PHOENIX — Arizona House Speaker Steve Montenegro asked the U.S. Department of Justice more than two months ago to investigate bribery and fraud allegations tied to Sunshine Residential, a foster-care contractor long entangled in pay-to-play accusations involving Gov. Katie Hobbs’ political circle, according to records obtained under the state’s public-records law and reported Thursday.
Montenegro’s July 21 criminal referral to the DOJ’s National Fraud Enforcement Division alleges potential federal bribery, wire fraud, and honest-services fraud by Sunshine Residential, CEO Simon Kottoor, and program manager Abi Saifi, a former Department of Child Safety employee. The letter followed a House-hired private probe by the James Otis Law Group, which billed the chamber nearly $307,000 between February and August.
Years of Arizona Republic reporting found that Sunshine received sizable state rate increases after its owner and affiliates contributed hundreds of thousands of dollars to Hobbs’ 2022 campaign and other Democratic efforts. Those increases raised the daily rate Sunshine charges the state for foster beds by nearly 60% across 2023 and 2024 awards, according to prior coverage cited in the referral narrative.
Republicans publicized many of the claims last month after Attorney General Kris Mayes announced she would not charge Hobbs, Kottoor, or the company. Mayes said a two-year investigation found no reasonable likelihood of conviction, citing contradictory statements between Kottoor and former DCS Director Mike Faust and insufficient evidence of a prosecutable quid pro quo.
Faust, appointed under former Republican Gov. Doug Ducey, told investigators Kottoor offered to help keep him in the job if he approved a rate bump — a claim Kottoor’s side disputes. Faust repeatedly denied Sunshine’s requests; months after Hobbs took office, her DCS director, David Lujan, approved an increase. High-level DCS staff told investigators they knew of the political contributions when the hike was approved, Montenegro’s referral states.
The referral also accuses Sunshine of overstating financial hardship and threatening to abandon Arizona foster contracts for federal Office of Refugee Resettlement beds — while allegedly lacking the license and financial records to back a claimed $4.5 million 2022 deficit. Company spokesman Tommy McKone denied wrongdoing, said Sunshine stayed with Arizona foster children despite higher federal migrant-bed rates under Ducey, and called the DOJ referral a campaign stunt five weeks before Election Day. Hobbs’ campaign said even Republican materials confirm the governor did not direct the rate decisions, matching Mayes’ findings.
DOJ has not said whether it is investigating. With Hobbs facing Republican Cong. Andy Biggs and foster-care costs already a Capitol flashpoint, the federal referral keeps a yearslong scandal in the midterm spotlight even after state prosecutors stepped aside.