The state attorney general's office is investigating Economic Development Director Dave Adams for possible ethics violations, officials said Friday.
The investigation was started only hours after the state's legislative auditor general released a report questioning Adams' role in two private, non-profit groups established to attract major sporting events to Utah.Meanwhile, officials in Gov. Norm Bangerter's office said Friday the investigation will not be a factor when the governor decides whether Adams will keep his job during the next four years.
Adams was in the Far East on state business and was not available for comment.
Bangerter, re-elected to a second term last month, has asked for the resignation of all appointed employees and is deciding which to keep. Economic development is seen as a critical department because the administration has targeted job growth as a major priority.
"There is nothing in this report that would endanger Dave Adams' job," Bud Scruggs, Bangerter's chief of staff, said after reading the audit. He said the audit contains no evidence of corruption or malicious wrongdoing.
In addition to Adams, the attorney general's office also will investigate Dave Johnson, director of Better Utah Inc. and the Utah Sports Foundation, the two private groups in the audit.
The audit said Adams may have violated the state's Employee Ethics Act by being a member of the board of directors of the Sports Foundation and being an officer in Better Utah Inc. while serving as director of the state department that dealt directly with those groups.
Better Utah was established in 1984 and was used to raise funds for the state's unsuccessful bid for the 1992 Winter Olympics. The Sports Foundation received a contract from the state earlier this year after state officials decided to turn their sports promotion efforts over to private business.
The foundation still receives $247,000 yearly from the state but has a goal of becoming self-sufficient.
The audit revealed evidence of double-billings done by Better Utah, which also received money from Salt Lake City. A recent Salt Lake audit revealed similar evidence.
However, no evidence was found that Adams, Johnson or any other employees were stealing money. Money obtained through double-billings, more than $20,000, was apparently used to build the financial base of the groups.
Adams was an officer with Better Utah when the Sports Foundation was given the state contract earlier this year. Better Utah committed $30,000 to support the foundation's bid, and state employees helped the foundation type its bid.
The Sports Foundation was the only company to submit a bid, and the contract that was subsequently signed stipulated that Johnson was to become an employee of the organization. He became the director of both private groups.
The audit said some obvious organizations were left off the list of potential bidders.
"Some DCED (Department of Community and Economic Development) employees engaged in several conflicts of interest," the audit said. "In our opinion, these conflicts gave an unfair advantage to the USF (Utah Sports Foundation) in winning the bid."
Scruggs said the idea of the state turning its functions over to private business is relatively new and state employees are unfamiliar with proper procedures.
"They need to realize that part of the choice to privatize is the understanding you have to let go," Scruggs said, adding that Adams will relinquish his ties with the two groups.
He said the state will look closely at the outside interests of other employees in the economic development department.
"We need to go through and have every member tell us what private boards they belong to," Scruggs said. "They will have to chose to either step down or lose their state jobs."
Dave Grant, deputy director of the Department of Community and Economic Development, said the state will follow the recommendations in the audit and will remove all conflicts of interest. He agreed the bidding process should have involved more organizations.