Former Dayton Development Coalition Director Jim Leftwich had a dual role with the state of Ohio and Wright State University that resulted in the Kasich administration terminating his employment and referring the matter to the Ohio Ethics Commission.
Documents obtained by the Dayton Daily News show Leftwich held an $85-an-hour job with the Ohio Department of Development at the same time he was positioning his private consulting company to hold a partial ownership in new businesses launched using research at Wright State.
Like many universities, Wright State is working to bring in more revenue through commercializing technology research and growing start-up companies that provide a research-to-market path for new technologies, which are often expensive to develop. Wright State hired Leftwich and his consulting company, Viance Partners, to assist in that effort, and is now into its second contract with Viance paying $20,000 a month.
But Leftwich’s role has raised questions. Emails and documents obtained by the Daily News show that Leftwich was on the state payroll when he and Wright State University Vice President for Research Robert Fyffe outlined a plan to give Viance Partners a 25 percent ownership stake in start-up companies established based on the WSU-originated research.
Leftwich and his company would find entrepreneurs and line up funding, but apparently he did not disclose what he was doing to his supervisors in state government. As a state employee, Leftwich was required to follow state ethics rules, which require disclosure of outside work.
In August, shortly after Leftwich signed his current contract with Wright State, Republican Gov. John Kasich appointed him to the board for the Third Frontier program, a $2.3 billion initiative designed to boost Ohio’s economy through investments in targeted innovation and technology.
Three weeks later, on Aug. 28, Leftwich suggested to Fyffe that Wright State could use Third Frontier money to help launch two potential start-up businesses the university was working to create.
“A Third Frontier program that can bring 100K into the university to prep each technology for the market and an additional 100K for each start-up to take it to market…” Leftwich wrote in an email the newspaper obtained from Wright State. “We should talk strategy for our two start-ups and maybe think about more in the pipeline.”
Kasich Press Secretary Rob Nichols said Leftwich did not inform the governor’s office that he had a consulting contract with Wright State when he was appointed to the Third Frontier board.
Paul Nick, executive director of the Ohio Ethics Commission, would not talk specifically about Leftwich or even confirm that an investigation had been initiated. But he said state employees can consult for other public agencies provided they disclose the relationship and file a form with the ethics commission, their employer and the entity they are consulting for.
According to the commission’s website, failing to disclose such relationships can result in a first-degree misdemeanor, with the maximum penalty of six months in prison and/or a $1,000 fine.
In October, the administration terminated Leftwich from his development department job and referred the matter to the ethics commission. Leftwich also resigned from the Third Frontier Advisory Board Oct. 5, saying he didn’t have enough time to “serve meaningfully.”
Leftwich declined to respond to 18 detailed questions the Daily News submitted to him in writing. He offered only this written statement: “I have spent more than the last seven years pursuing job and economic growth in the region and the state. My efforts have been sincere, appropriate, and successful.”
Fyffe, Leftwich’s main contact for the Wright State contract, declined an interview request and instead issued a written statement which read in part: “Any potential conflict of interest was addressed and fully resolved before the consulting contract was signed. The work being performed by Viance Partners is clearly separated from the work performed by Mr. Leftwich for the state of Ohio.”
Avoiding red tape
Leftwich has been tied to state government since the beginning of the Kasich administration. In March 2011, the governor tapped Leftwich, then director of the Dayton Development Coalition, to be director of the state Department of Development, a job that paid $127,400-a-year.
Leftwich stepped down abruptly four months later as the administration transitioned job creation efforts to the new JobsOhio, headed by Kasich’s long-time friend and venture capitalist Mark Kvamme.
Leftwich, however, soon found another administration job. Wayne Struble, Kasich’s top policy advisor, told the development department that he wanted Leftwich hired as a consultant for the unmanned aerial vehicles airspace project in the Dayton area, according to Department of Development emails.
The Federal Aviation Administration last week delayed indefinitely the selection of six U.S. sites for the testing of unmanned aircraft, disappointing local leaders for the moment because they have long hoped the Dayton-Springfield area will eventually be chosen as one of the sites.
Consultants to state government often have multiple clients, but Leftwich wasn’t hired as a consultant. Instead, he signed on as an intermittent employee charged with advising the governor on aerospace and defense issues. It is unclear exactly why Leftwich was hired as a state employee, which automatically made him subject to state ethics laws.
The new job paid $85 an hour for up to 1,000 hours. The state paid Leftwich $114,580 for 1,348 hours of work between Sept. 1, 2011, and Oct. 6, 2012, when the job was terminated as the ethics concerns came to light.
The Department of Development, now called the Development Services Agency, said administrators decided to hire Leftwich as a state employee to avoid red tape. A consulting contract typically requires public approval from the State Controlling Board.
Development Services Agency spokeswoman Katie Sabatino says now it was an oversight to hire Leftwich as an employee, and acknowledged that his job was terminated to avoid a conflict. She also said the decision would have resulted in disciplinary action against those involved if they still worked in the department.
