Kentucky workers’ comp agency cuts CEO’s pay, imposes probation after critical audit

April 19-- Apr. 19--In response to a stinging audit that criticized its spending practices, including no-bid contracts and University of Kentucky athletics tickets going to top managers for no identifiable business purpose, the governing board of Kentucky Employers' Mutual Insurance on Friday recommended that its chief executive take a pay cut and lose his long-term job contract in favor of year-to-year probation.

KEMI's board of directors unanimously voted to change the terms of CEO Jon Stewart's employment after a three-and-half-hour closed-door meeting in Lexington with representatives from the offices of the state auditor and the attorney general.

"The board has authorized the executive committee to work with Mr. Stewart to implement a probationary contract at a reduced salary for a one-year term, with opportunity for annual renewals," the board said later in a prepared statement. "As evidenced by the board's audit request, we continually look for opportunities to make improvements for the benefit of Kentucky's employers."

Stewart, who has served in his position for seven years, had a contract that ran until May 2023. A state database lists his annual salary as $445,438. The board did not reveal Friday what his reduced salary will be.

Stewart declined to comment after Friday's meeting.

On Tuesday, state Auditor Mike Harmon released an audit of KEMI that criticized the agency for a lack of competitive bidding and cost controls, inaccurate reporting of its contracts to the General Assembly in violation of state law, and business funds used for expensive meals, liquor, gifts and entertainment for the benefit of Stewart and other top managers.

KEMI is Kentucky's largest issuer of workers' compensation insurance, collecting money from 23,000 policyholders in all 120 counties, including most school districts. The General Assembly created it as an independent nonprofit in 1994 to serve as an insurer of last resort, staking it with a $7 million loan of public funds.

The chairman of KEMI's board, Northern Kentucky attorney Brandon Voelker, said he requested the audit after growing concerned about slipshod spending practices at the agency. Gov. Matt Bevin named Voelker to the KEMI board in 2016.

"As you can expect, anytime you've got an organization of 220 employees that has been doing things a certain way for 25 years, it takes some time to change behaviors," Voelker said Tuesday, after the audit was released.

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