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Personnel loophole in state law concerns auditor

Former Gov. Joe Manchin's administration may have circumvented state personnel law and bidding procedures to hire a personnel consultant whose job mirrored or overlapped the work done by the state's Division of Personnel, the Legislative Auditor's Office said Monday.

Legislative auditors examined contracts the Manchin and Tomblin administrations had with Joe Smith, a former state official who advised them on personnel laws. Legislative Auditor Aaron Allred said he is concerned Smith took advantage of a loophole in personnel laws designed to prevent double dipping.

Allred said he is concerned others may use the loophole in the future.

The audit also raises the question of why Smith's services were needed to begin with. His contract with the Manchin administration required Smith to "review personnel action recommendations" and "research and apply current personnel law."

"The Legislative Auditor is not clear why this contract was necessary since these are similar duties of the Division of Personnel which also falls under the authority of the Governor's Office," the audit report said.

The auditor even uncovered an email where Division of Personnel Director Sara Walker appears to ask Smith for approval on a personnel matter. Allred said he was concerned that government officials would be reporting to contractors.

Smith's contract has been reported on previously as a possible way for retired employees to double dip. State law says retired public employees who resume working for the state must give up their pension benefits if they are paid more than $15,000 a year.

Smith has said that provision didn't apply to him because he was an independent contractor and owned a company. He was the sole employee of his Smith Personnel Consulting LLC.

But Allred said Smith only created his company on May 12 — nearly three weeks after he signed a no-bid contract with the Manchin administration. Smith also had many of the trappings of a public employee, including a state telephone number, a ".gov" email address and a parking spot.

"An individual was hired, in our opinion, to act as if he was a state employee," Allred said.

Smith retired in 2001. When he came back to work on contract for the Manchin administration in 2005, he made several times the $15,000 limit but continued to draw his full state pension and during that period also received a stipend as a member of the state Racing Commission.

The audit found that the arrangement "exercises a loophole allowing a retired state employee to be paid $74,000 yearly while receiving his full annuity." Together with his retirement and his consulting contract, Smith made $750,000 in the six years the audit examined.

The audit also found that the state Purchasing Division approved a sole-source, no-bid contract without verifying that Smith was the only qualified individual for the job, something that is required of sole-source contracts.

Smith is the former acting personnel director for several governors, a relatively unique qualification. But the audit notes that there were at least several other former personnel directors who might have been qualified for the job.

Allred said, "There should have been notification and there should have been bids on this work."

Manchin, now a U.S. senator, defended Smith's work in a statement Monday evening.

"When I first became Governor, my goal was to make government work better and save taxpayers money," Manchin said. "Our state's personnel problems were expensive and our system lacked accountability. In order to establish a better system that was more uniform and accountable, I turned to one of our state's foremost experts, Joe Smith — whose contract for services was approved by the Purchasing Division. To be clear, Joe Smith played a critical role not only in making our government work more efficiently but also in saving taxpayers money."

Allred told lawmakers Monday afternoon that the audit was not about Smith's job performance.

"In no form or manner are we criticizing the work of Mr. Smith," Allred said.

Smith terminated the contract with Gov. Earl Ray Tomblin's administration in November. In an interview at the time, he cited family demands as the reason for his departure.

Contact writer Ry Rivard at or 304-348-1796. Follow him at


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