Audit finds free spending and cronyism by ex-state agency head

A sweeping state investigation into the Utah Department of Agriculture and Food under the leadership of former Commissioner Kerry Gibson has identified potential problems with the cannabis grower selection process, inappropriate use of state cars and questionable travel practices.

During his whirlwind tenure at the agency before he left to run for Congress, Gibson took state cars on personal trips to Las Vegas and Bear Lake, improperly upgraded his hotel rooms and airplane seats and asked the department to reimburse him for costs he’d already charged to his state purchase card, according to the review released Wednesday morning. The auditors also voiced concern about the way the agency awarded eight lucrative licenses to grow medical cannabis in the state.

And the problems called out by the audit extended to his hand-picked staff.

Gibson’s former director of operations and agriculture programs, Natalie Callahan, and his former public information officer, Sasha Seegmiller Clark, owned and operated a public relations firm while they were working for the state agency. Auditors uncovered four instances in which Callahan and Seegmiller Clark seemed to be working for their private clients while on the clock at the agriculture agency.

Callahan claimed significantly more overtime than others who have occupied her position, according to the report — and in one pay period claimed she’d put in nearly 90 hours per week.

The report also questions the propriety of thousands of dollars in bonuses that Gibson awarded to Callahan and Seegmiller Clark. Though the agency commissioner has the authority to hand out such bonuses, auditors “noted that there was no detailed written justification” for them and that Gibson issued them when Callahan and Seegmiller Clark were on their way out the door at the department.

“Bonuses are generally used as a tool for motivation,” says the report, which reveals that Callahan got $8,000 and Seegmiller Clark received $4,000. “Since the employees had been effectively terminated by this time, we question the propriety of awarding bonuses at this point.”

‘Documented improprieties’

In a prepared statement released Wednesday, legal counsel for Callahan and Seegmiller Clark said their clients have responded fully to state auditors over the past six months and complain that the final report doesn’t include their rebuttals.

“Our clients' responses to the written questions fully refute the report’s findings as to our clients," the statement from attorneys Rick Van Wagoner and Sam Alba says.

Callahan and Seegmiller Clark were transparent about the fact that they owned a public relations firm and asked state human resources officials if they’d need to disclose any information about the business, according to the statement. They were told no disclosures were necessary, the lawyers said.

During their time with the state, Callahan and Seegmiller Clark did not work with any clients regulated by the agriculture agency, according to the statement.

The attorneys also claim that one of the state’s auditors knew either Callahan or Seegmiller Clark from a relationship that “ended poorly" and should have been disqualified from participation in the investigation.

State Auditor John Dougall said the auditor in question informed supervisors about the relationship at the outset.

“We vetted it,” Dougall said, “and we said it didn’t rise to the level of a conflict that caused us concern.”

In a statement, the state auditor’s office later said the attorneys’ claim is unfounded and indicated that representatives of the office were “troubled that these individuals would drag this auditor through the mud and attempt to tarnish his integrity in an attempt to deflect attention from their documented improprieties.

The state auditor launched his investigation into various irregularities at the agriculture agency in response to whistleblower complaints.

Ultimately, Gov. Gary Herbert’s office ordered Gibson to either terminate Callahan and Seegmiller Clark or require them to cut ties with their firm, called the Dicio Group. Herbert also directed the commissioner to stop unnecessary travel and improper use of state vehicles and refrain from spending state resources in a way that might appear to advance Gibson’s political ambitions.

When Gibson didn’t follow the governor’s directions, Herbert’s office put him on administrative leave, the audit states. Gibson resigned in January before launching his campaign in the Republican primary for the 1st Congressional District, a contest he lost to Blake Moore.

“While this is a tough example of how an individual’s — or group of individuals’ — worst impulses can rob the public of both resources and trust, it’s also a great example of a functioning government rooting out corruption within its own ranks,” Katie Matheson, spokeswoman for the left-leaning Alliance for a Better Utah, said in a prepared statement. “During this stressful time, Utahns need to trust the government that serves them, and we applaud Governor Herbert and the State Auditor’s Office for their swift work on this matter and helping maintain that trust.

Cannabis licensing concerns

The report contains a slew of recommendations, including that the Utah Department of Agriculture and Food (UDAF) reassess the cannabis cultivation licenses it awarded last year. Gibson, the report noted, appointed six people to serve on the evaluation committee that was in charge of picking the eight growers.

Auditors conducted a statistical analysis of the way committee members scored the roughly 80 applicants for cannabis licenses and discovered that the numbers for two of the panelists — Callahan and Gibson’s deputy, Kelly Pehrson — were “highly correlated.”

In fact, Callahan and Pehrson ranked the same seven applicants in a similar order among their top picks, the audit states. The likelihood of that happening by chance is less than 5%, suggesting the possibility of collaboration between Gibson’s senior staff, according to the audit.

