The New Face of the Mob, Part 3

How a corrupt southern Nevada establishment operates to make state taxpayers into economic serfs

By Del Tartikoff & W. W. Anderson

IN LATE 2001, WHEN Gov. Kenny Guinn appointed former Clark County Finance Director Guy Hobbs to head the governor’s forthcoming Task Force on Tax Policy, Hobbs’ appointment was widely hailed as natural and appropriate.

At the time, Hobbs was described by Nevada Taxpayers Association President Carole Vilardo, speaking to the Las Vegas Review-Journal, as “very aware of fiscal realities, a reasoned, deliberate person who has a very good reputation for looking globally at issues, and for measuring issues against actual policy, not just doing things because they satisfy an immediate revenue need, but something that will be long-lasting.”

The impression at the time of many in the Southern Nevada business community was that Hobbs was “a good, sound Republican,” who could be relied on to serve as the people’s champion in the forthcoming fight over higher taxes. Most important of all, however, was Hobbs’ reputation for integrity—something generally recognized to be in short supply whenever big government and big money come together in Southern Nevada.

Hobbs’ reputation had stemmed from the fact that in 1995, Hobbs had been forced to retire from his then-position as Clark County Comptroller. The story initially reported in the Vegas media was that Hobbs had given two county commissioners fiscal-liability advice about personnel department policies that then-county manager, Pat Shalmy, did not appreciate. But later stories said that Hobbs had been advocating competitive bidding for Clark County bond counseling and underwriting contracts, instead of the then-practice of simply passing out the extremely lucrative contracts to friends of commissioners.

This story emerged following Shalmy’s own resignation in 1997. The Bond Buyer, a daily newspaper specializing in public finance, reported that some financial insiders thought Shalmy’s 12-year administration had played favorites by granting a “good old boys” network most of the county’s business.

“Over the past decade, 86 percent of the county’s financial advising business has been awarded to Howarth & Associates, a local firm,” reported the Review-Journal. “Since 1986, 77 percent of the county’s bond-counseling contracts have gone to the Denver-based firm of Sherman & Howard. And the Smith Barney investment firm—usually represented by two friends and former co-workers of county airport chief Bob Broadbent—underwrote all 10 bonds sold on behalf of the county’s McCarran International Airport from 1982 through 1995.”

Shalmy was widely seen as the deputized agent of a county-commission majority whose palms always had implicitly to be greased before favorable licenses or permits would come forth. Asked about the “cronyism” suggested by The Bond Buyer, Shalmy—according to the Review-Journal—chuckled: “If I’m going to be mentioned with (Commissioner) Bruce Woodbury, (former Commissioner) Jay Bingham, (former Commissioner) Paul Christensen, (Las Vegas Convention and Visitors Authority chief) Manny Cortez and Bob Broadbent as being part of their good old boy network, then I’m very pleased,” he said. “They’re all my friends, and they’ve done a tremendous number of good things for this county.”

So, compared to the run-of-the-mill corruption of Clark County government figures, Hobbs, in 2001, looked pretty good to members of the Southern Nevada business community.

Unfortunately, that says more about the common background level of Southern Nevada corruption than anything else.

It is now clear that Hobbs himself had a huge conflict of interest when he accepted the chair of the governor’s tax commission. Although he has labored diligently to portray himself to the state business community as an honest broker in the analysis of state revenue needs, he is not and never was. His firm, Hobbs, Ong & Associates, makes virtually all of its money from the two vested interests that are most eager to subject Nevadans to big new taxes—Southern Nevada municipal governments, and Big Gaming.

According to rankings from Thomson Financial Investment Banking, Hobbs Ong & Associates is one of the nation’s top municipal bond advisory firms, handing issues totaling hundreds of millions of dollars each year for Southern Nevada city and county governments. Government agencies when Hobbs Ong has secured contracts include the Clark County Commission, the Regional Transportation Commission, the Southern Nevada Regional Planning Coalition, the Clark County Library District, Boulder City and the Southern Nevada Water Authority (SNWA).

The contract with SNWA is illuminating about the kind of money that the Hobbs firm reaps from these deal. According to both Las Vegas daily newspapers, Hobbs Ong will receive $270,000 for assisting the public water agency’s effort to take over Nevada Power. The contract also has an additional incentive clause: if the takeover occurs, the fees go even higher.

