Last week, Maricopa County Superior Court Judge John Hannah ruled in favor of Tim Jeffries and Charles Loftus in their defamation case against the State of Arizona. The judge let stand allegations made by the two of public corruption on the part of Governor Doug Ducey’s administration.
Attorneys for the State attempted to have the public corruption allegations removed from the pleadings, but Judge Hannah rejected that request on the basis that the State had earlier requested more specificity in the filings, particularly regarding malice. Judge Hannah found that the allegations of corruption, if proven, would make the defamation malicious. Proof of malice is required in defamation cases filed by public figures, such as Jeffries and Loftus.
Former Attorney General Tom Horne and Scottsdale attorney Charles Johnson, an Assistant Attorney General for 30 years, brought the defamation case on behalf of Jeffries and Loftus in response to statements made in a DPS audit of the Arizona Department of Economic Security. The audit was conducted last year in response to false claims that Jeffries, who at the time served as director of the Department of Economic Security, had ordered Loftus, as the DES Chief Law Enforcement Officer, to stockpile weapons and ammunition, and that Loftus had done so.
“While not necessary to proving malice, there is also evidence of malicious motivation,” wrote Horne and Johnson in the latest court filings. “The State and its agents were maliciously motivated by a need to discredit plaintiffs, to cover up evidence, that the plaintiffs were bringing to light, of malfeasance, corruption, and incompetent administration by the Governor’s Chief of Staff and others regarding computer purchases involving tens of millions of dollars.”
Jeffries, Loftus and others were fired by Governor Doug Ducey, the day before Thanksgiving. The Governor gave no reason for the firings, but then launched a media campaign of defamation based on lies about them to justify the firings to the voters. The complaint upheld by Judge Hannah alleges that Jeffries and Loftus were investigating highly questionable technology purchases and practices and Medicaid fraud by politically connected individuals.
Earlier this year, ousted Representative Don Shooter made similar allegations regarding technology procurement practices. Shooter alleged that he was targeted by the governor for his insistence on questioning the actions of the governor’s staff.
Many believe Jeffries first put himself in the crosshairs when he pushed for the prosecution of Representative Ceci Velasquez. She was eventually found guilty and forced out of office for welfare fraud. Both the governor’s office and the attorney general’s office resisted prosecuting her crimes, relying on “prosecutorial discretion” to ignore public corruption. Jeffries and his team refused to go along with ignoring public corruption. They continued to push for the prosecution of Velasquez and others in Arizona government, who included supporters of the governor and attorney general. By doing so, Jeffries and his team became persona non grata in the offices of the governor and attorney general.
According to multiple sources, officials in both the governor’s office, including Adams and in the attorney general’s office conspired against Jeffries, especially as it related to Velasquez. Audio and written records reveal efforts by the offices’ staff to either alter or kill press releases proposed by Jeffries highlighting fraud detection accomplishments including those related to public corruption.
“For close to 8 months, high priced outside counsel for the State has filed multiple meritless motions to dismiss our case at a maximum and delay our case at a minimum,” said Jeffries on Friday, “Thankfully, the judge put a stop to this untoward behavior yesterday by ordering them to respond to the merits of our legal complaint. Though a couple of less important paragraphs were ordered removed from our legal complaint, we are gratified the judge recognizes the imprudence of delays and prudence for proceeding. Now, we can focus exclusively on the merits of our case, and the legal process of proving it.”
Experts say that the DPS audit itself likely cost over $100k in staff time.
Public corruption allegations outlined in the amended complaint filed by Horne and Johnson:
An example of the pattern of corruption and cover-up by the Governor’s Chief of Staff, is as follows: As the head of the Department of Economic Security, Jeffries accumulated a mass of information indicating corruption or malfeasance in the expenditure of tens of millions of dollars for computer services which were implemented by the Department of economic security. Jeffries disclosed this information at the Governor’s Office and asked that the situation be corrected. The Governor’s Office did not act on this request. Instead, the Governor’s Office launched a massive cover-up operation, to prevent the facts discovered by Jeffries from coming to the attention of the public.
Charles Loftus was Chief Law Enforcement Officer for the Department of Economic Security. With concurrence from his supervisors, Loftus took the case to the Arizona Attorney General’s office for investigation and prosecution. Jeffries and Loftus were then terminated by Kirk Adams, the Governor’s Chief of Staff. Adams had been hired as Chief of Staff despite the fact that he had been fined $1 million by the State of California for laundering political dark money.
Adams had been a significant supporter of Attorney General Brnovich, who benefited from over $700,000 of dark money advertising. The Attorney General took no action.
Jeffries and Loftus were scheduled to testify before the House committee on federalism, property rights and public policy, to discuss the corruption or massive malfeasance causing the state tens of millions of dollars. They were prepared to testify that the governor’s office was interfering with investigations when known donors and suspected friends of the governor came under investigation.
