Under fire, Nixon administration withdraws fee-office contract to St. Louis County councilwoman
The Missouri Department of Revenue has withdrawn the fee-office contract that was to go to St. Louis County Councilwoman Kathleen Kelly Burkett and is instead awarding it to the runnerup in the bidding process: Mid-America Transplant Services of St. Louis.
The state’s system of 182 privately run fee offices handle drivers licenses, vehicle plates and tags, and registrations.
Burkett, who currently manages a fee office in Ferguson, has been a Republican target ever since her contract had been announced because she had declared personal bankruptcy last year.
Burkett, D-Overland, has said her personal financial problems shouldn’t affect her standing as a fee-office operator and cited her experience helping to run her family’s former fee office in Overland for 40 years.
In a statement, the Department of Revenue didn’t mention Burkett by name, but did cite her firm, Deer Creek License Office Management, Inc. and its apparent “failure to satisfy all of the obligations contained in the proposal.”
“The bid had a financial assurance component in the Request for Proposal, and Deer Creek License Office Management Inc. failed to meet that obligation prior to assuming control of the office," the department added in a subsequent note.
Records filed with the Missouri secretary of state’s office indicated that Burkett’s firm had failed to file the proper paperwork and faced “administrative dissolution” if its annual registration report, due months ago, isn’t filed by June 12.
In an interview earlier this week, Burkett said that she already had taken steps to file the report. She blamed her accountant, David Yochum, who she said failed to notify her that the registration report had yet to be filed. She said at the time that she was unaware of the problem until the Beacon inquired about the late report, documented online.
Burkett said in an interview late Thursday that she was upset over the Department of Revenue's latest action. She said she found out that she had lost the contract via an email sent to her just minutes before the department sent out a news release.
Burkett said that the department had just told her a couple days ago of the paperwork issue involving her bank line of credit -- which is required for the fee office contract. She said she had been working with the bank to revise the wording, as sought by Revenue officials.
Burkett tearfully added that she believed that she lost the contract because of the publicity over her bankruptcy filing, and not because of anything improper with her application. If there had been problems, she said, "they could have tossed out my bid a long time ago."
Burkett's financial problems, first reported by KTRS radio's McGraw Millhaven, have made her a Republican target. The GOP contends that the shift on her contract validates its assertion that Gov. Jay Nixon's office initially awarded her the contract on political grounds. Burkett and state officials disagree.
Burkett long as has been a Democratic activist, and headed St. Louis County's Democratic Central Committee for most of the 1990s.
According to the Department of Revenue, Mid-America Transplant Services plans to retain the fee office at its current location, 3238 Laclede Station Road in Maplewood.
In its bid, Mid-America had promised to return up to 15 percent of its fee-office revenue to the state. The return was estimated to be $62,733 a year, based on the office’s current total income.
That was a larger return than Burkett had offered. But Burkett had scored higher total points in her bid because of her longstanding experience in Missouri’s murky, and unabashedly political, world of private fee offices.
The battle over the Deer Creek office -- long one of the state's busiest -- is just the latest chapter.
Private firms with public functions
For most Missourians, “fee offices” are simply the places – often storefronts – where they go to obtain their drivers licenses, purchase license plates and tags, and file papers for vehicle registrations or titles.
They are known as “fee offices’’ because a fee is tacked onto the price. That money covers the costs of the business, including equipment, staff – and profit.
For at least 70 years, Missouri’s fee offices also have served a political function. Until a few years ago, governors used them to reward supporters.
Each time a governor came to power, his administration and allies would award new fee office contracts to political supporters. The private contracts often have been highly sought after, although documentation is hazy over how much they are worth.
The amount of money that the fee offices receive for handling such state-provided items as licenses, tags and vehicle registrations is public. But the costs to operate the fee offices -- and any profit -- are not, because the offices are private businesses. Their employees are not on the state payroll.
Since the 1980s, lawsuits have been filed periodically by fee-office operators who want to retain their contracts under new governors. A frequent legal argument has been that the staff really are state employees, subject to protections against firings on political grounds.
So far, though, the courts generally have ruled against such suits – saying that governors have the right to control who gets the fee office contracts.
Still, fee offices often have been gubernatorial headaches as well.
When Republican Matt Blunt became governor in 2005, he privatized 11 state-owned license offices, including Deer Creek. Some of his allies also formed private management companies that, in turn, set up private contracts with fee office operators. The dealings were not public, and prompted accusations that operators were pressured to sign up with the management companies.