“Neither department leadership nor Mr. Leftwich realized the error and when we did we mutually agreed to end his employment, since his work was concluding and to eliminate even the appearance of a conflict with any of his other clients,” she said in a written statement issued in response to questions raised by the Dayton Daily News. “After it was discovered, this error was also brought to the attention of the Ohio Ethics Commission. Unfortunately the department employees who oversaw this are no longer with the department or they would likely face disciplinary actions.”
Nichols said Leftwich’s work during that time is a “trade secret” that cannot be disclosed.
“Continuing to advance the aerospace industry is a statewide priority, not just a Miami Valley one, and it’s something to which we’re committed because the potential for job creation is so significant,” Nichols said. “The Department was right to ask the (Ohio Ethics) Commission to review this to ensure that they acted appropriately and if any opportunities for improvement are identified, they should be made.”
Emails provided by the state Department of Development to the Daily News indicate the decision to hire Leftwich was widely known by senior managers, including Department Director Chris Schmenk, who supervised Leftwich.
Wright State contract
The contract with Wright State began in the spring of 2012, roughly six months after Leftwich began in his state job. Emails show he dropped Kvamme’s name as well as the names of other well-connected state officials to Wright State University officials as Leftwich attempted to get the university to contract with Viance Partners.
The first contract with Wright State, signed May 4, covered March 1 to June 30, paid Viance Partners $12,500 a month, and called for Leftwich to “drill down to a better understanding of the university’s commercialization opportunities and agree upon the focus of the next phase.”
The second contract, signed July 19, covers July 1, 2012, to June 30, 2013. It pays Viance Partners $20,000 a month, and calls for Viance to develop a structure for supporting WSU’s new start-up companies.
Although not specified in the contract, Leftwich and Fyffe collaborated in June on a “technology commercialization model” that called for Viance to receive a 25 percent equity share in the start-up companies, emails and documents show.
The university’s Board of Trustees was not made aware of the details of the contract with Viance or the fact that Leftwich’s dual role could be the subject of an Ohio Ethics Commission investigation, said chairman Larry R. Klaben.
“That board will want to have a full understanding of what this entails,” Klaben said.
Wright State has been looking at ways of increasing revenue opportunities to meet the university’s budgeting needs, according to Klaben.
“One way was are there any services that we have with the university that we can provide to other universities as revenue? And another was this commercialization of intellectual property or patents from the university,” he said.
After the Department of Development hired Leftwich in September 2011, Deputy Chief Legal Counsel Robert Stempfer detailed the restrictions he would face representing other clients while working for the state:
- No working for outside contracts while on state time;
- No representing private clients that would be pursuing assistance from the Department of Development where Leftwich had a hand in the issue when he directed that department;
- No representing other state agencies unless he filed a statement with the Ohio Ethics Commission.
“Unless you recognize an entanglement I do not see, I believe we can work around this restriction,” Stempfer wrote in a Sept. 6, 2011, email.
But Wright State apparently did develop some concerns. As negotiations were underway for the second contract with the university last summer, Leftwich was informed that WSU General Counsel Gwen Mattison was researching whether the Viance contract raised ethical issues.
In an email on July 5, Fyffe told Leftwich that Mattison will want to explore the area of “ethics/conflict domain, to make sure we don’t get burned by some regulatory or oversight issue regarding your role/involvement. I know we’ve discussed this lightly before, but we’ll need to perhaps explain further. She is looking over the contract agreement at the moment.”
In a follow-up email on July 11, Fyffe wrote Leftwich, “Gwen has give(n) her approval for your contract.”
When asked by the Daily News what ethical issues were raised and how were they resolved, Mattison said, “I’d prefer not to comment at this time.”
Although Leftwich’s consulting contract with Wright State is unique among area colleges, it is increasingly common for universities to work with consultants when they need certain expertise or do not have the funding to hire someone on full-time, said Todd Sherer, president of the Association of University Technology Managers.
Sherer, whose organization supports the transfer of academic technology for use throughout the globe, said it is not uncommon for a consultant to receive equity in a start-up company because those companies often have very little cash to get businesses off the ground.
Wright State’s hiring of Leftwich’s firm came as the Ohio Board of Regents, which coordinates higher education in Ohio, prepared to unveil a report calling on universities to commercialize more of the $2 billion they spend on research.
The June report was critical of university efforts throughout the state, and said between 70 percent and 90 percent of research in Ohio does not result in new companies or new products. The report called on universities to make changes and meet their responsibility to create new jobs.
Fyffe said in his written statement that Viance Partners was hired to help identify and commercialize intellectual property developed by WSU faculty.
“All efforts to implement new programs or establish start-up companies are in their formative stages, and many organizational and administrative details remain to be determined,” he wrote. “Viance Partners has played no role in grants received by Wright State University from the state of Ohio.”
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