Who Audits the Auditor?

            Some of the most informative and satisfying moments in the follow-up to the extraordinary cheating scandal in El Paso schools actually took place at a meeting in the State Capitol early last year. In a case that featured reports of truancy officers going to homes to keep low-performing refugee kids—desaparecidos as they are called—from going to class. It’s hard to imagine anything that could be more bizarre than what students and teachers already endured in E.P. Independent School District, but at the Texas Capitol all things are possible and legislative hearings can be as strange and unnatural as anything seen in crazy classrooms. 

The principal witness of the House Select Committee on Transparency that day was John Keel, longtime State Auditor.

John Keel’s testimony was not intended to be about what his office had or—more importantly—had not done after the first reports of scholastic wrongdoing in West Texas. But Democrats on the committee smelled blood and that’s what they got.

The venerable Mr. Keel later described his own testimony during the legislative session as “bob and weave” yet it seemed, really, he sat there and took a beating. The State Auditor was on the defensive as he described his performance on a number of investigations from cancer research to Governor Perry’s varied economic endeavors. The hearing was like watching a young Ali—or a couple of young Alis—against an old George Foreman. First out of the corner was Rep. Trey Martinez-Fischer of San Antonio. The lawmaker asked an apparently innocent question about authority to audit local schools. He connected on his very first punch.

John Keel explained that his office has authority to investigate all state entities—but has no mandate to look at the workings of cities or counties in Texas—and has statutory review of river authorities (Brazos, Colorado, Red et al) but where, the auditor left unsaid, the politics can be pretty heavy-going. “We do very little work at school districts. It depends on the nature of the money,” Keel told the committee. As if that weren’t explanation enough, which it would turn out not to be, he repeated, “We do very little work on school districts.”

Next at the microphone was Rep. Naomi Gonzalez of El Paso who is actually a product of the schools in question. As the Republican chairman ran interference for Mr. Keel and reminded The Committee of the clock’s few remaining minutes Rep. Gonzalez pressed home basically a single question phrased as two: Does the state auditor—you sir, in other words although she put her question in a cordial and businesslike manner—“have the authority to audit a school district?” She asked again, “What exactly are those parameters when you get involved?” 

Mr. Keel said he would get back to her with a written response, which her office says he never did. “I’d like to go back and check with our general counsel,” he told the committee six years after he was first contacted by the El Paso delegation about corruption in hometown schools. Little matter, because—as in a courtroom—at a committee hearing in the Capitol you don’t ask a question for which you don’t already know the answer. It may be why the members are meeting in the first place. They just want to hear you say it for the record.

At the end of the hearing someone threw Mr. Keel an easy one, something he could hit—about his opinion as an experienced state official.

 “It’s a pretty good idea for me,” said the auditor, the state’s chief numbers guy, a CPA described even by his friends as having a personality like stone, “to keep most of my opinions to myself.” 

John Keel is old Texas from a well-known fifth-generation-Austinite, Irish Roman Catholic family whose members, like the Johnsons and Bushes, have mostly worked in public office.

For the Keels public service has been, until recently, often on the administrative not elective end. John Keel’s origins are not as well-known as those of his famous cousin, former State Rep. Terry Keel who was sheriff in Austin before arriving at the House of Representatives and eventually becoming Parliamentarian. Running for office, after all, lays someone naked to the public eye in a way that serving as a high bureaucrat—what the British call a mandarin—does not. 

It’s said nonetheless that John Keel was brought up alongside Terry, “like wolves,” as a former adversary noted, by Terry’s father Thomas Keel who was for many years director of the Legislative Budget Board, also at the State Capitol. John learned his numbers early taught by someone, Uncle Tom, who knew how the State of Texas makes money and pays its bills. That may be part of the problem—not the State Auditor’s knowledge base but his extended family. There are so many Keels and they are so well-connected which may be why John looked so wary last legislative session, about questions that were both asked—and not asked at all. The undercurrent of the questioning can be described as an effort to understand the Keel family as well as John or Terry. The Keel cousins are “made guys” at the Texas Capitol, an underworld term that also sometimes serves in Austin.