A federal investigation of Missouri’s fee office system ensued, although authorities said that Blunt was not the target. By 2007, his administration set up the bidding process that was expanded by Nixon when he took office in 2009.
Nixon then persuaded the General Assembly to pass a bill that made the fee-office bidding system permanent. Nixon’s administration also set up the system so that all bids can be viewed online, including the “points’’ given each bidder for various aspects of their proposal. The bidder with the highest number of points is to get the contract.
But the new law didn’t prevent fee-office holders under Blunt from suing Nixon to keep them -- or for Nixon to be accused of still using politics to dole out the new contracts.
Burkett on good terms with current fee-office operator
Yochum, Burkett’s accountant, previously had done work for the current holder of the Deer Creek contract, Michael Becker, who has been running the office since he acquired the contract during Blunt’s administration.
Becker had sued Nixon’s administration in 2010 in an attempt to keep the contract but settled out of court. Plans had called for Becker to sell his equipment to Burkett, who also planned to keep Becker’s staff and the same location.
Until the news broke about her financial problems, Burkett had hoped for a seamless changeover in early June. In fact, she has become friends with Becker and even worked briefly in his office this spring to help him out when a top employee was on leave, Burkett said.
Burkett, 66, maintains that her private financial failings shouldn‘t have had any impact on how she operates the Deer Creek office. She blames her financial troubles on the loss of her family’s fee office in 2005, when Blunt took over.
Until Blunt, Burkett's family had held onto the Overland fee office through Republican and Democratic governors, going back to the 1960s.
Since losing that fee office, Burkett says she has been unable to find a job that provided as much income.
For about two years, she has been managing the Ferguson fee office, run by the local Lions Club.
Burkett said Thursday that she already had given her notice weeks ago to leave the Ferguson office, and now has no job after June 6. She added that she was particularly upset because a Ferguson coworker who she had planned to bring with her to the Deer Creek office also now has no job, since she had also given notice.
Spence campaign launches attack
After Millhaven's radio report about Burkett's financial troubles, the campaign of one of Nixon’s Republican rivals, Dave Spence, took notice and fired off news releases that cast a spotlight on her.
(Burkett contends that Republicans had warned her months ago that the GOP was aware of the bankruptcy and might use it against her or other Democrats, should the opportunity arise.)
Spence’s campaign had alleged that Burkett’s money problems should have prevented her from getting the Deer Creek contract. Nixon was accused of rewarding her for her political ties, which his administration has denied.
Burkett's application had included recommendations from St. Louis County Executive Charlie Dooley and county Assessor Jake Zimmerman.
For at least two years, Republicans have cited other Democratic allies who got fee-office contracts under Nixon. His camp has countered with lists of Republicans who also got contracts.
Spence's consultant Jared Craighead, former executive director of the Missouri Republican Party under Blunt, contended that the GOP’s accusations against Nixon were valid.
“He tries to wear the ‘white hat,’ “ Craighead said. “The broad context is that, in spite of his claims to take patronage out of fee offices, the governor has miserably failed in that regard.”
Craighead is familiar with the fee-office system. A lawyer, he represented former fee-office operator Buddy Hardin in his suit against Nixon. Like Becker, Hardin had been awarded the contract under Matt Blunt and wanted to keep it.
Hardin ended up dropping his case.
A spokesman for the Missouri Democratic Party contended that the Spence campaign’s jabs at Nixon over fee offices were aimed at masking Spence’s own embarrassments while on the board of a bank that received $40 million in federal bailout money.
“When it comes to talking about ethics, Dave Spence completely lost his credibility when he voted not to repay his bank’s $40 million bailout and then lied about it to the press," the spokesman said.
Nixon’s allies also highlight the fact that the fee-office bidding system is now largely public – which was not true under his predecessors.
Craighead contended that the apparent misstep’s over Burkett’s now-lost contract are proof that politics remain at the core of Missouri’s fee-office system.
"Jay Nixon’s backtrack on the most recent fee office award can be summed up in one word: guilt," Craighead said. "Once again, he was caught handing out political favors instead of doing the right thing, and now he is trying to cover it up by blaming the person he awarded the office to.”
He added that Spence will change the system. However, Craighead said the campaign was still working on the specifics.
(Begin update) Spence said in a later interview that, if elected governor, he'd seek to get all patronage out of the fee-office system.
He called the system representative of "a bygone era. It breeds controversy."(End update)