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Gov. Chris Gregoire (D) this month hired an outside consulting group to conduct a top-to-bottom review of the state agency in charge of policing which construction companies qualify for minority highway contracts -- a review prompted by KING 5 News's ongoing series on fraud and mismanagement of the program.

The review, due by the end of July, is being conducted by the Coraggio Group, a Portland-based organizational leadership and strategy consultancy.

To date, KING 5's series has found that the agency -- the Office of Minority and Women Business Enterprises -- ignored fraud by contractors that gained access to the program when they shouldn't have, punished employees who tried to follow the rules and disqualify contractors who were in violation of state and federal rules, and ignored the Washington State Department of Transportation when its own inspectors and compliance officers found fraud and violations.

But even as the Coraggio Group conducts its review, KING 5 can report additional details about dysfunction at OMBWE, including the fact that actions by one-third of the small agency's 15-member staff are under review by the Washington State Executive Ethics Board.

In one case, OMBWE staffer Gerald Ballard regularly traded stocks from his state office computer. An anonymous complaint to the Washington State Auditor's Office prompted a review of Ballard's computer records. The investigators found Ballard violated state law. Between 2007 and 2010, the Board found that Ballard visited the stock-trading site E-Trade 500 times and saved 650 stock-related files to his computer. The Auditor s Office stopped its forensic analysis of the employee s computer when investigators determined they d gathered enough information to prove an improper governmental action had occurred.

The investigators also found email strings about day trading between Ballard and another state employee from the Department of Corrections.

You are right [the markets] are taking a bad hitting. However, knowing that it s a traders market (not long term investing) I was able to buy a dip and pop to the tune of $5300 today. Dip and pop means to buy when it dips and sell when it pops up. That works when the market is trying to find direction-which way it will go, up or down, wrote Ballard in an email to the DOC employee during a work day.

Ballard regularly encouraged other OMWBE employees to join him in playing the stock market. And when some employees complained directly to OMWBE leaders, their concerns were treated as no big deal until the Auditor's Office concluded its investigation.

In their investigatory notes, representatives from the Auditor s Office wrote, In interviews with other witnesses each stated they had seen the subject day-trading on his work desktop. The witnesses stated it had been going on for years and management was aware of it and the effect it had on the subject s productivity. In fact, employees had addressed this issue with the supervisor, the current Director, who instructed them to pick up the slack and make sure everything got done.

Ballard ultimately received an oral reprimand and was allowed to keep his job.

Obviously we found it pretty easily, said state Auditor Brian Sonntag. Of OMWBE's managers, Sonntag said: What it takes is for someone to care. ... We didn't see it.

Ballard's actions are now being reviewed by the State Executive Ethics Board; two other OMWBE staffers are also being probed for excessively using their work computers for personal use as well.

Separately, an OMWBE manager is under investigation for how she handled a 2010 holiday fundraiser. Longtime manager Jean Wheat approached fellow staffers during the Christmas season about raising money for a family in need. Only later did the staff learn that the needy family Wheat suggested was comprised of her son, daughter-in-law and two grandchildren.

In the Executive Ethic Board s Preliminary Investigation and Board Determination report, investigators wrote, ...Ms. Wheat is a manager of the largest section in OMWBE, with a salary of up to three times more than many of her subordinates, yet she still asked that these individuals purchase gifts for her son s family.

The Director of the State Executive Ethics Board, Melanie de Leon, conducted the investigation into Wheat s activities. She found reasonable cause to believe the employee broke state ethics laws. In addtion, de Leon said Wheat appeared surprised that what she d done was problematic. She didn t see that that could have been a potential ethical issue. That s what I saw was the biggest issue for me, said de Leon.

Wheat has requested a hearing before the Ethics Board to formally present her side of the story.

One other case being investigated by the Ethics Board involves the illegal funneling of state business to a company. According to the Auditor's office, Cathy Canorro, the woman who ran OMWBE from 2010 until last month, violated state law earlier this year by giving a $65,000 contract to John King, a family friend for more than 30 years. The contract was awarded without allowing other businesses a fair chance to bid on the work.

The Director stated to witnesses that she was interested in awarding the contract to a specific individual prior to notifying other potential bidders. The Director also gave interested parties only two days to submit written proposals showing their qualifications to do the work outlined in the contract. When potential bidders contacted her within the two days, serious consideration was not given to them to determine whether they might be capable of performing the work at a lower cost to the state, wrote the Auditor s Office.

It is favoritism, it is cronyism, Sonntag said. Supplying a government contract at this level and guiding that to one specific person, who's a personal friend. That's wrong.

Sonntag said it s particularly troubling to see this type of activity at the very top of the agency. That affects everybody. It speaks poorly of that operation, but it also sends the wrong message to citizens, said Sonntag.

Besides Canorro, the four other OMWBE staffers being probed by the Ethics Board remain on the job. For one-third of one agency's staff to be under investigation is unusual, Director Melanie de Leon said: Because of the size of this agency, the number of cases kind of stands out as being an anomaly.

Canorro left OMWBE on June 16, but she has already landed another state job. She will start next month as a hearings examiner at the Department of Licensing.

Meanwhile, her replacement at the agency, former Washington Lottery chief Chris Liu, is taking a different approach to dealing with the media. For three months, KING 5 was denied permission to come to OMWBE offices to gather video or conduct interviews. Liu, on the job for less than two weeks, opened the doors.

We serve the people and I intend to carry out that mantra and that thought. This is a public agency, of course you can come in, said Liu.

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