The Governor’s Office, through friends at the legislature, canceled the hearing. House Majority Leader John Allen advised Committee Chairman Thorpe that the testimony was not to proceed. Instead, the Governor’s Office offered an appearance by Morgan Reed, the State’s CIO. But then Reed notified the legislature that he was unable to make the meeting as well. Details about the malfeasance and corruption are as follows:
The computer system involved here is known as HEA plus. The system was to determine eligibility for the state’s Arizona health care cost containment system (AHCCCS). The computer system was adopted in connection with the launch of Obamacare and subsequent expansion of Medicaid. It was not just for Medicaid. It was also intended to be integrated with temporary cash assistance for needy families (welfare) and the supplemental nutrition assistance program (SNAP, formerly known as food stamps). Although the system was begun under AHCCCS purview, all the eligibility workers were in the Department of Economic Security (DES).
DES has 77 service centers across the state, which handle eligibility processing for all three federal programs: AHCCCS (Medicaid), welfare, and “food stamps.” Jeffries did over 600 town halls across the state. In the summer months of 2015, employees were severely criticizing the HEA plus system.
Experts determined that the HEA plus system had a faulty software code foundation. That faulty foundation was of such poor quality that there was no practical way to shore it up or save it. The system was not scalable nor sustainable. Arizona’s neediest residents fall through the cracks of that fractured foundation.
HEA plus was sold as a 20-month project that would cost $47 million in tax monies (largely federal). Taxpayers were supposed to have a 21st-century system for Medicaid, food stamps, and welfare. When Jeffries began investigating the system, they were 50 months into it (not 20), $102 million (not $47) had been spent, and only a third of the system was done. Only the Medicaid portion was completed, and was working poorly. The software supplier was pitching the state on another two years and another $50 million. Jeffries arrived at the determination that it was not in the tax-payers interest to continue the system.
Jeffries also determined that there was no proper contract. It was a time and materials purchase order, which did not have milestones, penalties, or clawbacks. This was an extremely wasteful way to implement a massive computer acquisition which had already cost $100 million and was only one third done, with the one third not operating properly.
Jeffries determined that 7 or 8 states had implemented a much better solution, which supported Jeffries recommendation that better solutions were available. In addition to the cost overruns, on path to be over $100 million, the Department of Economic Security calculated that at least $80 million in state employee time was invested in solutions and troubleshooting the HEA plus system.
When Chief of Staff Adams fired Jeffries and Loftus, there was considerable blowback and criticism, because they had quite an excellent reputation for their performance of their jobs. Some of the substantiation of this is as follows:
Credibility of Plaintiffs that Defendant sought to Undermine
Prior to joining the calcified DES, Jeffries was told it would take “two years to dent the culture.” Yet, within 13 months of his transformative directorship, DES employee satisfaction improved an astounding 300 percent. This unprecedented tripling of DES morale was validated by the Department of Administration (ADOA) in April 2016 and reverified in November 2016. DES employee satisfaction was 200% to 250% greater than every large state agency, and this increased the overall state employee satisfaction score by 38% in 2016. Within 120 days of Jeffries’ ouster, ADOA measured an 18% plummet in DES morale in 2017.
During Jeffries 633-day directorship, every terminated employee was legally terminated. To turn around the agency, it was necessary to terminate those who were not doing their jobs and reward those who were. Only two of the 475 former employees sued, and both legal challenges were dismissed. Concurrently, salary increases were given to over 4,000 DES colleagues. Thousands had never received a raise at DES. Arizona diversity was celebrated, and bi-lingual stipends were reinstated. Tuition reimbursements were restored, and other employee-focused moves were made. Employee merit bonuses were granted for the very first time in 2015, a second time in 2016, and promised for 2017. The director-level commitment to salary increases and merit bonuses ended with Jeffries’ exit.
One of the allegations in the DPS audit was that Jeffries was trying to create his own police force. In fact DES already had around twenty AZPOST certified officers established six years before Jeffries was hired as the director. Based on employees’ pleas for protection, prudent moves were made to expand security throughout DES.
Because of the exceptional job Jeffries had done, there was considerable blow-back after he was terminated. A corrupt motive for defaming him was to stifle this blow-back criticism.
To take away their credibility and prevent further investigation into the corruption or malfeasance that Jeffries and Loftus were trying to uncover, the state initiated a massive campaign of libel against them, including the report which is the subject of this lawsuit, with numerous false statements that can be decisively disproven. These facts prove that Chief of Staff Adams, and others acting on behalf of defendant in this case, had malice in making false statements about Jeffries and Loftus, which malice is attributable to the employer, the defendant in this case.
Loftus and Jeffries have not only suffered from the claims made in the audit, but the fake news reports that stemmed from it. For example, attorneys noted that based on the audit, “Brahm Resnick reported on TV that DES had enough ammo for a large agency like Phoenix PD for three years. The amount of ammo which Phoenix PD utilizes every three years is in excess of 7 million rounds. The amount of ammo which DES had purchased was 86,000 rounds, barely 1% of the Phoenix PD amount.”
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