An Attorney General's Office investigation into Murray Paolo's stewardship of the county air support program, requested by county officials following his demotion from a department directorship to a division managership, exonerated him of any criminal misconduct on all four counts.

Investigator Robert Culley examined Paolo's use of county air time to get a helicopter pilot rating, internal budget transfers to cover air support costs, allocation of city payments for contracted computer support to the county air program and resale to private parties of helicopter parts obtained through federal surplus programs open only to government entities.

In a report released Friday, he concluded:

n Elected officials and top administrators had been aware since at least August 2005 that Paolo was using county flights to obtain his helicopter rating. The county derived a direct benefit from that, he concluded, and no formal objections were registered at the time.

n "It seems clear that the Board of Commissioners did or reasonably should have known where those funds were being applied inside the county budget. There is no indication that those funds were used for anything other than a viable county program."

n Thought the city payments were for a service unrelated to the air support program, the city had no objection, and the board either knew or should have known how he was allocating the money from the city information services contract.

n The purchase and resale of surplus helicopter parts, including parts that did not fit helicopters in the county fleet, appears "questionable." Federal program rules may have been violated. However, that is a federal rather than state issue, no one accused Paolo of seeking personal gain and the dollar sum was relatively minor.

"Additionally," Culley said in his report, "Paolo, in his interview, presents an articulate defense to any of the questions mentioned above."

The investigation came on the heels of a pay cut and demotion, stemming from an internal audit of the air support program accusing him of insubordination, financial mismanagement and unauthorized use of county resources. Paolo lost control of the air support division and took a $10,000 pay cut on a 2-1 vote, with Commissioner Mary Stern in opposition, following a contentious Aug. 26 executive session.

A follow-up second draft, based on further work by the audit committee, raised new concerns regarding Paolo's surplus parts transactions. When they subsequently requested the AG's investigation, county officials said they doubted any criminal misconduct had occurred, but felt it was incumbent on them to be sure.

Culley quoted Stephen Smith, head of the federal parts program in question, as saying he "had no idea Paolo was buying parts to resell to other private parties until 2009," and that "some of the parts Paolo purchased were for a helicopter that Yamhill County did not own, and those surplus parts were the ones resold."

But Smith said any investigation into that activity would need to be opened by the Office of the Inspector General, and nothing of that sort had occurred as of Friday. Smith indicated one criteria the office uses in making its decision is the amount at issue, and it is very small here.

County Counsel John Gray said only one thing caught him by surprise about the report - how long it took to complete. Even at the inception of the investigation, which began Sept. 30, county officials said they doubted Paolo had done anything criminal.

"The result is consistent with what the Board of Commissioners had understood," agreed Commissioner Kathy George, who joined with Commissioner Leslie Lewis in authorizing his demotion. "It's just nice to have the confirmation."

The formal request for an AG investigation came from District Attorney Brad Berry, who said an examination by an outside agency was needed to ensure both impartiality and the appearance of impartiality. Sheriff Jack Crabtree supported the move, saying an investigation would help clear the air and restore public confidence.

In public statements at the time, Paolo encouraged the move. "I welcome it," he said, "because I have nothing to hide."

On Friday, he said, "I'm glad that the report is completed. Now it's time for us to focus on the business of serving the citizens of Yamhill County."

However, Paolo does have one more hurdle to clear. Conservative activist Neal Lockhart filed a complaint with the state Ethics Commission that is scheduled for a preliminary hearing in March.