John Keel’s conflicts of interest—in a position as sensitive as State Auditor—it's like appointing a member of the Gambino Crime Family as director of the FBI. In a statehouse famous for influence-peddling and questionable deals, no doubt, so extensively corrupt that it seems almost mean-spirited to single out any one COI. But if you had to chose one, one fact of life in the affairs of the State of Texas that might explain why the State Auditor’s integrity is compromised and why he was probably the wrong guy to expect action from about a scandal that started in El Paso but which implicates state officials in Austin—it is this:

Suppose, for a moment, the fraud hot-line rings at the State Auditor’s Office.

Suppose someone is denouncing the way, for example, burial plots are handed out as patronage in Austin—as freebies to the deserving and sometimes-undeserving elites. That is a claim that has actually been made, repeatedly, about the State Cemetery, a few blocks east of the Capitol, last resting place to Stephen F. Austin, Ann Richards, “Big John” Connally and many other Lone Star heroes and heroines and not a few also-rans. Suppose John Keel got the call. Keel’s office could investigate, it’s certainly within his authority as auditor, but the Keel family through reservations for the living including two yet-to-be-named spouses has nine burial plots already set aside for themselves, a whole little row in Statesman’s Meadow, more than all the Bushes and Perrys and Richardses combined. The Keels are a made family too.

 

On paper John Keel’s expertise is without parallel. He knows the State of Texas better than most anyone can claim. He worked for former state rep/secretary of state/comptroller/lieutenant governor Bob Bullock way back when, at the Comptroller's Office, when Bullock was in his prime and his game was tightest, which means something even today to Republicans and Democrats alike. It means John Keel is good like most of Bullock’s people were—although not necessarily good in an ethical or right-versus-wrong sense because that’s not what’s meant when you say someone is good at the Capitol. 

Keel was an aide to Bullock who was the last patron before Gov. Perry, the last strongman in the state—back in the ‘80s and later when Bullock was president of the Texas Senate, in the roaring 90s, just before the old pol met and found common cause with Governor George W. Bush in the waning months of the millennium. John Keel according to who you’re talking to—either was never one of Bullock’s rat-pack drinking-buddy let’s-chase-the-secretary-around-the-desk kind of assistants of which Bob Bullock had quite a few—or he was, yes, very much a party guy, booze and babes, drinking til dawn like many of the rest of the early-mid Bullock crowd, before he gave up booze, Bullock not Keel. There’s no doubt about one thing: “Keel was a numbers guy,” said a former lobbyist who worked in the Capitol when Mr. Bullock ran state government. Bullock respected a good accountant, which John Keel is said to be, because Bullock’s power in government was based on having better numbers than anyone else. Keel was one of “Bullock’s number guys” and that’s saying a lot, good and bad.

Later, still back in the day, while Bullock was lieutenant governor, John Keel became director of the Legislative Budget Board just like his Uncle Thomas. When John Keel was appointed, as Speaker Craddick proudly proclaimed at the time, there had only been four directors of the Legislative Budget Board in history and two of them were named Keel. After Mr. Bullock’s death, and after W made the move to D.C., the then-serving state auditor—who had a reputation for “sticking his nose in things that didn’t concern him,” as a high-ranking Democrat explained—angering both D’s and R’s—made the fatal error of criticizing Gov. Rick Perry. A big, big mistake, what can you say? The old auditor was out. John Keel was in. He’s been in ever since. The last decade, the last few years, especially the last two or three years, have been rough. The questions about how he handles investigations are getting tougher, it seems, as the scandals get worse. John Keel knows the Capitol like no one else. Arguably, he knows the state’s numbers better than anyone else—and he knows when things don’t add up. Yet his audits seem only to confirm what has already been in the newspaper—until El Paso where his own integrity was placed on the line and his reputation with the power structure in Austin was first called into question.

