Gov. Katie Hobbs cleared of wrongdoing in pay-for-play scandal

After a two-year investigation, the Arizona Attorney General’s Office said Friday it found insufficient evidence to prosecute Gov. Katie Hobbs or Sunshine Residential Homes over allegations of a “pay-to-play” scheme.

Investigators found no evidence showing a reasonable likelihood of convicting Hobbs, the group home operator or anyone else involved of bribery or related crimes.

The case may remain technically open, however, so the Attorney General’s Office can assist with a separate investigation by the Arizona Auditor General’s Office.

“The report released today clearly states that there was no wrongdoing by the governor or her office,” according to a statement from Hobbs’ office. “As has been publicly reported multiple times and the attorney general’s report now confirms: 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.”

Arizona Attorney General Kris Mayes issued the following statement in her statement:

After two years of investigation, consisting of multiple interviews, reviews of campaign-finance records, procurement records, bank documents, and State emails and chats, totaling over one terabyte of data, including more than 100,000 documents, the investigation has not uncovered any evidence of the necessary quid pro quo to support a bribery charge.

Mayes and Hobbs are both Democrats.

Why was Hobbs accused of a “pay-to-play” scheme?

The case stemmed from a June 2024 Arizona Republic report alleging that Hobbs’ administration gave preferential treatment to Sunshine Residential Homes, which contracts with the Arizona Department of Child Safety.

The company donated about $400,000 to Hobbs’ inauguration committee and the Arizona Democratic Party. DCS later approved a special 30% rate increase for Sunshine Residential Homes in 2023.

Hobbs has consistently denied wrongdoing, saying neither she nor her office influenced the agency’s decision. Former DCS Director David Lujan, who approved the rate increase, has also said the Governor’s Office did not influence or pressure him.

Investigation became an issue in governor’s race

The investigation became a major political issue as Hobbs sought a second term.

Her Republican opponent, U.S. Rep. Andy Biggs, made the allegations a focus of his campaign and released an ad accusing Hobbs of awarding a lucrative state contract to a donor.

Hobbs maintained her innocence throughout the investigation and repeatedly said she looked forward to its conclusion.

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