Grants under investigation after ex-official alleged manipulation, Kansas Gov. Kelly says

Kansas Gov. Laura Kelly said Wednesday that an outside investigation is reviewing the awarding of federal pandemic aid after a now-dead former official at the state Department of Commerce alleged he helped manipulate the process.

The Democratic governor also said state law should change to allow for expanded criminal background checks after The Kansas City Star and The Wichita Eagle reported that the Kansas Department of Commerce hired the former official, Jonathan L. Clayton, without a national criminal background check – failing to uncover that he had committed multiple financial felonies in Pennsylvania.

Clayton, who left Commerce in 2023 after serving as its director of economic recovery, had been working as the interim city clerk of Peabody. He went missing on Aug. 3 and his husband, Christopher King, said he was found dead on Sunday after his truck went off the road near Newton and crashed into a tree .

On Aug. 8, an email purporting to be from Clayton was sent to officials and journalists. The message, with the subject line “Message from Jonathan Clayton following his death or incapacitation,” alleged that Lt. Gov. David Toland, who leads Commerce, had employed a “scheme” to alter the recipients of the first round of the Building a Stronger Economy , or BASE, grant. Clayton wrote that at Toland’s direction, he had helped alter the scores of applicants for the grant, which launched in 2022.

Asked on Wednesday whether she was confident the BASE grants were awarded appropriately, the governor responded that “‘we’re actually investigating that to ensure that they were.”

“I know that when the BASE grants went out initially that there was some concern, not necessarily on the specific grants, but on the geographic distribution of the grants,” Kelly told reporters after an unrelated event in Olathe. “So we addressed that in future BASE allocations but in terms of the fidelity of the grants themselves, we think that was OK but we want to make sure.”

Kelly said “independent investigators” were examining the grants. The governor said she didn’t know who is conducting the investigation but that they are independent of Commerce and Kansas as whole.

Clayton’s email alleged that the Kansas Department of Commerce, directed by Toland, “concocted a scheme to alter the results of the BASE Grant program” by changing application scores to steer grants to the districts of the House speaker and Senate president. Those legislative leaders were then-House Speaker Ron Ryckman, a Johnson County Republican, and Senate President Ty Masterson, a Butler County Republican.

Clayton said the first round of BASE funding involved an “inordinate number” of projects that were awarded in Butler and Johnson counties. The two counties – which combined have less than a quarter of the state’s population – received nearly half (47.8%) of the award funding for the entire state. The other 103 Kansas counties competed for the remaining 52.2% of the funding in BASE 1.0.

Of 440 applicants for the more than $100 million in grants, 35 projects were awarded in the first round.

Clayton said in his email that he was ultimately forced to resign after he refused to alter the results in the second round, an additional $50 million of grant money. In that round of funding , projects in Johnson County received just 8% of the funding while no Butler County projects were awarded BASE grants. Projects in Sedgwick County, home to the state’s largest city and to Republican Dan Hawkins, who was House speaker during the second round, received 25% of the funding in BASE 2.0 after receiving less than 5% of BASE 1.0 awards.

A spokesperson for Hawkins didn’t immediately respond to a request for comment. Ryckman couldn’t immediately be reached.

On Thursday morning, Masterson spokesperson Mike Pirner in a statement emphasized that legislative leaders played no role in Commerce’s scoring of BASE projects and that Masterson never requested “or even had a conversation about altering the Department’s scoring.” He also said that any characterization that Butler County received an “inordinate” amount of funding is unsupported by the grant award data.

“The circumstances that surround Mr. Clayton’s apparent death and involvement on several boards and commissions as a KS Dept of Commerce employee are appropriately being investigated by law enforcement. Our office has and will continue to support law enforcement in their efforts to uncover the truth,” Pirner said in an email.

The Kansas Department of Commerce in an unsigned statement on Thursday called Clayton’s allegations “categorically false.”

“While there is no evidence of any impropriety at the Department of Commerce, as an extra precaution, an independent third-party contractor is doing a full review of all ARPA grants,” the statement says.

Commerce spokesman Patrick Lowry said last week in response to questions about Clayton’s allegations that the agency was aware of allegations of misconduct against a former employee “in connection to activity that occurred after they left state employment” – a reference to Clayton, who is suspected of embezzling pandemic aid while working for local associations in Peabody and Mullinville.

“We are reviewing the matter to determine what, if any, impact the alleged activity may have to the agency or community partners,” Lowry said. “We are also assisting state and federal law enforcement, as appropriate.”

Kelly on Wednesday said that she “of course” stands by Toland.

“David Toland is an absolutely phenomenal secretary of Commerce who has been spearheading the most capital investment in state history – $20 billion in new capital investment – and it’s been because of the hard work of the secretary and his people at the Department of Commerce,” she said.

Background check changes

Clayton, 42, went missing in early August as his Pennsylvania criminal record was becoming more widely known locally after the Peabody Gazette-Bulletin reported on it. He and King were also served in a debt collection lawsuit on the day he went missing.

Clayton previously pleaded guilty to theft and forgery in Pennsylvania stemming from his misuse of an employer’s credit cards to bolster his and his husband’s fledgling theater company, which ultimately closed. He was sentenced in 2018 to five years probation and was ordered to pay $210,000 in restitution.

But Commerce has said the agency was unaware of the felony record when it hired him in 2020 – first as a regional project manager in southwest Kansas and then as director of economic recovery, where he oversaw economic recovery programs within the agency funded by federal pandemic dollars.

The Kansas Department of Administration, which handles some personnel functions for state agencies, said Commerce was unable to perform a national criminal background check. State law must authorize specific positions to seek national checks from the FBI – the positions held by Clayton weren’t on the list.

Kelly indicated she thinks state law needs to change.

“I think the process worked the way the process usually works,” Kelly said. “I think what we discovered now, though, is that we have some statutory language that we need to address that will allow us to do more comprehensive background checks.”

Clayton was also on probation when he moved to Kansas from Pennsylvania and landed a job with the state’s Commerce Department.

Ordinarily, his probation officer or some other Pennsylvania authority would have transferred Clayton to a Kansas probation office to take over responsibility for his supervision when he moved. Clayton’s husband told The Eagle that Clayton continued reporting to his Philadelphia-based probation officer via phone calls while working at Commerce.

Kansas corrections officials said Clayton was never under their supervision, and they don’t know how he “fell through the cracks.”