When John Keel spoke at the Transparency Committee, before Representatives Martinez-Fischer and Gonzalez, his remarks were not limited to schools. He was asked about a number of recent investigations/reports by his office. The Office of the State Auditor had, for example, gone over the books of the Governor’s much-criticized Emerging Technology Fund but had not audited Governor’s much-criticized Texas Enterprise Fund, he admitted. In the case of the billion-dollar Cancer Prevention and Research Institute of Texas, on the day Keel testified CPRIT was getting national headlines for insiderism in grant-awarding. An indictment was coming from the district attorney. Extraordinarily, John Keel explained that his audit of CPRIT was produced without reviewing email, even though email was the original source of revelations of grant-awarding abuse. The auditor said that his own investigation had relied on information provided by the CPRIT Foundation—which has since been closed down by the legislature on the assumption it was a kind of slush fund. Let’s start there for analysis purposes.

John Keel's appearance before the legislature came at a particularly sensitive time for his family, too. Cousin Terry, head of the Texas Facilities Commission—housekeeper and landlord for state government—was at that moment being roasted in the press for attempts to sell or lease pieces of prime state land in Austin's super-hot real estate market in a process that was described by the daily newspaper as highly non-transparent. The Auditor’s Office report issued shortly thereafter ignored concerns raised by legislators and the press and concentrated instead on facility maintenance and costs per square feet of rentals for state office space, which no one really questioned but after issuing the audits John could say he audited Terry. The Sunset Commission, which also reviews state agency performance, issued a report that was not as family-friendly for the Keels, condemning Terry’s “quick acceptance and use of authority with limited direction, involvement or oversight,” in fact John's report on Terry was not even placed on the auditor’s website until there was an inquiry from the public if John Keel had ever investigated operations at the state agency run by his cousin. An open records request led to a response from both Keels that they have not communicated any time recently by email, private or public.

Responding to a legislator’s question during another Committee meeting—John Keel said he was unaware if top executives of state agencies file financial disclosure reports, an amazing answer from a man who has been in the Capitol for four decades, the last nine years theoretically reviewing conflicts of interest. The Auditor himself does not file a disclosure form with the Ethics Commission, btw. His cousin Terry Keel’s disclosure shows only that he has been buying condos in downtown Austin, at 1801 Lavaca, near the state office complex he was attempting to develop as a state official. Not that there's anything wrong with that. But it was John Keel’s handling of the CPRIT Foundation that seemed to draw more interest from legislators—second only to corruption in El Paso schools. 

“We do not have the authority to audit private foundations,” John Keel said. “I don’t have the authority to go into that foundation,” speaking of CPRIT. But he was actually answering a different question than what was being asked: The Auditor may not have the authority to audit a private foundation but he does have the authority to subpoena information—from anyone.  

The State Auditor’s Office maintains a “Special Investigations Unit” that has access to Texas Department of Public Safety files and databases and can obtain warrants and subpoenas, none of which John Keel appeared to have done at CPRIT where the Lieutenant Governor, State Comptroller and Attorney General were all on the governing board. “We require access to do our job,” Keel explained to legislators, as if the only compliance he can request is voluntary. In fact the State Auditor’s Office has more confrontational means at its disposal. He has authority to conduct criminal probes across the state. The entire bureaucracy of state government—including tens of thousands of public sector workers and billions of dollars of expenditures and revenues—is technically under Mr. Keel’s microscope. He can for example examine digital devices and email records and, actually, early last year, in a practice reminiscent of the National Security Agency, Keel’s staff was warned by the Auditor's highest levels to instruct email providers not to inform customers when a warrant is served for records and even to include a subtle threat of prosecution, if the warrant is revealed, which means John Keel can play hardball when he chooses. “Internet Service Providers are notifying customers when served with a preservation [of evidence] letter, subpoena, or search warrant. To prevent this from happening, include the following language in your preservation letter, subpoena requests, and search warrant applications,” a recent State Auditor’s inner-office edict reads: “’Please do not disclose or notify the user/subscriber of this [preservation letter, subpoena, or search warrant]. Disclosure to the user/subscriber could impede an ongoing criminal investigation or obstruct justice.’” Which begs the question: Why the reluctance to use a big stick at CPRIT or in E.P.?

