Colorado's Top Scandals of 2010 - www.coloradoforethics.org

Colorado’s Top Scandals of 2010

        www.coloradoforethics.org

House Ethics Committee to King: Stop Breaking Those Rules We Said You Didn’t Break!

        In January, Ethics Watch filed a complaint with the Speaker of the House, asking for a
House Ethics Committee investigation of Representative Steve King (R-Grand Junction). Ethics
Watch filed the complaint based on documents apparently showing that during the 2009
legislative session King sought and received mileage reimbursement from the state for travel
expenses, even though his campaign committee’s expenditure reports showed that $1408.33 was
spent on gasoline and other travel expenses, apparently between Grand Junction and Denver on
weekends during the session. This appeared to be a clear violation of the House’s requirement
that legislators certify that that they actually incurred the requested expenses and did not receive
reimbursement for the same expenses elsewhere.

         The House Ethics Committee formally dismissed the complaint, allowing King to claim
exoneration and cast himself as the victim of a smear. Weeks later, the Ethics Committee quietly
filed its final report, in which it criticized Rep. King for “reimbursing himself for gas and
maintenance expenses for the same travel for which Representative King received mileage
reimbursement from the state.” Of course, this is exactly what Ethics Watch had alleged in the
dismissed complaint. The committee also expressed concern about “Representative King’s use
of his campaign fund as a source for short-term loans.”

        The Ethics Committee’s conduct removed any doubt that its primary interest was to
protect members from accusations of ethics violations, not in enforcing ethics standards. The
episode vindicated proponents of Amendment 41, which established an Independent Ethics
Commission in part because the state legislature seemed incapable or unwilling to police its own
members’ ethical conduct, and made it more important for the Commission to follow through on
reforms to its investigation and complaint system.

Pinnacol Assurance: The Worst of Both Worlds

         Pinnacol Assurance, the former Colorado Compensation Insurance Authority, rebranded
itself in 2002 as part of its evolution into a public/private hybrid -- a “political subdivision” of
the State of Colorado with a public mission to serve as workers’ compensation carrier of last
resort, but funded entirely by premiums paid by employers, including Colorado local
governments and special districts, who purchase insurance from Pinnacol. In 2010, Pinnacol
displayed behavior that could be characterized as the worst of both the public and private sectors.

         In June, the state auditor released a report that was highly critical of Pinnacol’s oversight
of staff travel and entertainment expense payments, finding that 75% of the time, Pinnacol failed
to enforce its own internal expense policies. Even worse, the auditor found that Pinnacol did not
“require staff or Board members to track or report gifts or expenses paid for on their behalf by
business partners.”

         Around the time the audit report was released, Channel 7 TV reported that Pinnacol had
paid for a golf vacation in Pebble Beach, California for three members of the state commission
that is supposed to oversee Pinnacol. Although Pinnacol publicly claimed it would reevaluate its
gift policies, its president angrily confronted the Channel 7 reporter when he attempted to

interview board members about the trip. Pinnacol also went to court to block the television
station from obtaining documents about the golf trip, arguing unsuccessfully that for this purpose
it should be treated as a private business, not as a state agency with a public purpose.

       Questionable travel and entertainment expenses were not the only, or even the most
significant, of Pinnacol’s troubles – secret private sector-style “golden parachutes” also came to
light during 2010. The audit report revealed that while lawmakers were looking at ways to tap
into Pinnacol’s cash reserves as a way to address the state’s ongoing revenue crisis, the Pinnacol
board quietly approved “change in control” agreements that would obligate Pinnacol to pay over
$4.3 million to executives if Pinnacol were returned to the status of a full state agency or were
privatized – both options then under consideration.

        All of these revelations came against the backdrop of ongoing questions about the
premiums Pinnacol charges to its customers – rates that the state auditor said “could be
discriminatory under state law.” Pinnacol’s pattern of acting like a private company when it
comes to spending and oversight, but using its public status to avoid the full regulatory system
that applies to private insurers, deserves a hard look during 2011.

“Musings On Water”

        Former Congressman Scott McInnis, once considered the front-runner in the 2010
Colorado gubernatorial race, lost the Republican primary after evidence came to light that he
plagiarized materials to fulfill a fellowship obligation and made misrepresentations about the
authorship of the material.

        During 2010, media blogger Jason Salzman raised questions about a fellowship the
Hasan Family Foundation had awarded to McInnis in 2007, shortly after McInnis retired from
Congress. In June, the Hasan Family Foundation released a series of articles delivered by
McInnis under the fellowship, and disclosed that it had paid Congressman McInnis $300,000
over a period of two years to write a series of articles on water issues. In July, The Denver Post
reported that significant portions of the essays appeared to be identical to a 1984 article written
by Gregory Hobbs, then a water attorney in private practice and now a Justice of the Colorado
Supreme Court. These allegations of plagiarism, however, proved to be just the beginning of
McInnis’s problems.

