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Scott G Winterton, Deseret News
U.S. Attorney for Utah John Huber walks past UTA officials during a press conference in Salt Lake City on Tuesday, April 4, 2017. Huber announced a deal with UTA that means it will not be prosecuted in connection with an investigation of financial and ethical issues.

SALT LAKE CITY — Federal prosecutors announced Tuesday they have reached a deal with the Utah Transit Authority that means it will not be prosecuted in connection with an investigation of financial and ethical issues.

U.S. Attorney for Utah John Huber said, however, that the investigation into individual wrongdoing continues.

"Today's announcement is not the end of the story," he said.

Some of the deals and complicated relationships surrounding multimillion-dollar developments near UTA transit stops have been talked about for years. But much remains unclear, even after two separate news conferences Tuesday.

Under the agreement, federal prosecutors will not go after UTA over its operation of mass transit services, applications for federal grants, use of federal lands, acquisition of property and capital improvements — provided that UTA complies with certain conditions.

But Huber said there is still a "very active investigation into misconduct by individuals," though he refused to elaborate or answer any questions about the agreement. UTA officials also declined to talk about any of the people connected to the investigation.

Utah House Speaker Greg Hughes, a former UTA board chairman, met with federal authorities last week but is not a target of the investigation, according to a statement from his attorney, Brett Parkinson.

Documents attached to the agreement do refer to three former UTA board members — Terry Diehl, a developer who is Hughes' friend and business partner; Sheldon Killpack, a former Senate majority leader; and Chris Bleak, who served as chief of staff to a former Utah House speaker.

And a former House majority leader, Kevin Garn, is a principal in a company cited in the documents, the Thackeray Garn Co. in Layton.

The FBI has talked to the company, but Garn said "they made it clear we are not under any kind of investigation." Bleak and Killpack said the FBI has not interviewed them and they don't expect to hear from the agency.

Phone messages left with Diehl and his attorney were not returned.

The inch-thick agreement package mandates full cooperation from UTA and requires the agency to retain an outside independent monitor “to ensure continued implementation of improvements,” for three years, Huber said.

If UTA fulfills the agreement, Huber said the agency will not face criminal prosecution.

The issues identified in the agreement are inadequate controls over federal funds; inadequate oversight of transit-oriented development projects; noncompliance with ethical standards; and improper approval of executive bonuses.

Jerry Benson, president and CEO of UTA, said the announcement “has been a long time in coming, and I agree we still have a long road ahead of us to build trust and support.”

Benson said the agency has made “dozens of changes and reforms” since a 2014 legislative audit uncovered details about development and other issues, including employee bonuses.

The UTA board chairman, Robert McKinley, said the agreement “lifts a dark cloud from over UTA.” McKinley said the agency is “fully committed” to cooperating with the federal investigation.

UTA officials held a separate news conference to detail the changes that have been made as a result of the federal investigation that began two years ago, as well as the critical legislative audit that raised similar concerns.

No current employees or board members are being investigated, according to McKinley, who also said UTA "was never a target of this investigation, at least from my knowledge of it."

UTA general counsel Jayme Blakesley said what was labeled a "non-prosecution" agreement protects the agency from having information UTA turned over to federal investigators used against it.

"That's not to say there was concern about what was being provided," he said. However, the agency is dependent on federal funding, which accounted for nearly $1.5 billion, or 41 percent of the cost of light rail and other major projects.

Federal funds were involved in two of the projects Blakesley said investigators are looking at — rail extensions in South Jordan and Draper. But he said UTA did not lose or have to repay any federal funds and has since received grants for a Utah County project.

"The bottom line for me is that the U.S. Attorney's Office recognizes the many reforms that UTA has enacted to address past problems and prevent them from recurring," Blakesley said.

He described the agreement, which requires the agency to provide information to investigators, as voluntary and said the changes made by UTA were not dictated by the federal government.

Individuals were named in documents made public to show UTA was enforcing its new polices that include what he termed the state's strictest ethics and conflict of interest policies, Blakesley said.

Investigation confirmation

Tuesday was confirmation of a long-rumored investigation into UTA projects.

In February, FBI special agent Jon Isakson acknowledged during former Utah Attorney General John Swallow's criminal trial that the FBI has an ongoing investigation of Whitewater VII, a company looking to build a transit-oriented development near the Draper FrontRunner station in 2009.

The development also has been the subject of two legislative audits and a Utah Attorney General's Office investigation, which was turned over to the FBI.