While originally declining to look at issues at the Texas Education Agency, related to what was happening to thousands of El Paso kids and hundreds of millions of dollars in public funding, Keel’s “Special Investigations Unit” nonetheless found time to do a criminal probe at the Texas Education Agency regarding fraudulent reimbursement for payroll expenses of less than $100,000, like, who cares? And a request by new TEA Commissioner Michael Williams that the State Auditor review how TEA’s own investigators missed the corruption in West Texas, was first declined by John Keel citing a heavy workload. His office would not be able to get to the audit until 2014, John Keel said in 2012, seven years after he was first informed of problems in El Paso schools. He suggested TEA might instead wish to use a private contractor for the review. While many people believe that what happens in El Paso is not of any interest to the rest of the state, compared to what happens in Dallas for example, the Auditor’s refusal to become involved, over a period of years, despite early and frequent requests by Senator Eliot Shapleigh, and others, in and outside of the school district, was dogged and intransigent. John Keel eventually did the TEA audit and came to the obvious conclusions but only after everyone else. 

Senator Shapleigh wrote these words to John Keel in a letter in August of '07: “I am concerned school district funds and other state resources may have been misused.” That kind of language from a member of the Texas Senate is usually enough to get even the rustiest wheels of the bureaucracy turning. Not so with the Keel machine. Keel’s reply: “The State Auditor’s Office has been monitoring the FBI investigation and relating press stories for a number of months.” He wrote that he had completed an investigation of EPISD, the report of which school officials say they have never seen. Four years after that the auditor reported that his “Special Investigations Unit” did a “preliminary” audit of El Paso Independent School District that, likewise, appears to have never seen light of day. Why? The answer is, once again, John Keel has a big family. With powerful friends.

With a high proportion of immigrant school children the State of Texas seems to be particularly susceptible to skewed populations of test-takers. Although there’s no reason to believe bad practices are limited to within our borders. No Child Left Behind was born in the Lone Star State, so to speak, and it makes sense that it was first in crisis in Texas as well. A member of the El Paso delegation in Austin noted that there was even a website, intended for school administrators, devoted to gaming President Bush's landmark national achievement test system. Legislators from other parts of the state who thought the cheating was an El Paso-only problem are said to have reconsidered. “School districts are a big business,” said one lawmaker, speaking of administrators’ bonuses that have been tied to district performance on achievement tests. In a presidential campaign Gov. Perry’s economic “miracle” will bring kudos from many—while his stewardship of public education will be fair game to others. That’s a danger because the money trail from El Paso leads to Austin. 

Every public money trail in Texas goes through Austin. Looking behind the scenes at the test itself, its administrators and “Big Education,” or “Big Testing” means one company—the prime contractor—Pearson. Which has brought private contracting to public education the same way Blackwater brought private enterprise to national defense. Once you get to Pearson it’s a short trip—it seems—to the Capitol. “You have to know what it was like then,” say those who were there then, in Austin, back when the testing craze first hit more than a decade ago. This was the era after George W. Bush had left for Washington with only two policy programs in his pocket, one foreign and one domestic: to invade Iraq and to institute No Child Left Behind as his signature homeland initiative. At that time, back in Austin, Gov. Perry put in a management team defined by two individuals, legislative director Patricia Shipton and chief of staff Mike Toomey, who had been Perry’s roommate in Austin when both men were serving on the Appropriations Committee. 