       Mr. McInnis’s campaign claimed that Rolly Fischer had been hired as a research assistant
and plagiarized Hobbs’ work without McInnis’s knowledge. Fischer vehemently denied that
charge, telling a local television station that the McInnis campaign had sent him a written
confession and asked him to sign it. Fischer refused, saying that he thought McInnis only
wanted him to provide articles to get McInnis up to speed on water issues for a possible future
campaign and never knew the material was going to be submitted to anyone.

       The Hasan family also made it known that they felt they had been misled, rejecting
McInnis’s assertion that Fischer was to blame for any plagiarism with a statement that the family
never authorized the use of a research assistant and was never told that McInnis was relying on
an assistant to prepare the articles.

McInnis and the Hasan Family Foundation later announced that they had reached a
confidential settlement. The Office of Attorney Regulation Counsel launched an investigation
into McInnis’s conduct. Republican primary voters rendered their own verdict on McInnis in
August when they handed the gubernatorial nomination to Dan Maes – no stranger to scandal
himself.

Maes Campaign Funds End Up In Pockets of Candidate and Family

       Republican gubernatorial nominee Dan Maes made the wrong kind of headlines by being
extremely effective at directing campaign funds to himself and members of his family.

        In August 2010, Maes paid a fine of $17,500 for violating Colorado campaign law. A
complaint filed with the secretary of state’s office alleged multiple violations, including that Mr.
Maes received $8,675 in mileage reimbursements during the fourth quarter of 2009, while Maes
would have driven only approximately 6,890 miles, even assuming that Maes drove from his
Evergreen home to each event and then returned home. Applying the 2009 standard Colorado
state government mileage reimbursement rate of 50 cents per mile, Mr. Maes would have been
entitled to $3445. The fine imposed by the administrative law judge was reportedly the largest
fine in Colorado history resulting from a complaint filed under Colorado’s private-party
campaign finance enforcement procedure.

       Maes’ payments of campaign funds to himself and his family did not stop after the fine
was paid. In December, The Denver Post reported that almost a third of the money raised by the
Maes campaign was paid to Maes himself or members of his family, including $66,235 in
mileage reimbursements to himself and a $1,300 per month salary and $2000 bonus to his
daughter.

        News of Maes’ campaign finance violations, along with revelations that he exaggerated
his prior work experience as a police officer in Kansas, dimmed Maes’ rising star. Maes finished
third in the race for governor with approximately 11% of the general election vote.

“Mr. X” Revealed

        In a year when four of six statewide ballot initiatives made it to Election Day without any
public report of how the effort to qualify for the ballot was funded, Douglas Bruce was the poster
child for the all-too-routine flaunting of disclosure requirements in ballot issue elections.

        When a private citizen filed suit over the lack of disclosure of the funding of
Amendments 60 and 61 and Proposition 101, it was obvious that Bruce needed to answer some
questions. After all, the Colorado Springs Gazette had reported in January that eight petition
circulators for the ballot measures had stayed in a house owned by Bruce. But when a routine
deposition subpoena was issued for his testimony in the case, Bruce avoided service, reportedly
evading 30 attempts by El Paso County deputies to serve him.

Ultimately, the Attorney General was forced to file a separate lawsuit to require Bruce to
submit to questioning. After a contempt hearing in Denver District Court was repeatedly
postponed, Bruce finally testified in a deposition less than one month before Election Day. By
then, an administrative law judge had already imposed fines against some of the proponents of
the three measures for violating campaign finance disclosure laws, and it was too late for a new
case to result in meaningful disclosures before the election.

        Bruce may have had good reason to avoid testifying. A witness in the disclosure case
identified Bruce as the “Mr. X” who sent instructions to the proponents, going so far as to give
strategic advice and draft pleadings for use in the disclosure litigation. (Bruce has a law degree
but does not have a license to practice law in Colorado.) He revealed himself to the witness, one
of the proponents, after she expressed concerns about the lawsuit. She testified that Bruce called
her to say she was overreacting, then e-mailed her a motion to sign and file with the court.

        Bruce’s manipulation of the system continued into December. In October, a second
disclosure suit regarding the three initiatives was filed, this one against Active Citizens Together
(ACT), a non-profit tied to Bruce. No one appeared to defend ACT at the December 14 hearing
on the complaint, and Bruce told a Gazette reporter that he planned to dissolve ACT and empty
its bank account, arguably rendering uncollectible any fine levied as a result of the complaint.
On December 23, the case concluded with a $11,300 fine against ACT.

       Bruce, who was named in Ethics Watch’s 2008 Ethics Roundup for being censured
during his brief tenure as a member of the Colorado House of Representatives, managed to keep
himself embroiled in scandal even after leaving office.