The case came up in the Swallow trial because the state's star witness, convicted millionaire businessman Marc Sessions Jenson, testified that a secret meeting involving UTA officials and developers took place in his Southern California office in June 2009 when he was hosting Swallow and former Utah Attorney General Mark Shurtleff at the posh Pelican Hill resort where he lived.

Jenson claimed that Hughes, a Republican who represents Draper, attended the meeting. Hughes was a House member at the time as well as UTA board chairman.

Hughes vehemently denied being at the meeting and provided proof that he was in Utah during that time.

Hughes' attorney issued a statement saying the U.S. attorney confirmed to him that the speaker is not a target of the ongoing UTA probe or any investigation.

"Speaker Hughes has offered and continues to offer his assistance. In response to his offers of assistance, the speaker met with federal authorities last week. Out of respect for their investigation, we cannot comment further," Parkinson said.

Hotel project

In an August 2016 letter to the Thackeray Garn Co., UTA expressed concerns that the Layton company had invited Killpack and Bleak to invest in a hotel project at the UTA station in South Jordan.

Bleak and Killpack were members of the UTA board when the so-named SoJo hotel project came before the board for discussion, including in closed meetings, and approval. Both were privy to information about transit-oriented developments that was not available to the public.

"It is inappropriate for a UTA board member, officer or employee to be on both sides of a transit-oriented development project," according to the letter signed by UTA's Benson and Blakesley.

"This is exactly the type of concern that UTA repeatedly gave voice to in discussions with you — and we do not believe there is any question that you understood UTA's concerns."

Bleak said he was not a member of the board when a friend and colleague invited him to invest in the hotel project, but after doing due diligence, including contacting UTA, did not invest.

"Once it became clear this would be an issue, I didn't invest any money, and am not, was not and will not be an investor in this project," he said.

Killpack, too, said he did not put money into the project after UTA informed Garn that it was against agency policy. Killpack was no longer a board member when he was approached about the investment.

"They let him know that they were going to exercise their right to do that. That was fine with me, so I'm not part of that investment," Killpack said.

Both Bleak and Killpack said they didn't receive nor ask for any non-public information relating to the South Jordan transit project.

Garn said he was not aware of the UTA policy when he asked Killpack to get involved in the project. He said the "simple solution" was for him not to invest.

"We did not do anything outside of policy at all," Garn said.

Terry Diehl

The Thackeray Garn letter also says that "in the recent past," UTA raised concerns about another former board member's participation in transit-oriented development projects.

Though he is not named in the letter, that would presumably be Diehl, who worked for Whitewater VII while he was a member of the UTA board.

Diehl in 2008 consulted for and later held ownership in Whitewater VII, which wanted to develop land next to the proposed FrontRunner stop at 12800 South in Draper, according to a 2011 legislative audit.

In November 2009, UTA selected that site for the station. A month later, Diehl sold the development rights for the property to a company called Draper Holdings, the audit said, "for an undisclosed amount."

Legislative auditors concluded Diehl made "in the millions and less than $24 million" on the deal. Diehl resigned from the board in May 2011.

As recently as 18 months ago, Diehl was trying to influence UTA board members, executives and staff members on UTA projects, according to a letter included in the agreement the transit agency reached with federal prosecutors.

"As you may be aware, pending legal matters call into question the propriety of your ongoing contact with UTA. For this reason, I write to request that you cease and desist from any and all contact with UTA, effective immediately," Blakesley, the UTA attorney, wrote in the August 2015 letter.

The documents included in the UTA agreement with the U.S. Attorney's Office also include four May 2016 letters from UTA to Thackeray Garn canceling contracts for development projects at the Ballpark, 3900 South, Farmington and North Temple transit stations.

Garn said that was done by mutual agreement because there were "big problems" with developing around those areas and that UTA was not dissatisfied with the company's work.

Thackeray Garn is currently building an eight-story hotel and two office buildings near the South Jordan transit station.

15 comments on this story

Senate Minority Whip Karen Mayne, D-West Valley City, a longtime UTA critic, tweeted, “UTA tap dancing,” while watching the agency’s news conference from the back of the room.

Afterward, she told reporters she expects lawmakers to consider making the public transit district, now governed by a board appointed by local and state government officials, a state-controlled entity.

“They are an arm of state government,” Mayne said, no different than any state department that receives federal funding. “We have control over that. And that control, we need to use. If they’ve gone rogue, we need to bring it back.”