Arizona House Escalates Probe: Independent Counsel Retained in Governor Hobbs’ Alleged Pay-to-Play Scandal

Arizona House Speaker Steve Montenegro (R-29) announced on Monday that the House has retained independent counsel to deepen the investigation into Governor Katie Hobbs’ (D) alleged pay-to-play scandal at the Department of Child Safety (DCS).

 This move comes amid mounting evidence of political donations influencing state contracts, particularly involving Sunshine Residential Homes, which donated over $400,000 to Hobbs and the Arizona Democratic Party before receiving a lucrative 30 percent rate increase. 

The scandal first came to light through extensive reporting by The Arizona Republic, which documented how Sunshine Residential Homes secured a special rate hike worth millions, even as the agency faced budget shortfalls and a directive to reduce reliance on group homes. Internal communications revealed that the increase was approved despite warnings it would exacerbate a projected $13 million shortfall, raising serious questions about favoritism tied to political contributions. 

In response to these revelations, Speaker Montenegro formed an advisory team in November 2025, consisting of State Reps. Selina Bliss (Chair of the House Health and Human Services Committee), David Livingston, Matt Gress, Quang Nguyen (Chair of the House Judiciary Committee), and Speaker Pro Tempore Neal Carter. The team was tasked with reviewing records and investigating the allegations. “The facts reported raise serious questions the House cannot ignore,” Montenegro stated at the time. “Arizona’s children, families, and taxpayers deserve a system that is clean, fair, and focused on care, not political access or donations.” 

GOP challenger Rep. Andy Biggs weighed in on social media, stating “Time for Arizonans get all of the facts…”

Time for Arizonans to get all the facts.

We need to know the truth about the alleged pay-to-play scheme that resulted in $4M of taxpayer dollars going to a Katie Hobbs donor. https://t.co/fCd5NB24cO

— Andy Biggs (@andybiggs4az) February 2, 2026

The advisory team’s recommendation led to the retention of outside counsel: Justin Smith of the James Otis Law Group in Missouri, who will review records, conduct interviews, and report findings directly to House leadership. Smith, a former prosecutor with experience in public integrity investigations, emphasized the need for transparency: “The House will not look the other way when taxpayer dollars and vulnerable children may have been used as leverage in a political scheme. We will follow the facts, consider the findings, and ensure transparency and accountability in state government. Arizonans deserve nothing less.” 

This development builds on prior scrutiny of Hobbs’ administration.

As the California Globe reported in November 2025, Hobbs faced a racketeering probe by her colleague Arizona Attorney General Kris Mayes (D) over the same pay-to-play allegations. The timeline is suspect: Sunshine was denied a rate increase in December 2022, but just three days later donated $100,000 to Hobbs’ inauguration fund as a “gold sponsor.” By 2023, the company received the 30 percent bump, amounting to $4 million annually, while other providers were turned away. Hobbs’ spokesperson dismissed the investigations as partisan, claiming the administration would be “cleared of wrongdoing,” but the governor herself has been caught on video evading media questions about the scandal. 

The pay-to-play controversy is just one in a series of scandals plaguing Hobbs’ tenure. Her time as Secretary of State has also come under fire, particularly following a July 2025 cyberattack by pro-Iranian hackers on the SOS Candidate Portal. Arizona Rep. John Gillette (R) blew the whistle on what he called a “national security crisis,” accusing Hobbs’ allies, including current SOS Adrian Fontes (D) and AG Mayes, of stonewalling federal oversight and failing to secure election systems. Gillette’s “Project Sentinel” initiative exposed vulnerabilities that could jeopardize the 2026 midterms, including outdated infrastructure and potential “sleeper code” insertions by hackers.  These issues echo longstanding concerns about election integrity in Arizona, dating back to the contentious 2020 and 2022 cycles under Hobbs’ watch.

Furthermore, calls of impeachment have grown louder. Although details remain sparse, Arizona Senate President Warren Petersen (R) signaled readiness to pursue impeachment amid the pay-to-play allegations and accusations of prosecutorial misconduct against Hobbs and Mayes. With additional probes into “missing” funds totaling $339 million and broader claims of corruption, Hobbs’ administration appears increasingly embattled.

As the independent counsel begins its work, Arizonans—and observers nationwide—will be watching closely. The California Globe will continue to monitor developments in this unfolding story.