By Staff Reporter |
Governor Katie Hobbs is under investigation for an alleged “pay-to-play” scheme with a group home that donated to her inaugural fund and the Arizona Democratic Party.
Last May, following the donations, the Arizona Department of Child Services (DCS) drastically increased the rates for the for-profit, state-contracted group home operator and major Democratic Party contributor, Sunshine Residential Homes (formerly Sunshine Group Homes). The nearly-60 percent rate increase was approved several months after the company gave $100,000 to Hobbs’ “dark money” inaugural fund. That $100,000 rendered to them by the second-largest donor after Arizona Public Service (APS). The governor raised nearly $2 million.
As the Arizona Republic reported, that $100,000 to the fund came several days after the group home operator was denied a rate increase in December 2022. No other group homes have been awarded rate increases under Hobbs, and none came close to the rate granted to Sunshine Residential Homes: over $230 a day, where the average was about $170.
The governor’s fund earned the unofficial “dark money” pejorative following reports that Hobbs pushed for $250,000 donations to her inaugural event, though the event itself only cost around $200,000.
Sunshine Residential Homes also donated $200,000 to the Arizona Democratic Party in September and October of 2022, and another $100,000 to the party in August 2023.
The group home operator’s CEO and founder, Simon Kottoor, and his wife, Elizabeth, also donated $10,000 collectively to Hobbs’ campaign.
Hobbs appointed the Kottoors to her inaugural committee.
Last year, the group home operator received a nearly 60 percent increase in rates: much higher than the rates awarded to other group homes, and unique given DCS choosing to cut contracts with dozens other group homes: 16, to be exact.
DCS blamed budget constraints coupled with a desire to scale back on the reliance of group homes for the contract denials.
Hobbs’ spokesman, Christian Slater, claimed the allegations came from a place of unsubstantiated scrutiny similar to other attacks by “radical and partisan legislators.”
“Governor Hobbs is a social worker who has been a champion for Arizona families and kids,” said Slater “It is outrageous to suggest her administration would not do what’s right for children in foster care.”
Some have questioned whether Sunshine Residential Homes wired additional funds to Hobbs’ inaugural fund after their $100,000 donation cleared in February 2023, or whether the group home operator or its executives issued donations to other groups operated by Hobbs, like the “An Arizona For Everyone” entity.
An Arizona For Everyone, a nonprofit, was activated in December 2022 and voluntarily dissolved in September 2023. No tax filings exist for the nonprofit on the IRS public search portal of tax-exempt entities.
Last Thursday, Attorney General Kris Mayes announced an investigation into the matter. On Friday, Mayes also ordered Maricopa County Attorney Rachel Mitchell to back off her investigation and for Auditor General Lindsey Perry to stay away.
“It would not be appropriate or in the best interest of the state to conduct parallel investigations into the same matter. Furthermore, a separate process conducted by the MCAO could jeopardize the integrity of the criminal investigation that my office will now proceed with,” wrote Mayes.
However, Treasurer Kimberly Yee urged Mitchell to continue her own investigation into Hobbs to complement Mayes’ investigation. In a press release on Monday, Yee announced request letters to both Mitchell and Mayes.
“Arizona taxpayers deserve financial accountability. Giving state dollars to political donors is a grave misuse of public funds,” posted Yee on X.
In her letter to Mitchell, Yee advised that Mitchell continue her investigation over Mayes’ conflict of interest.
“Pursuant to these legal authorities and due to concerns related to Attorney General Mayes’ ethical conflict of interests because her office is required to provide legal services to the agencies at issue and the fact that her representatives have personal and professional relationships with those individuals potentially involved in any alleged wrong-doing, I respectfully request that you investigate the allegations that have occurred in your jurisdiction, Maricopa County,” wrote Yee.
In Yee’s letter to Mayes, the treasurer advised the attorney general that her assertion of singular control over any investigation — especially one involving the state agencies she represents — was inappropriate and unlawful. Yee suggested that Mayes transfer the investigation wholly to Mitchell or another independent county attorney.
“[T]hat is the only action that will ensure the integrity of the investigation and avoid the duplication of efforts you raise as a concern in asserting sole jurisdiction,” wrote Yee.
Sunshine Group Homes was recognized as a nonprofit by the IRS until 2022, when they were placed on the auto-revocation list that August (EIN: 86-0815254).
According to the latest publicized tax filings from a decade ago, the Kottoors received a collective $623,500 annually in reportable compensation from related organizations.
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