arizona Democratic Party.

And it was just revealed that Sunshine provided another $150,000 for Hobbs to use in her ``legal defense fund'' to battle past and future lawsuits over her election. But those donations came after the boost in funding to Sunshine.

Mayes, in investigating the pay hikes, said she could find no evidence that Hobbs was involved. Instead, she said it appears that Sunshine had ``outsized leverage,'' being the largest provider of beds for foster care children in Arizona. And Mayes said Sunshine said if it didn't get more money from the state, it would make fewer beds available and instead provide them to the federal Office of Refugee Resettlement, which was offering more.

But what the Mayes probe did not mention is that Sunshine's request had been denied, first by Michael Faust, who had been DCS director when Hobbs was elected, and again by Matthew Stewart, who had been the governor's first pick to head the agency. The governor withdrew his nomination after six weeks amid questions raised -- including by Hoffman -- about his conduct when he had previously been a training supervisor.

That led to Hobbs tapping Lujan, who approved the rate hikes.

Also not in the Mayes report was that Faust had told her investigators that Kottoor, after the 2022 election, had offered to recommend that Hobbs keep him on as DCS director if he approved the requested contract increase. Mayes defended not mentioning that, saying Kottoor disputed the claim, meaning it would have come down to bringing a case where there were no witnesses. And Faust never reported the incident to police or prosecutors at the time.