Republican state lawmakers in Arizona have hired an outside lawyer to investigate an alleged pay-for-play scheme involving Democratic Gov. Katie Hobbs. The investigation centers around Hobbs’ Department of Child Safety and a group home for children in the state.
How it started
The investigation began after an Arizona Republic report found Sunshine Residential Homes received more state money after donating $300,000 to Arizona Democrats and $100,000 to the governor’s inaugural fund.
Sunshine Residential Homes also reportedly gave Arizona child welfare leaders an ultimatum. Either give the group home more money, or they’d take their business elsewhere.
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David Lujan was the director of the Department of Child Safety at the time and approved the pay increase.
“It puts, I think, state agency directors, state employees in an uncomfortable position,” Lujan said to The Arizona Republic at the time. “I really tried to make the decision based on what was best for our agency and the children, but of course you’re going to get second-guessed when you have campaign contributions involved.”
Sunshine Residential Homes ended up getting a 30% raise, or $4 million more per year.
Lujan acknowledged it would “raise suspicions.”
Outside counsel
House Speaker Steve Montenegro formed an advisory committee to investigate the allegations last year. On Feb. 2, Arizona House members announced they would hire outside counsel for an independent investigation into the allegations against the governor’s office.
“The Arizona Republic’s reporting describes political donations followed by special treatment inside Governor Hobbs’ administration,” Montenegro said. “The advisory team has done serious, disciplined work, and their recommendation to bring in independent counsel is the right next step.”
The lawyer is Justin Smith of the James Otis Law Group in Missouri. Smith is expected to conduct interviews, review records and report findings directly to lawmakers.
“Justin Smith has the experience and integrity this investigation demands,” Montenegro said. “He has no interest other than uncovering the truth. The House will not look the other way when taxpayer dollars and vulnerable children may have been used as leverage in a political scheme.”
That group, including Smith, has close ties to President Donald Trump. Smith himself served as a lawyer for the president in his lawsuit against E. Jean Carroll.
Meanwhile, the law group’s founder, John Sauer, currently serves as the U.S. solicitor general and has represented Trump personally.
Arizona Republican lawmakers have also hired the firm in the past while defending controversial state laws.
Arizona’s Democratic Attorney General Kris Mayes is also investigating the matter in a separate case.
Governor’s response
Hobbs has maintained she had nothing to do with the increase in pay for Sunshine Residential Homes.
“This is a shameless stunt by partisan actors desperate to score political points,” Liliana Soto, press secretary for Hobbs’ office, told Straight Arrow News. “Arizonans are fed up with extremist legislators playing games, distorting facts and spreading misinformation. Even the Arizona Republic confirmed the Governor’s Office had no communication with DCS about Sunshine’s rate increase.”
Soto said this is all a waste of money.
“It’s time for the legislative majority to stop wasting taxpayer dollars on stunts and focus on helping everyday Arizonans improve their lives,” she added.
DCS officials have acknowledged the need for Sunshine Residential’s capacity, especially their ability to keep siblings together.
Hobbs has also committed to back legislation that would require people and companies seeking state contracts to disclose their political contributions, but so far, there’s been no proposed legislation.
The governor vetoed legislation in 2025 that would have made all Medicaid contracts subject to state procurement rules, meaning a state-funded residential home would have to disclose any donations. Hobbs called the bill a “political stunt” at the time.