In effect, the Southern Nevada Water Authority has put a bounty on the head of Nevada Power, and Hobbs and his partner, former Clark County Budget Director Kathy Ong, are deputized bounty hunters. And since the takeover of Nevada Power by the public water authority would be essentially a political issue, Hobbs and Ong are political bounty hunters.

That also was the nature of the job Hobbs took on when he became chairman of the Governor’s tax task force. In that case, what he was selling was his presumed credibility as an honest man. Supposedly he would lead an inquiry, in behalf of the people of Nevada, into the question of whether or not Nevada taxes really needed to be raised. In actual fact, however, Hobbs had for years already been on board with the gaming industry’s goal of imposing big new taxes onto Nevadans.

This fact was long known among the Las Vegas casino-resort strategists, who for years have had intimate relations with Hobbs on the Las Vegas Convention and Visitors Authority (LVCVA), where Hobbs, again, has a contract to provide financial advice. Supposedly the LVCVA is a public-private agency where elected officials and hotel-casino executives pursue all Nevadans’ common interest in expanding tourist traffic to Southern Nevada. Many long-time Las Vegans, however, say the LVCVA is where Clark County politicians get to prove their fealty to the reigning consortium of gamers and receive, in return, campaign funds and marching orders.

Actually, Hobbs was on public record for higher taxes as far back as September of 1998. That was when—participating in a panel dedicated to “planning” Nevada’s economy—he argued that state tax revenues could be “stabilized” if Nevada’s tax system had “a broader tax base.” To many ears at the time, Hobbs’ comments sounded like mere technical economic analysis. But today—after four subsequent years of various campaigns to impose big new taxes on the state—many Nevadans have become sensitized to such talk about “stabilizing tax revenues.” Recent history has shown such language is only political code for reaching deeper into Nevadans’ pockets and purses. The fact is: Nevada has one of the most stable revenue streams of any state in America, being one of only two western states where tax revenue did not decline in the fiscal year that included September 11, 2001. (See http://www.csgwest.org/committees/Fiscal/CrisisWorsening.pdf.) Such recent history has shown the whole “stability” campaign for higher Nevada taxes for what it was: a dishonest effort to apply to Nevada, cookie-cutter-like, a campaign that had successfully raised taxes elsewhere. Only problem was, it didn’t fit the actual facts here in Nevada.

Guy Hobbs, it is now evident, is an intelligent individual who for many years had watched Clark County corruption up close, inside local government. Did he also eventually conclude that his own best chance to score some of the gravy for himself lay with taking his public image as an honest economist and putting it up for sale? It is not difficult to conclude that, based on the available evidence.

In January 2001, months before Hobbs was named to head the tax-hike task force, the possibility that he lacked "independence" became a big public question.

Because of two decades of non-compliance by Clark County’s Health Department with state and federal air quality rules, a state legislative committee had ordered up an audit for the department’s Air Quality Division. But shortly after Hobbs Ong got the nod to do the audit, reports surfaced of hanky-panky in the selection.

“The head of a committee charged with finding a company to do an audit of a controversial pollution-control program,” reported Launce Rake of the Las Vegas Sun, “says Air Quality Division employees misled him to promote a company with close ties to regional governments.

“Jack Greco, chairman of the three-person ad hoc committee, said division employees pushed for the selection of Las Vegas-based Hobbs, Ong and Associates, a financial consulting firm. Greco said Tuesday that the company’s officers and work history create a conflict of interest for the sweeping audit of the division’s emissions-reduction credit program.

“The committee has formally recommended Hobbs, Ong to do the audit, but Greco said Tuesday that he is withdrawing his endorsement.

“Environmentalists also are criticizing the company’s selection, arguing that the company isn’t the independent voice that a state legislative subcommittee demanded when it ordered the audit last year.”

Greco said that division employees should have revealed the close ties of Hobbs Ong to Clark County government. The legislative subcommittee had specifically asked that a company with no history of work for the district do the audit.

Yet, as reporter Rake went on to report, not only was Hobbs a former chief financial officer for Clark County, and Ong was a former budget director, but the company’s resident agent was Dale Askew—Clark County’s top administrative executive!