You may have heard Mike Toomey's name recently as a press whipping boy and the face of “crony capitalism” in Austin when Gov. Perry made his first aborted run for president. Look back—and then fast forward from the beginnings of No Child Left Behind and both Toomey and Shipton have become lobbyists, Shipton, indeed, became Pearson’s lobbyist at the Texas Capitol. Fast forward again, to early last year as the legislative session began: Anger—from both Democrats and Republicans—that Pearson seemed to be getting preferential treatment from the State of Texas. Democrats were incensed that Sandy Kress, the former Dallas schools administrator who “invented” No Child Left Behind, before W adopted it, and who has become a Pearson hired gun, was appointed by Gov. Perry to serve on boards related to education standards even though Kress has a proprietary conflict of interest by working for Pearson. There’s more. Pearson seemed to have an unnatural relationship with stat government. Which led—actually—belatedly—to a State Auditor’s report last year. John Keel's audit examined the Texas Education Agency’s relationship with Pearson itself and had three major findings: 

One, that Pearson’s contract to provide state standardized achievement tests (worth almost a half billion dollars) had been awarded even though Pearson was not the lowest bidder. Two, that TEA had allowed Pearson itself to decide how much money the company would not receive for failing to meet performance standards. In other words if Pearson did not achieve contracted-for results, Pearson management not the TEA would decide how much money to penalize the company. 

Either of these findings alone might smell to any auditor, a sweetheart deal, yet John Keel thought otherwise. The opening sentence of his audit reads: “The Texas Education Agency complied with most requirements related to . . . its $462 million contract with NCS Pearson Inc.” The third of the findings was actually the bombshell. TEA itself added a clause to the Pearson contract allowing former TEA staff involved in the Pearson contract to leave TEA and go to work for Pearson. Specifically. That makes for a pretty sweet deal—for both Pearson and the right state employees—a kind of revolving door written into the contract between government regulators and private business. Indeed Sen. Shapleigh had urged Keel to subpoena bank records of selected TEA employees to see if any had received money from El Paso in exchange for turning a blind eye to manipulation of test scores. The Senator was trying to establish the vital monetary connection between wrongdoing in El Paso and bureaucrats in Austin. Keel declined—and apparently did not take the next step last year in his Pearson audit, either. There may be a simple reason why. Family relationships—once again—got in the way.

John Keel’s wife Lara is a lobbyist. Her partner at the Texas Lobby Group is Mike Toomey, the governor’s former roommate—former chief of staff—present best friend and major campaign supporter. Far from being an embarrassment—a conflict of interest—Lara Keel’s marriage to the State Auditor has been used to promote Toomey’s company as in website headlines like: “Wife of State Auditor John Keel.” You can’t get much more direct about influence-peddling than that. Lara Keel is literally sleeping with the State Auditor. Or, better, the State Auditor is sleeping with the lobby. And it’s apparently a successful lure to clients. Mrs. Keel has been named the number one female lobbyist at the Texas Capitol for the last few years, while her partner Mike Toomey is usually in the running as number one guy. 

Among Lara Keel’s clients include companies doing business with the state—like the Corrections Corporation of America, a major contractor for state prisons. Apparently no one questions whether Mrs. Keel’s business relationship with the governor’s best friend is unseemly—a conflict of interest—but that may explain why John Keel’s investigations are so tame, or don’t happen at all. 

