Questions remain after Attorney General Kris Mayes concluded a two-year investigation with a short report declaring Gov. Katie Hobbs cleared of pay-to-play wrongdoing.
Mayes’ seven-page legal analysis, published last Friday, stated that she could not and would not prosecute due to an absence of evidence.
Mayes said her team reviewed more than 100,000 documents consisting of campaign finance records, procurement records, bank documents, and state emails and chats, but couldn’t find evidence of quid pro quo between Sunshine Residential Homes, a group home operator, and Hobbs.
It is unclear whether this investigatory scope included personal correspondence, such as messages sent over text or encrypted platforms like Signal.
Investigations began after the Arizona Republic reported that Sunshine Residential Homes had received a unique rate increase following unprecedented donations totaling more than $500,000 to Hobbs and the Arizona Democratic Party.
In addition to the previously reported $400,000 to Hobbs and the Arizona Democratic Party, the group home operator gave $150,000 to the Katie Hobbs Legal Defense Fund, a secret account whose donors and funds remain a mystery under an exemption in campaign finance law.
The group home operator gave more to Hobbs’ legal defense fund than Arizona Public Service gave to the governor. It was the APS disclosure of their donation that made Hobbs’ fund known to the public.
In November 2022, shortly after she won the governor’s race, Hobbs called Simon Kottoor, founder and CEO of Sunshine Residential Homes, to solicit inaugural fund donations.
In December 2022, Sunshine Residential Homes — already with one of the highest rates in the state — applied for a rate increase.
In February 2023, the Department of Child Services (DCS) initially denied the rate increase request.
In April 2023, Hobbs and her campaign manager at the time, Nicole DeMont, went to have dinner in the Kottoor home.
Hobbs told 12News that meeting was nothing more than a normal encounter with a supporter.
“I have never talked to him about his government contract. He is a political supporter and I often have socialized with supporters,” said Hobbs.
In May 2023, Sunshine Residential Homes reapplied and got its requested rate increase, from $149 per bed to $195 per bed.
The operator also got another rate increase the following year, in 2024, from $195 per bed to $234 per bed.
Since-scrubbed photos on a news website based in India showed Hobbs and her husband with Kottoor and his wife at what appeared to be the latter’s home around April 2024.
https://x.com/AZBrianAnderson/status/2091332315180105872
The attorney general’s seven-page memorandum was authored by Nick Klingerman, Mayes’ chief counsel for the criminal division.
Per investigators, the $550,000 in donations were not made in return for an explicit promise or undertaking by Hobbs to secure their rate increases.
Investigators said political contributions were only the subject of conversation in one identified instance within the reviewed records. In that instance, Robert Navarro, assistant DCS director, advised Department of Child Services (DCS) leadership that Sunshine Residential Homes wanted a rate increase and was a donor to Hobbs.
“While Navarro claimed that Sunshine’s donations ‘put pressure on, I think, everybody,’ the investigation has shown that any perceived pressure was a result of Navarro’s own knowledge of Sunshine’s contributions,” said Mayes.
The report said that Sunshine Residential Homes received the rate increases due to its “outsized leverage” over DCS — a result of its intake capacity and willingness to take in children on short notice — combined with notice from Kottoor that he would reduce DCS bed availability for the higher rates offered by the Office of Refugee Resettlement (ORR) to house unaccompanied alien children.
Mayes’ team bolstered these justifications with other rationale: several years of stagnate rates and inflation were also drivers for rate increases.
“My reasons for thinking the rate increase is justified: they are one of our larger congregate care providers, one of the few who is willing to keep siblings together, and because they do often accept siblings, when those siblings are moved out of their facilities, they can lose multiple children all at once which impacts their staffing costs, and they were being offered more $$ to provide services to ORR,” said DCS Director David Lujan in a September 2023 email.
Another discrepancy made itself apparent in Mayes’ legal analysis.
For months, Hobbs claimed she was in touch with Mayes’ office about an in-person interview.
However, Mayes’ report revealed that Hobbs waited until Aug. 17, 2026, to provide a response, which only consisted of two written statements through her attorneys and not an in-person interview. A few days later, Mayes issued her report clearing Hobbs of wrongdoing.
In a statement, Mayes said the main conclusion to draw from their investigation is that the legislature and governor must establish stricter transparency requirements for donors.
The auditor general’s office is conducting their own investigation into the allegation against Hobbs and will continue to do so, according to Mayes’ office.
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