Arizona Attorney General Kris Mayes will not prosecute Gov. Katie Hobbs over an alleged pay-to-play arrangement involving Sunshine Residential Homes, concluding after a two-year criminal investigation that prosecutors found no evidence of a quid pro quo linking political contributions to state rate increases.
Senate President Warren Petersen, the Republican nominee challenging Mayes for attorney general this November, responded Friday by accusing Mayes of shielding Hobbs, a fellow Democrat.
“After dragging her feet on the pay-to-play allegations against her Democratic pal, Kris Mayes announced her refusal to hold Governor Katie Hobbs accountable for her actions,” Petersen said in a statement issued through Arizona Senate Republicans.
The Attorney General’s Office announced its findings Friday, saying investigators reviewed more than 100,000 documents totaling over one terabyte of data and conducted 12 interviews during the investigation.
“The investigation has not uncovered any evidence of the necessary quid pro quo to support a bribery charge,” Mayes said.
The case concerned Sunshine Residential Homes, one of Arizona’s largest providers of congregate care for foster children, and two rate increases approved by the Department of Child Safety after Sunshine made hundreds of thousands of dollars in political contributions benefiting Hobbs and Arizona Democrats.
Arizona Daily Independent reported in June 2024 on the original allegations involving approximately $400,000 in political contributions benefiting Hobbs and the Arizona Democratic Party and subsequent rate increases received by Sunshine.
Sunshine gave $200,000 to the Arizona Democratic Party ahead of Hobbs’ 2022 election, followed by $100,000 to Hobbs’ inaugural fund and another $100,000 to the state party in August 2023, according to reporting cited by the Associated Press Friday.
The company received a mid-contract rate increase to $195 per bed in May 2023 and subsequently received a $234-per-bed rate during its April 2024 contract renewal. Sunshine’s rate rose 56% between 2019 and 2024, according to the Attorney General’s legal analysis.
The investigation found that DCS personnel knew about the company’s political contributions while Sunshine sought a higher rate.
Then-DCS official Robert Navarro informed colleagues in February 2023 that Sunshine was likely to seek an increase and mentioned that the company had donated to Hobbs. Navarro and Assistant Director Alex Ong also discussed Sunshine’s political contributions in internal Teams messages, according to the memorandum.
Navarro told investigators the contributions placed pressure on agency officials. Investigators reported no evidence that the Governor’s Office created that pressure or instructed DCS to provide Sunshine with favorable treatment.
Former DCS Director David Lujan, who approved the May 2023 increase, told investigators that the Governor’s Office did not direct the decision. A September 2023 email quoted in the AG memorandum likewise showed Lujan saying he learned of Sunshine’s political support from Navarro rather than Hobbs’ office.
Investigators identified a separate business reason for DCS to approve the increase.
Sunshine accounted for roughly 20% to 25% of Arizona’s non-DDD congregate-care beds and was a particularly significant provider of placements that allowed siblings in foster care to remain together. Sunshine told state officials it was considering moving beds to contracts with the federal Office of Refugee Resettlement, where reimbursements for housing unaccompanied migrant children were substantially higher.
DCS had already lost two providers to federal ORR contracts. Lujan told investigators that losing Sunshine’s capacity could leave the state without sufficient beds and force sibling groups to be separated.
The Attorney General’s Office concluded that Sunshine’s increases appeared to result from the provider’s “outsized leverage” over DCS’ congregate-care program rather than a bribe.
The Attorney General’s investigation was one of several inquiries launched after the allegations surfaced. ADI reported June 7, 2024, that the Arizona Auditor General had asked Maricopa County Attorney Rachel Mitchell’s office to serve as the prosecution office working with auditors, while Mayes’ Criminal Division opened its own investigation following a referral from Republican Sen. T.J. Shope.