That was actually the unspoken question at the House Select Committee on Transparency early last year with State Representative Trey Martinez-Fischer et al: Why doesn’t the auditor ever take the next step? Mrs. Keel doesn’t work for Pearson although Toomey’s firm is said to, at one time, have done education lobbying, before John Keel's wife became a partner. That’s not the point. The point is Caesar's wife. “SAO employees (including their immediate family or close family members) who engage in outside employment,” per the State Auditor’s own ethical guidelines, “or in business activities that conduct business with other state agencies can impair their independence and create real or apparent conflicts of interest both for themselves and for the State Auditor’s Office." Keel’s examination of TEA’s Pearson contract found ties between TEA regulators and the company. There were also ties between former Perry administration officials like Patricia Shipton and Pearson. But the Keel audits didn’t mention those. Like not looking at CPRIT email—or not checking the books at the governor’s Texas Enterprise Fund, John Keel’s audits seem always to stop just short of integrity. A Democratic former legislative aide who has tracked the education debate in Texas noted recently that Rick Perry has no one to blame but Rick Perry if Democrats wrap business-government interests like Pearson around his neck. Because Perry’s tenure and performance are both ample cause for suspicion. Rick Perry has been in power so long—almost an entire generation of schoolchildren now know no other governor than the man from Paint Creek. He has taken so many contributions from so many people that if you scratch the surface of practically any major state contract or state policy or state deal you find Rick Perry. His fingers are everywhere and, equally importantly, have been for a long time. That’s the Perry connection. You’ll find it everywhere in the Capitol. 

While Barack Obama’s rise, on the other hand, was so sudden that he had practically no political history when he reached high office, Rick Perry has been a major player in Austin for three decades and has left a long, long trail. Perry alone has appointed seven commissioners of the Texas Education Agency since becoming governor in 2001. Robert Scott, who resigned three years ago, under pressure, after presiding over much of the era of good times for Pearson, and almost all of the troubles in El Paso, was Perry’s own education advisor in the Governor’s Office before going to TEA as an administrator. Watchdog groups have noted that many heavy hitters in the Austin lobby scene once worked for Perry—the revolving door—or are high bureaucrats now, running the apparatus of state government for him. (Patricia Shipton, who was once Perry’s legislative director, Pearson’s lobbyist and also a lobbyist for the City of El Paso, is now “strategic legislative advisor” for Speaker Joe Strauss.) That was how the last strongman in Texas politics, Bob Bullock—John Keel’s old boss—ran things too. You have to spread your most loyal people around to work in other state agencies. A high-ranking Democrat said that it was actually Bullock’s plan that Keel become auditor earlier than he did but Bullock got sick and left office before he could help make the change. So it's said. Then came Rick Perry. And the Keels. It’s an extraordinary family, big and well-connected.

Among the Keels who have plots set aside in the State Cemetery: Thomas, who is John’s uncle, formerly of the Legislative Budget Board, and Thomas’ wife Patricia, and Lara and John, and of course Terry. Patrick Keel has a spot, he is Terry’s brother, who was appointed by Governor Perry to the District Court in Austin as a Republican a few years ago and was promptly beaten in the general election. And there’s Mary Lou, another sibling, who is a district judge in Houston, and two as-yet unnamed spouses. A Keel serving in the special forces was killed in a raid in Afghanistan two years ago. The family has done great public service and certainly Thomas Keel, formerly of the Budget Board, is much-admired as a public servant. But in recent years the Keel ambition has been raw—and well-rewarded. 

John’s daughter Kelly's position at the Texas Commission on Environmental Quality serving as a $120,000-a-year director is a potential conflict that could jeopardize any meaningful examination of environmental controls, were the State Auditor inclined to do one. No worry, because he is not so inclined. Two other Keels have attempted in recent years to be elected in Austin-area races, one as a county constable and one as a Hays County state rep, both Republicans although the family started, like everyone else in Texas, as Democrats. Lara Keel, John’s wife, sponsors a conservative group that fights for limited government but not limited Keels-in-government. 

This is a family that has grown, literally, by its connections, especially to the governor who is known in his own right for extreme connectivity. Perhaps John Keel was right as auditor when he declined to get involved in El Paso. If El Paso did lead to Austin, in the deeper sense, John Keel was the wrong guy to make the call. His guardianship of state integrity would have been sorely tested if it wasn’t already, which it was. One of the oldest proverbs in Western government may apply here, actually. It’s a rhetorical question first asked by worried Romans: 

“Quis custodiet ipsos custodes?”

Who watches the watchmen? Who guards the guardians? In the Texas Capitol the question is: Who audits the auditor?