Asked about his independence, Hobbs gave a Delphic answer. Independence, he said, "is one of those things that is in the eye of beholder."

The controversy arising out of Hobbs Ong’s close links to the Clark County political establishment forced the Clark County Health Board to postpone the appointment of the firm to do the audit. When it became apparent that, politically, the only way that such an audit could go forward would be with a fully independent outside auditing firm, Clark County commissioners put on their Regional Planning Coalition (RPC) hats and heard a presentation by two consulting firms—one of which was Hobbs Ong. Jeremy Aguero, an associate of the Hobbs firm, argued for a new, unified, air quality agency that merged air quality agencies from the county and the health district. The RPC then passed a resolution calling for such a new agency.

To many environmentalists and others who for 20 years had watched Clark County and its Health Board create ever-new excuses not to enforce clean air standards, it appeared that Hobbs Ong had, once again, played a willing part in a conspiracy to defeat any honest audit of the air quality agency problem.

This impression was further reinforced when Hobbs appeared in the halls and hearings of the 2001 Nevada Legislature, operating as a registered lobbyist for NACO, the Nevada Association of Counties (dominated by Clark County) on the air quality issue. State senators Jon Porter, R-Henderson, and Dina Titus, D-Las Vegas, had both told the Review-Journal that Clark County's continuing failure to conduct the audit soon would confirm suspicions that wrongdoing had occurred in the program. “This is a question about public trust,” said Porter, pledging to bring an “emergency bill draft request” before the Legislative Affairs and Operations Committee.

But despite the bipartisan consensus in the state senate, lobbyist Hobbs and Christine Robinson, director of the Clark County health board's division of air quality, appeared before the Senate natural resources committee, seeking significant amendments to the legislation proposed by Porter and Titus.

Back in Clark County, reported the Sun’s Launce Rake, “district health board member and Clark County Commissioner Erin Kenny has vowed to fight the audit.

“Porter’s move ‘shows contempt for local government,’” Kenny said, adding that “the issue for the district board is closed. The board has voted to table an audit at least until a review of what needs to be changed in the emissions program is completed, a process that could take four to six months.”

“If the state is interested, they should hire Hobbs, Ong,” said Kenny. The aggressively corrupt Kenny recently signed a plea deal with federal prosecutors after infamous tape recordings surfaced of her selling her votes on the Clark County commission to lap-dancing/ titty-bar impresario Michael Galardi.

No audit was subsequently conducted of the Clark County Health Department's air quality division. Instead, Erin Kenny got Gov. Kenny Guinn (remember him?) to, by executive actions, take air-quality regulatory authority away from the county health district and give it to the Clark County Commission. 

It was essentially mere musical chairs. The health district had been given anti-air-pollution responsibilities in 1978 by then-Gov. Mike O'Callaghan. Fourteen years later in 1992, then-Gov. Bob Miller redesignated the district with the same duties. But the reality always was, according to the Clark County's district attorney's office, that the county could have taken the authority back by simple ordinance any time it wanted. 

So all that was going on was a continuation of the 20-plus years of busy-work charades that the developer-politician power structure in Clark County has used to block any actual compliance with federal air-cleanup rules.

As noted above, by 2003 Erin Kenney herself had become notable for in-your-face corruption. After much posturing as prime sponsor of legislation in Clark County to prohibit commissioners from becoming lobbyists for a year after leaving their posts, she herself, the day after stepping down from the commission, signed up to lobby for well-known developer Jim Rhodes. Her legislation, conveniently, had carried no penalties.

For Guy Hobbs, however, Kenney's endorsement just may. 

In November 2001 when Hobbs was named to chair the Governor’s Task Force on Tax Policy, Gov. Guinn—the fervent agent of the Nevada Resort Association’s proposed tax hikes—was clearly confident that Hobbs, too, would be a reliable servant for the cause.

The final work-product of the Hobbs task force proved this was the case. As a recently released authoritative review of the work product showed, the task force’s technical committee had intentionally, radically, over-estimated future state spending needs while at the same time radically under-estimating future state revenues. (See www.cprnevada.com.) In words of one syllable, Hobbs’ operation had cooked the books to justify a huge tax hike.

Guy Hobbs once had a reputation as a reliable economist. But in any political context, he will never again have credibility.

Chalk up one more casualty to Sin City.