Three days later, ADI reported that Republican Rep. David Livingston called for Mayes to recuse herself, arguing her political ties to Hobbs and the Arizona Democratic Party presented a conflict. Mayes did not recuse herself. Mitchell subsequently said she would continue working with the Auditor General despite Mayes’ request that only one criminal investigation proceed, according to ADI coverage at the time.
Investigators also sought an interview with Hobbs. The governor declined an in-person interview and instead provided two written statements through her attorneys on Aug. 17, according to the memorandum.
Hobbs denied discussing Sunshine’s rates or any DCS procurement decision with Sunshine CEO Simon Kottoor or anyone associated with the company. She also stated that her office never provided direction or input to DCS regarding Sunshine’s rate decisions.
Petersen rejected Mayes’ conclusion and characterized the investigation as politically compromised.
https://twitter.com/votewarren/status/2090908023820874160
“Mayes’ decision was predictable in an election season,” Petersen said, alleging that Mayes had “protected her political ally.”
Petersen added, “She shamefully shifted accountability and protected her political ally, turning a blind eye to Hobbs’ misconduct. But we now know Sunshine Residential made $300,000 in political donations that benefited both Mayes and Hobbs in the midst of the ‘investigation’. Once again, Mayes has proven herself unfit to lead the Arizona Attorney General’s Office, putting politics ahead of enforcing the law.”
Petersen’s office also said Sunshine made three $100,000 contributions to the Arizona Democratic Party during Mayes’ investigation. Previously reported contribution dates place $200,000 in Sunshine donations to the party before the 2022 election and another $100,000 in August 2023, before Mayes opened her investigation in June 2024. The Attorney General’s findings released Friday do not identify any additional Sunshine contributions made during the investigation.
The political criticism comes as Petersen prepares to face Mayes in the Nov. 3 attorney general election. Petersen won the Republican nomination in July, while Mayes was unopposed for the Democratic nomination.
Mayes said Friday that the investigation demonstrated a need for legislation requiring greater transparency surrounding political contributions from state contractors.
That issue has already produced two bills from Shope. ADI reported in February 2025 that Shope introduced SB 1612 in response to the Sunshine controversy and other state procurement disputes. The bill would have required companies seeking state contracts or grants to disclose things of value given to a governor, related campaign organizations, inaugural funds or groups supporting the governor during the preceding five years. It also included procurement-record provisions and eliminated an AHCCCS exemption from state procurement requirements. Hobbs vetoed it.
Shope introduced a revised measure, SB 1186, during the 2026 session. It again required contribution disclosures from companies seeking or holding state contracts and required state agencies to preserve procurement-evaluation notes. Hobbs vetoed that measure in June, calling it a political stunt aimed solely at the governor and urging lawmakers to consider her broader proposal instead.
Hobbs’ own proposal would have restricted large political contributions by prospective state contractors during the bidding process, established a searchable contractor database and imposed additional lobbying restrictions. The Legislature and governor did not reach agreement on a package before the session ended.
Legislative scrutiny also expanded after the criminal inquiries began. ADI reported in November 2025 that House Speaker Steve Montenegro formed an advisory team to investigate the DCS-Sunshine matter and coordinate with the ongoing law-enforcement inquiries. In February, the House retained Justin Smith of the James Otis Law Group as independent counsel to review records, conduct interviews and report findings directly to the advisory team and House leadership.
Mayes’ office is closing its criminal inquiry into whether Hobbs and Sunshine engaged in the pay-to-play arrangement alleged in Shope’s original referral. The memorandum states that investigators found no evidence substantiating the alleged scheme and no evidence sufficient to establish a reasonable likelihood of conviction for bribery or related offenses.
The scrutiny of Hobbs’ conduct is not over, however. The Attorney General’s Office said it would continue to assist the Arizona Auditor General if requested, and the Associated Press reported Friday that the separate investigation involving Maricopa County Attorney Rachel Mitchell and the Arizona Auditor General remains ongoing.
And you expected a different outcome??? It’s ludicrous to think there is anyone holding political office today that isn’t beholden to $$$$…however it’s received!!!