On July 29, 2009, the State of Ohio’s Office of the Inspector General (OIG) released an investigative report concerning the relationship between Ohio Department of Rehabilitation and Correction (ODRC) Assistant Director Michael Randle and Keith B. Key, President of Columbus-based KBK Enterprises, a real estate development company. The focus of the report was on allegations that their personal relationship had influenced business dealings between ODRC’s Ohio Penal Industries (OPI) and KBK.
The OIG investigation was sparked by an on-line report that alleged KBK subsidiary Key Industries was allowed to purchase OPI products at OPI’s net cost for material and labor – a special pricing arrangement that was not even avail-able to state agencies.
The OIG learned that Randle and Key shared a personal relationship. Both had attended Ohio State University at the same time, were members of the same fraternity, and lived in the same fraternity house for about a year. More recently, they had socialized and even vacationed together.
The OIG found that Randle had a minimal role in the drafting of a memorandum of understanding (MOU) between OPI and KBK, for KBK to sell prison industry-made goods and share the profit with OPI. Although Randle did not directly profit from the MOU, he failed to reveal his relationship with Key to ODRC and OPI employees who were dealing with the company. Further, whenever KBK had a problem with the MOU, company officials went to Randle, who then called OPI and supported KBK’s position. The OIG found that this created an appearance of impropriety on Randle’s part.
OPI and KBK did not get along well. The MOU was terminated before it expired, and no formal contract ensued. Therefore, the OIG had no reasonable cause to believe that a wrongful act or omission had occurred with regard to the MOU.
The OIG found more serious problems in a KBK transaction with ODRC. Randle had attended a presentation by Israel-based Elmo-Tech related to that company’s electronic tracking devices. He expressed ODRC’s interest in using the devices to track outside prisoner work crews, and gave Elmo-Tech representatives Key’s name as the owner of a company that could be an Ohio distributor for their products.
ODRC paid KBK a total of $120,000 for eight sets of the tracking devices. KDK paid Elmo-Tech $80,000, realizing a 50% profit. Elmo-Tech officials told the OIG they would have sold the devices to ODRC directly for less than the 50% markup, but went through KBK because Randle had given them Key’s name.
Randle said that Elmo-Tech wanted to work through an Ohio distributor, and that he gave them the names of KBK and other minority-owned businesses because ODRC wanted to increase the percentage of its business conducted with minority-owned companies. The OIG found “reasonable cause to believe that wrongful acts or omissions occurred in this in-stance.”
In both cases, the OIG found no evidence that Randle personally benefited from business dealings involving KBK and Elmo-Tech. Therefore, there was no violation of criminal laws. The OIG did find that the appearance of impropriety was enhanced by the fact that ODRC could have purchased the tracking devices directly from Elmo-Tech at a lower cost. It also found that profit-sharing terms were not included in the MOU between OPI and KBK Enterprises, but should have been.
Even before the critical OIG report was released, Randle had already moved on – more precisely, he had moved out of Ohio. On May 14, 2009, he was appointed director of the Illinois Department of Corrections. The OIG report is available on PLN’s website.
Sources: Associated Press; OIG Report, File No. 2009105
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