By Alexandra Berzon, J. Patrick Coolican

Fri, Apr 25, 2008 (2 a.m.)

The Nevada attorney general’s office has opened an investigation into the state Business and Industry Department’s handling of a case involving the deaths of two workers at the Orleans, the Sun has learned.

The public integrity section of the attorney general’s office has asked the state agency involved to provide its case file on the Orleans, sources familiar with the investigation told the Sun Thursday.

A representative of Attorney General Catherine Cortez Masto declined to comment about the case, other than to confirm that the public integrity section investigates impropriety among public officials.

The action comes after the Sun reported that Mendy Elliott, appointed by Gov. Jim Gibbons as head of the Business and Industry Department, became involved in the Orleans case. Two workers died and another was seriously injured in a February 2007 accident on the property owned by Boyd Gaming, which has contributed at least $90,000 to Gibbons’ campaigns for governor and Congress over the past 12 years.

The Nevada Occupational Safety and Health Administration, responsible for enforcing workplace safety laws, recommended charging Boyd with a willful violation in the deaths, a finding that would have permanently marred the company’s record and could have exposed it to costly lawsuits and fines.

But after several meetings, including one involving Elliott, state administrators and Boyd officials, the violations were downgraded to serious and the fines were cut sharply. Elliott and other officials of the Business and Industry Department maintain her role in the case was minimal and entirely appropriate.

The legal issues for the attorney general could include whether Elliott influenced the outcome of the investigation or merely watched as underlings handled the decisions, as she insists.

One section of Nevada law appears to bar a department head from involvement in decisions by regulators. Another section, however, says that OSHA decisions can be reviewed by a department head.

The attorney general’s office could also be looking into whether OSHA staff or Industrial Relations Division Administrator Roger Bremner, who reports to Elliott and oversees OSHA, acted improperly in negotiating the outcome, said a lawyer with experience in Nevada regulatory matters.

“What I found unusual was that the director of the department would be involved in safety violations,” the attorney said. “She should get reports from agency heads on approach and direct policy. But to get down involved in a safety violation, that’s a little surprising.”

OSHA’s top administrator, Tom Czehowski, has said the Orleans investigation was the first time in his seven years at the department that officials at the level of Bremner and Elliott entered a case.

The original OSHA investigator on the accident and Boyd safety manager Don Barker quit their jobs in anger over the outcome.

Department officials say that, acting on advice from Industrial Relations Division attorney John Wiles, the decision to reduce the citations was made by Bremner, not Elliott. Bremner has said Elliott put no pressure on anyone.

Barker, the former Boyd safety manager, told the Sun last week company officials had been resistant to his warnings about safety flaws identical to those that caused the deaths. The two workers died when they entered a manhole to correct a sewage problem. A third man was on life support for weeks before recovering.

The OSHA investigation found Boyd had repeatedly ignored calls from OSHA and in-house safety people to come up with a plan to deal with such confined spaces. The agency’s findings were supported by OSHA administrator Czehowski and other OSHA officials. Before the case was resolved, Elliott transferred Czehowski out of the agency. (She recently transferred him back.)

Word of the attorney general’s investigation touched off a flurry of activity Thursday, including Elliott’s first comments to the Sun about the case. Her department’s spokeswoman Elisabeth Shurtleff, had not allowed the Sun to interview anyone in the department, citing department policy.

Elliott agreed to an interview in her office Thursday. Wiles and Shurtleff also attended.

Both Wiles and Elliott said nothing is wrong with the involvement of high government officials in an OSHA investigation.

“The governor is the chief executive officer, the department head is the head of the department, the division head is the head of the division,” Wiles said. “The fact that anybody above a certain level is involved in a case is in my mind not something that should be called into question. It’s just a matter of oversight.”

The closing conference for the Orleans case was held in Elliott’s office. It included Boyd representatives and the OSHA investigator who later resigned.

Elliott said Thursday that at the closing conference, she asked only for a resolution of the case within 10 working days because it had dragged out for six months.

After the meeting, negotiations between the state and Boyd continued at some point. The OSHA investigator was not invited. Elliott said she was not involved in those later discussions. (The department said last week Elliott had been involved.)

Wiles and Bremner then reported to her they had decided to reduce the citations, Elliott said Thursday.

“I said, ‘You’re the experts in the field,’ ” Elliott said. “All of the people in the department work tirelessly to make sure the needs of the citizens are met and I take it as a super responsibility to be there to support them. I also listen to constituents if they’re not happy with a decision being made.”

After the settlement, Elliott said, she called Gibbons’ chief operating officer, Dianne Cornwall, to brief her on the case.

The case was unusual in many ways, including that after the closing conference, the matter was resolved through settlement negotiations held before OSHA formally issued its citations. Informal settlement conferences commonly occur after citations are given and after a company appeals.

When Wiles was asked Thursday whether in the 13 years he has been a lawyer for the agency he has seen another case negotiated before citations were issued, he said, “I don’t recall another.”

Wiles said he recommended reducing the citations because he was concerned the case would result in drawn out litigation and because he had found some holes in OSHA’s case he thought Boyd could exploit.

He thought it would be better to work out the “unprecedented” deal, which forces Boyd to overhaul its safety procedures.

“Our goal is to reduce workplace hazards and prevent injuries,” Wiles said. “In this settlement we can look forward to a safer workplace.”

Also Thursday, Wiles confirmed a statement Shurtleff made to the Sun last week about the origin of Elliott’s involvement. Wiles said a Boyd attorney asked him to have Elliott and Bremner attend the closing conference. Boyd wanted the two administrators there because “this was a significant and important case. And it was,” Wiles said.

Boyd spokesman Rob Stillwell vehemently denied this week that the company sought Elliott’s involvement. Stillwell said Elliott decided on her own to host the closing conference after learning that Boyd’s general counsel would attend.

Stillwell also chastised the Sun for reporting that the $90,000 Boyd and its various entities contributed to Gibbons’ campaigns constituted “major” donations.

Elliott said she was not aware of any contributions to Gibbons.

Sun reporter Cy Ryan contributed to this story from Carson City.