Arizona House speaker asked the DOJ to investigate Sunshine Residential pay-to-play allegations

The top Republican in the Arizona House of Representatives asked the Department of Justice to investigate bribery allegations against Sunshine Residential and its founder, who are at the center of a pay-to-play scandal.

In July, House Speaker Steve Montenegro sent a criminal referral to the Department of Justice, asking it to investigate bribery, fraud and other allegations against Sunshine Residential.

That came after Montenegro hired the James Otis Law Group, which has ties to President Donald Trump, in February to investigate the company and Gov. Katie Hobbs following years of reporting by the Arizona Republic that found Sunshine Residential received sizable rate increases from the state after its owner and others affiliated with the business contributed hundreds of thousands of dollars to Hobbs’ campaign and other Democratic electoral efforts in 2022.

Reporting by the Republic later led to speculation that the political contributions influenced the decision to hand the company two pay increases in 2023 and 2024 that upped the rate it charges the state to provide beds for children in foster care by nearly 60%.

Montenegro’s criminal referral states the House’s investigation found evidence of potential violations of federal bribery, wire fraud and honest services fraud laws by Sunshine Residential, its CEO Simon Kottoor and program manager Abi Saifi, a former Department of Child Safety employee, according to a copy of the July 21 letter provided to KJZZ under Arizona’s Public Records Law.

Montenegro sent the referral to the DOJ’s National Fraud Enforcement Division, a new unit set up by Trump this year to combat fraud in government programs.

Republicans made many of the allegations included in the referral public last month after Attorney General Kris Mayes cleared Hobbs of wrongdoing and declined to bring charges against anyone involved.

That includes allegations made by former DCS Director Mike Faust, who told investigators that Kottoor offered to recommend Hobbs keep him on staff if he approved a requested pay bump.

Faust, who was appointed by former Republican Gov. Doug Ducey, repeatedly denied Sunshine Residential’s rate increase requests. But a few months after Hobbs took office, her DCS Director David Lujan approved the request.

High-level DCS staffers told investigators they were aware of the political contributions at the time the pay hike was approved.

“(Alex) Ong also testified that Simon Kottoor, Abi Saifi, and Sunshine had created at least the appearance of political influence at some levels within DCS through their political contributions and meetings with Governor Hobbs,” according to Montenegro’s referral.

The referral also accuses Sunshine Residential and its executives of overstating the company’s financial hardships and misleading the state by threatening to end its contract to instead provide beds for the federal government’s Office of Refugee Resettlement.

The letter notes Sunshine did not have a license to offer beds to the federal department at the time and that its own financial records did not support the claim that it needed the rate increase because it had run a $4.5 million deficit in 2022.

Tommy McKone, a spokesman for the company, denied the allegations.

“In 2021, Governor Ducey highlighted that federal payments exceeding $300 per day for migrant children coming across the border, roughly double Arizona’s average, were making it difficult to maintain the needed capacity for Arizona’s children in foster care,” he said in a statement. “We could have followed that money. We didn't. We stayed with Arizona's foster children and kept every employee and child in place. Our rate requests have always been about sustaining care.”

McKone also accused Montenegro of playing politics.

“For 30 years, Sunshine has proudly served Arizona's foster children. We have cooperated fully with every inquiry and have never been contacted by the Department of Justice,” he said in a statement. “Oversight should follow the evidence, not the election calendar. Five weeks before an election, with Congress out campaigning, this referral is nothing but a campaign stunt.”

Michael Beyer, a spokesman for Hobbs campaign, also accused Republicans of playing politics as Hobbs seeks re-election against Republican Andy Biggs.

“Even Republicans have now confirmed what the facts have shown all along: that there was no wrongdoing by the Governor, her office, or her campaign," Beyer said in a statement. "As has been publicly reported multiple times, and as the Attorney General’s report found and the House Republicans acknowledge, Governor Hobbs was not involved in, did not direct, and did not instruct any member of her administration regarding the rate increases the Department of Child Services approved."

Mayes ultimately chose not to bring any charges against Kottoor or Sunshine Residential.

The Attorney General’s Office said that Kottoor and Faust gave contradictory statements and investigators did not uncover evidence to support prosecution.

“I have an ethical obligation to make decisions that can be upheld in court. We determined there was not a reasonable likelihood of conviction based on the evidence that we have,” Mayes said. “We did a two-year-long exhaustive investigation in this case, we utilized what had to be thousands of man and woman hours on this case, and we decided ultimately that we could not prosecute a crime in it.”

It’s unclear whether the Department of Justice is investigating the case and it did not respond to a request for comment on the referral.

A spokesman for House Republicans also declined to comment.

“We are not commenting on any communications with the Department of Justice,” spokesman Andrew Wilder said.

Records provided by the Arizona House of Representatives show the James Otis Law Group charged the House nearly $307,000 between February and August to conduct the investigation.