Watchdog finds conflict of interest issue at state agency

SPRINGFIELD — The state economic development department “committed mismanagement” by failing to investigate potential conflicts of interest for a deputy director who continued to be paid by his former company, which had a contract with the state agency, according to a report from Illinois’ top government watchdog.

Daniel Thomas started as deputy director of the Illinois Department of Commerce and Economic Opportunity’s tourism office in 2023 after previously owning TimeZoneOne, a communications firm that was a vendor for DCEO, according to the Office of the Executive Inspector General.

Thomas was fired from his position with DCEO after it was revealed he was still being paid by his old company even though it did business with the state agency. The IG’s investigation showed that Thomas continued receiving about $117,000 “in earnout payments” from his 2020 sale of TimeZoneOne, and he was actively involved in negotiations of that amount, expressing in an email to the new owner of the company that he continued to be a “true champion” of TimeZoneOne.

Thomas did not reveal he was still being paid by TimeZoneOne when he was hired and the department made only a “cursory inquiry” about his previous ownership, the IG’s office said in a newsletter that included summary of the investigation’s findings and provided a link to the full report.

“The OEIG determined that DCEO committed mismanagement by placing Mr. Thomas in charge of the Tourism Office, despite knowing about his prior relationship with TimeZoneOne, but not taking reasonable steps to determine if there was an actual or perceived conflict, as well as allowing contractual payments to be made with state funds without ensuring reconciliations were performed to support such payments,” the newsletter stated.

At an unrelated of event Tuesday, Gov. JB Pritzker said Thomas’ actions, as described by the state’s executive inspector general, “are ones that will not happen again.” The governor also heaped praise on the tourism section of DCEO, which he said “has helped us to enhance tourism all across the state of Illinois.”

“That one gentlemen broke the rules,” Pritzker said in Jacksonville, “and he’ll be held accountable.”

During the fiscal year after Thomas started working for the state agency, TimeZoneOne’s billing for subcontracted work for the state increased by more than $600,000, the IG found. In one instance cited in the report, Thomas was involved in the decision to award TimeZoneOne a project under a subcontract “to produce 30 additional videos over the 15 videos it was contracted to produce in the previous year.”

Additionally, the state’s payments to TimeZoneOne under its contract with DCEO increased by about $1 million in the fiscal year after Mr. Thomas began working for the agency, the newsletter stated. The investigation also revealed DCEO paid “significant amounts of money” to TimeZoneOne for years without supporting documentation or “reconciliation of the expenses,” the newsletter stated.

“Despite his ongoing financial relationship with TimeZoneOne, Mr. Thomas took no steps to recuse himself from DCEO’s work with TimeZoneOne,” according to the investigative report. “To the contrary, he approved TimeZoneOne’s FY 2024 Work Plans less than two weeks after he began working for DCEO, and immediately took steps to increase TimeZoneOne’s business with DCEO.”

The investigation also showed that TimeZoneOne regularly paid for travel expenses incurred by Thomas as part of his state duties, as well as travel expenses for at least one other DCEO employee, even though that wasn’t specified in the company’s contract. The newsletter said at least some of the expenses, such as for business or first class flights and alcoholic beverages, “raised red flags.”

“In addition, it was clear to DCEO management that TimeZoneOne was paying for at least some of Mr. Thomas’ and his subordinates’ travel, yet no action was taken to ensure such payments were appropriate and that the travel rules were followed,” according to the newsletter.

As a result of the case, DCEO is auditing TimeZoneOne’s billings and reconciliations, and is implementing new or updated policies for conflicts of interest, vendor billing, and travel expenses, the newsletter said. Pritzker’s office has directed its Office of Management and Budget to develop training for state agency fiscal offices pertaining to appropriate documentation and reconciliation for vendor payments, according to the newsletter.

In a December letter to the state watchdog, DCEO Director Kristin Richards said the agency instituted “additional oversight procedures with respect to vendor management, including for the Department’s Illinois Office of Tourism” and her office instructed staffers who manage vendors and contracts to discuss all significant contract management decisions with her office “to ensure all decisions are made in accordance with the conflicts of interest policy and the (state) Ethics Act.”

“With respect to conflicts of interest, DCEO is updating its conflicts of interest policy and adding a conflicts of interest disclosure form to its onboarding process,” Scott Lerner, a deputy general counsel for the governor’s office, said in a February letter to the watchdog.

Meanwhile, Thomas’s lawyer earlier this month slammed the executive inspector general’s office’s investigation in a letter, saying that “rather than conducting a full and fair investigation” the office “misused and manipulated facts” in its reporting “to corroborate its predetermined and biased conclusions regarding Thomas.”

The letter said when Thomas was hired by DCEO, the director of the agency, its general counsel and the governor’s office all knew of his relationship with TimeZoneOne. The letter also said the state knew Thomas had sold his company and was still receiving earn-out payments, and upon being hired by the state, he disclosed all of his TimeZoneOne payments.

“All key State employees knew Thomas was hired to oversee the TZO contract. However, 18 months after beginning work, the OEIG determined that, regardless of all the other ethics officers’ decisions and the Governor’s office’s blessing, the hiring of Thomas was improper,” Thomas’s lawyer wrote. “Thomas filled out all reports and disclosed all his potential conflicts and DCEO and the Governor’s office approved his hiring.”

In a statement to the Tribune Tuesday evening, Thomas said while he’s “always acted in the best interest of Illinois,” his experience working for DCEO and the scrutiny he fell under can discourage “capable private sector talent from entering public service.”

“The OEIG’s investigation was one-sided, lacking fairness and transparency. They targeted me despite knowing that all the actions in question had been reviewed and approved by DCEO counsel and ethics advisors,” Thomas said.

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