PHOENIX (AP) 鈥� State prosecutors declined to file criminal charges against Arizona Gov. over allegations that she took part in a pay-to-play scheme with a group home company that received a rate increase from the state after contributing $100,000 to her inaugural celebration, Attorney General Kris Mayes announced Friday.
The Democratic governor has been accused of giving preferential treatment to Sunshine Residential Homes after the Arizona Republic revealed the private company contributed to the inaugural fund and Arizona Democratic Party and later received a 30% payment increase. Only Sunshine and one other company were given increases during the 2022-2023 contracting period.
The investigation has turned into a political millstone for Hobbs as she . Her Republican opponent, U.S. Rep. , has run an ad underscoring the investigation into Hobbs.
Hobbs denies wrongdoing, saying she wasn鈥檛 involved in the decision to grant the increase.
鈥淭he investigation has not uncovered any evidence of the necessary quid pro quo to support a bribery charge,鈥� Mayes, a Democrat, said in a statement. Her investigators concluded the rate increase was the result of Sunshine’s leverage as the largest provider of beds for children in foster care, not political pressure.
While the situation did not meet the standard for criminal charges, Mayes said her investigation 鈥渟hows there is a need for legislative reform” around the transparency of political donations made by state contractors. She urged Hobbs and the GOP-controlled Legislature to adopt improvements.
A separate investigation by Republican Maricopa County Attorney Rachel Mitchell and the state auditor general is continuing. It鈥檚 unclear when the latter investigation will be completed, or whether its scope differs from the attorney general’s focus on bribery-related crimes. A spokesperson for Mitchell, Erin Pellett, said she had no estimate for when the the investigation would conclude. She declined to comment on the attorney general’s announcement, citing the open investigation.
鈥淎s has been publicly reported multiple times and the Attorney General鈥檚 report now confirms: Governor Hobbs was not involved in, did not direct, and did not instruct any member of her administration regarding the rate increases the Department of Child Services approved,鈥� Christian Slater, a spokesperson for Hobbs, said in a statement.
As Democrats in a Republican-leaning state, Hobbs and Mayes both face tough fights for reelection in November. Biggs, who has made the scandal a centerpiece of his campaign for governor, said Mayes was 鈥渨hitewashing obvious corruption鈥� by clearing her fellow Democrat.
Company got a rate increase after political contributions
The company gave $200,000 to the state Democratic party in the months leading up Hobbs鈥� November 2022 showdown against Republican Kari Lake. After her narrow victory, Sunshine gave another $100,000 to Hobbs鈥� inaugural fund weeks before she took office in 2023 and another $100,000 to the party in August 2023, according to records.
Sunshine also gave $150,000 to a legal defense fund for Hobbs between November 2023 and the following May, according to records released by Mayes. Those contributions had not previously been disclosed.
The company’s founder, Simon Kottoor, and his wife, Elizabeth Kottoor, each contributed a total of $10,400 to Hobbs鈥� two gubernatorial campaigns.
Sunshine sought an increase in 2022, but it was denied about a month after Hobbs took office. The company tried again and was approved in May 2023, raising its rate from $149 to $195 per bed.
The Arizona Department of Child Safety said Sunshine told the state it would reduce its bed capacity if it didn鈥檛 get a rate increase and instead would use such beds to house unaccompanied immigrant children for the federal government.
The ultimatum came as the federal government was reimbursing group homes at nearly twice the rate paid by the state, which had already seen some providers moving beds to the federal program that serves unaccompanied immigrant children, the agency said.
Sunshine is the state’s largest provider of beds for children without developmental disabilities, with about 290 beds across 28 homes. It also provides 70% of beds for siblings in foster care in metropolitan Phoenix. Losing Sunshine鈥檚 beds would significantly affect the state鈥檚 ability to place children in homes and would likely lead to siblings in foster care being split up and sent to different homes, the agency said earlier this month.
鈥淭he potential loss of approximately 290 beds was a serious capacity concern that required careful consideration of the consequences for children and the broader child welfare system,鈥� the agency said in a statement.
The agency said then-DCS Director David Lujan approved the increase and that the governor and her staff weren鈥檛 involved.
All providers that previously had contracts with the agency received rate increases during a new round of contracts in 2024, when Sunshine also saw its rate increase to $234 per bed.
Rate increase likely the result of Sunshine’s leverage over the state, AG concludes
Hobbs declined to be interviewed by investigators but submitted two statements through her attorneys on Monday, according to a memo from Nick Klingerman, chief of the attorney general鈥檚 criminal division. Her statements said she did not discuss contract rates with anyone from Sunshine, nor did she 鈥渙rder or authorize鈥� others to do so on her behalf, and didn鈥檛 even know there were discussions about rates until after the increase was approved.
鈥淩ather than the result of a bribe, the investigation has found that Sunshine鈥檚 rate increases appear as the result of its outsized leverage over DCS鈥� congregate care program,鈥� Klingerman wrote.
Furthermore, he wrote, political contributions are protected speech, and any charges filed against Hobbs or Sunshine executives would likely be tossed on First Amendment grounds.
In seeking the investigations, Republican state Sen. T.J. Shope pointed out the group-home company was under scrutiny for its care of , a 9-year-old who stayed at a Sunshine home in Glendale in December 2022 after his father was arrested on a drug charge. He days later at a hospital from complications of Type 1 diabetes, including the serious complication known as ketoacidosis.
A lawsuit alleges poor management of the boy鈥檚 diabetes while in the foster care system and that child welfare authorities and Sunshine were negligent in exposing the boy to harm that resulted in his death. While the state has denied the negligence allegations, two Sunshine employees responsible for providing direct care for Blodgett during a crucial stretch of his decline in health testified they didn鈥檛 have the necessary training or knowledge to manage a Type 1 diabetic.
The Maricopa County Sheriff鈥檚 Office interviewed several Sunshine employees as part of its criminal investigation into Blodgett鈥檚 death. No one has been charged. The county agency said the investigation remains open.
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Associated Press writer Jonathan J. Cooper contributed to this story.
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