The Arizona House of Representatives has hired Justin Smith from the James Otis Law Group in Missouri as independent counsel to investigate allegations that Sunshine Residential Homes received a significant rate increase after making large donations to Governor Katie Hobbs and the Arizona Democratic Party. The investigation was prompted by reports from The Arizona Republic, which revealed that Sunshine Residential Homes obtained a 30-percent rate hike worth millions, while other providers did not receive similar increases.
Internal communications within the agency referenced in these reports highlighted concerns about Sunshine’s political connections and discussed efforts to keep the rate increase confidential from competitors. These discussions took place despite budget constraints and a statutory requirement to reduce reliance on group homes.
Speaker Montenegro accepted the advisory team’s recommendation to hire an out-of-state attorney for what he described as an impartial review. “The Arizona Republic’s reporting describes political donations followed by special treatment inside Governor Hobbs’ administration,” Speaker Montenegro said. “The advisory team has done serious, disciplined work, and their recommendation to bring in independent counsel is the right next step.”
This inquiry builds on previous actions taken by the House in 2024. These include referrals made by Representative Matt Gress, Chairman of the Joint Legislative Audit Committee, to both the Auditor General and Maricopa County Attorney. Additionally, Representative David Livingston called for Attorney General Kris Mayes to recuse herself due to potential conflicts of interest. In 2025, Speaker Montenegro established the advisory team to coordinate these oversight efforts.
“Justin Smith has the experience and integrity this investigation demands. He has no interest other than uncovering the truth,” Speaker Montenegro added. “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.”
The advisory team will continue its collaboration with Smith as findings are reviewed throughout the course of the investigation.
Carbone, a Republican, was elected to represent Arizona’s 25th House District in 2023, succeeding Michelle Udall.