Before being hired by Gibson, Pehrson was the administrator for San Juan County, which contracted with Dicio for public relations. Dicio also did P.R. for Weber County when Gibson was a county commissioner there.

After the initial evaluations of the cannabis cultivation candidates, there were “significant adjustments” to the initial evaluations given by other committee members, whose scores were brought into closer alignment with those of Callahan and Pehrson, the audit found.

“[T]he bias in favor of senior management preferences are considered unusual,” the audit states, “and could indicate an attempt by senior management to influence other evaluation committee members.”

Three of the companies that ended up landing cannabis cultivation licenses wouldn’t have won them but for these scoring changes, according to the report. While the audit doesn’t name the three companies, information contained in the report indicates that one of them is True North of Utah.

Dicio Group represented one of True North’s executives before Callahan and Seegmiller Clark joined the state, according to the audit. And Mike Standlee, the company’s owner, contributed $8,400 to Gibson’s congressional campaign in March 2020, according to campaign finance reports.

While Callahan and Seegmiller Clark were employed at UDAF, their P.R. firm did not represent any companies that won a cannabis cultivation license, according to Van Wagoner and Alba. But a Dicio Group representative was communicating with reporters on behalf of True North in May and June.

And Gibson and Callahan visited True North’s facilities in June 2019, after the company had already applied for a cannabis cultivation license — and during the “blackout period” that restricted communications between evaluation committee members and bidders for the cannabis license.

That visit stoked the sentiment that True North was “improperly favored” by the committee, according to auditors.

Recommendations for change

The report also indicates that both Gibson and Pehrson, who was hired by Gibson last year and is still employed at the agency, misused state-owned vehicles on numerous occasions.

The vehicles were outfitted with a geotracking device, which kept a record of the day, time, speed and location that they were being driven. Records show Gibson improperly used a state vehicle to commute between home and work at least 58 times and document trips to shopping malls, recreation areas and a church.

The finding resulted in a directive from Herbert’s office that restricted Gibson’s state vehicle privileges while he was still commissioner. After the directive was issued, the audit found that Pehrson began violating state policies with his own vehicle use.

On at least 18 occasions, Pehrson used a state vehicle to commute to and from work, the report states. The vehicle assigned to Pehrson was also used on six occasions to visit “sports complexes and other non-business related locations.”

It was unclear who was driving the vehicle during each of these instances. In all, auditors concluded the violations resulted in “a financial loss of at least $4,419.”

As a result of their findings, the auditors suggested that the department:

• Seek reimbursement for thousands of dollars in inappropriate personal use of state vehicles.

• Seek repayment for $1,245 in questionable travel expenses.

• Make sure to document overtime properly.

• Establish written policies and procedures for the state’s medical cannabis program.

Commissioner Logan Wilde, who currently leads the state’s agriculture department, concurred with many of the auditors' recommendations and described the steps the agency is taking to remedy some of the weaknesses identified by the report. Gibson and some of his staffers did engage “in certain activities that violated state and Departmental policies and resulted in an environment that did not accurately reflect the values and mission of the Department.”

However, Wilde suggested that the auditors' recommendation to redo the cannabis cultivation licensing could create a major setback for the state’s fledgling medical marijuana program.

“Considering the investment and capital expended by our current licensees,” he wrote, “revocation of an existing license may have a significant impact on the cultivators, producers, medical cannabis providers, and patients who rely upon the state to have an appropriate amount of product available to meet their medically necessary needs.”

The department, he said, is asking for guidance from the Utah Attorney General’s Office and other state agencies about how to proceed.

In a Wednesday afternoon phone interview, Wilde said the agriculture department is in the middle of a mandated annual review of whether cannabis cultivators are meeting their commitments to the state. The department plans to hold a public hearing in mid-December to discuss its findings, he said.

If UDAF does not renew a company’s approval to grow cannabis, that license could become available to a different grower through another competitive bidding process, according to Wilde.

But yanking all the licenses at once could lead to cannabis shortages, he warned.

The agency has also asked a third party within state government to examine the cannabis cultivator licensing process for irregularities and inconsistencies, Wilde said. UDAF sent all potential reimbursement claims over to the state agency that handles debt collection, he added, and has asked for a recommendation about whether to pursue repayment.

Wilde declined to comment on the audit’s findings about Pehrson’s conduct. Pehrson is an appointed employee who serves at the pleasure of the UDAF commissioner.

Gibson previously was the subject of a criminal investigation by the Ogden Police Department when he was a Weber County commissioner. That was closed with no charges. Gibson currently is in a court fight to prevent the public release of that closed investigation. He did not immediately return a call for comment Wednesday morning.

— Tribune reporter Zak Podmore contributed to this report.