‘Conflict of interest’: Idaho AG gave officials legal advice, then investigated them

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An Ada County judge ruled Thursday that Idaho Attorney General Raúl Labrador had a “notable conflict of interest” when his office began investigating officials with the Idaho Department of Health and Welfare over how it distributed federal child care grants.

The health officials were the attorney general’s clients. And a lawyer under Labrador had advised them that the grants in question were legally distributed.

“The attorney general provided an opinion to a client and cannot now seek to investigate whether ... the client violated the law on the same issue,” 4th Judicial District Judge Lynn Norton wrote in Thursday’s ruling.

The attorney general’s office in March launched an investigation into the Community Partner Grants, which are federal funds overseen by the Idaho health department that address learning loss among children during the COVID-19 pandemic.

Labrador’s office demanded that the health officials hand over records related to the program around the same time Idaho lawmakers approved an audit of the grants, amid concerns that the federal funds weren’t distributed properly. Lawmakers dictated that the funding go to programs serving kids 5 to 13. Labrador previously told the Idaho Statesman that he’s investigating whether those directions were followed.

After receiving Labrador’s demands, health officials, through private attorneys, asked the 4th Judicial District to intervene. Idaho law directs the attorney general to represent state agencies and officials in legal matters.

In a separate case, leaders of Idaho nonprofits and school districts that received the grants asked the Ada County court to block similar investigative demands from Labrador’s office. Norton in April ruled that the attorney general had the authority to demand the records and ordered dozens of child care providers to comply. The nonprofit and school leaders have since appealed the ruling.

Norton ordered Labrador to appoint a special prosecutor to investigate state health officials’ distribution of the child care grant money.

In a statement following Thursday’s decision, Beth Cahill, Labrador’s spokesperson, pointed to the previous ruling and noted that Norton “acknowledged our reasons to believe the law was violated.”

“This is consistent with the pending legislative audit, authorized by the governor, reviewing the Department of Health and Welfare’s administration and expenditure of $14 million of public funds under the Community Partner Grant Program,” Cahill said by email. “The attorney general is reviewing his options for proceeding with the investigation.”

Legal opinions created a conflict, judge rules

Central to the health officials’ case are two legal opinions, written by former deputy attorney general Daphne Huang, who advised health department officials that the child care grants were distributed legally.

Huang issued one opinion in November, during former Attorney General Lawrence Wasden’s tenure, and a nearly identical opinion in January, after Labrador assumed office and lawmakers questioned Jeppesen about the grants.

Labrador was unaware of the Jan. 25 legal opinion and “would never knowingly have put his name on a legal opinion like that,” Cahill previously told the Statesman.

But the legal advice created “a client relationship” with health department officials and a “duty to act in protection” of the department’s interests, Norton wrote. Idaho State Bar ethical rules prohibit attorneys from advocating against their clients’ interests.

Norton also wrote that an attempt by Labrador’s aides to seize the work phone of a former attorney assigned to the department shows that the attorney general’s office failed to create a sufficient ethical firewall between investigating attorneys and the lawyers advising the Department of Health and Welfare.

Thursday’s ruling is the first time a judge has publicly analyzed the unique conflict between the executive branch officials and their own attorney. It’s among a handful of clashes between Labrador and state agencies that have marked the Republican’s first term in office.

In a separate case, Labrador’s office sued the University of Idaho’s board of trustees, alleging it violated open meeting law when it secretly discussed a deal to acquire a for-profit university. The board’s executive director said the deputy attorney general assigned to advise the board was aware of the closed-door meeting and raised no concerns about it.

The Statesman reported in May that 26 attorneys have left the office, including half a dozen attorneys who previously represented the health department. Two of them accused Labrador of defying ethical rules in his handling of the child care grant investigation.