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The Colorado State Capitol in Denver Tuesday, Dec. 1, 2020. (The Gazette, Christian Murdock)

Colorado auditors have been investigating for more than two years whether fraud occurred at the Colorado’s Secretary of State’s Office when Wayne Williams headed it as an elected official.

Williams, a Republican who lost his re-election bid for secretary of state in 2018 and is now an at-large Colorado Springs city councilmember, said he has not been contacted by the auditors and does not know what they are investigating.

“I have no idea what this is all about,” Williams said.

The Gazette discovered the existence of the probe into the Secretary of State’s Office after filing Colorado Open Records Act requests with all state agencies to determine which ones were reported to the fraud hotline maintained by the office of the Colorado State Auditor since the beginning of 2017. The investigation of the Secretary of State’s Office is one of two long-running fraud investigations state auditors are conducting, the survey found.

The exact nature of the probe into the Secretary of State’s Office and what is being investigated remain unknown.

The Gazette’s survey revealed dozens of reports of alleged occupational fraud at state agencies. The allegations ranged from abuse of sick and bereavement leave to spending abuse and instances where employees jumped from state agencies to work for firms doing business with their state agencies. In one instance, a state employee got a job with a firm doing work with his agency and continued collecting a state paycheck for two months before his employment with the state ended, records show.

Virtually all the allegations were investigated internally by state agencies and quickly resolved, often without any finding of wrongdoing or any imposition of employee discipline. The investigation into the Secretary of State’s Office is one of the rare instances in which an investigation was not wrapped up quickly and the investigation remains active.

Usually in shadows

Fraud hotline reports almost never become public, in accordance with a state statute governing the state auditor’s fraud hotline. A hotline report might end up uncovering serious transgressions by public officials, but the public likely will never learn any details unless prosecutors file criminal charges.

While State Auditor Dianne Ray releases to the public performance and financial audits of state agencies, state law requires her to keep the public mostly in the dark when it comes to reports to her office’s fraud hotline and any investigations those reports generate.

State agencies are not similarly constrained and are free under the law to share with the public any information about the hotline allegations and any investigations they generate. The Gazette’s survey found officials at agencies differ widely on how much information they are willing to give the public.

The Secretary of State’s Office was one of the instances in which a state agency declined to divulge key details about the probe generated by a hotline tip. Officials at other state agencies divulged more information about hotline allegations and investigations generated by the fraud hotline. In many instances they provided redacted versions of the transcripts or complaints submitted to the state auditor’s fraud hotline. Often in the documents they withheld the names of employees accused of fraud, redacting the names even when the employees were disciplined or had their pay docked.

In other instances, state agencies said they could find no responsive records when The Gazette was able to determine through other sources that employees at those agencies actually had been the subject of tips to the state auditor’s fraud hotline.

In one example, the Colorado Corrections Department provided no records to The Gazette despite a member of that department’s executive team being the subject of a fraud hotline report. That complaint alleged the corrections employee received access to private hunting grounds and a cabin in exchange for allowing a private firm, under the auspices of a state contract, to extract gravel and sand from a gravel mine at Buena Vista Correctional Facility.

An investigation by then-Gov. John Hickenlooper’s office determined the allegations of favoritism in that case were unfounded. Efforts to award the contract began before the hiring of the corrections employee, according to a letter Jacki Cooper Melmed, the governor’s chief legal counsel, wrote to the state auditor’s office. Melmed said the investigation determined that the employee played no role in the awarding of the contract. The name of the employee was redacted from documents the governor’s office provided.

Details of some investigations

The allegations of fraud uncovered by The Gazette’s survey included an instance where a high-ranking employee in the Colorado Department of Health Care Policy and Financing (HCPF), which administers the state’s Medicaid program, received approval for eight taxpayer-funded leadership training sessions along with about $40,408 in paid leave and benefits after she was fired for bullying subordinates in January 2020.

Despite the firing of the employee, HCPF redacted her name from the documents. She attended only four of the training sessions. An investigation by HCPF determined the paid leave and training sessions were appropriate even though the allegations of bullying prompted the firing of the employee.

In another instance, an anonymous complaint from judicial branch employees alleged that Tammy Carroll, a court executive for Montrose Combined Court, had been abusing the Family Medical Leave Act and conducting personal business from her judicial office when she was not on leave. An investigation found that although Carroll’s leave from work was in accordance with personnel rules, when she was in the office, she was conducting work on her personal real estate business.

The investigation found 3,400 real estate-related files on Carroll’s state-issued computer. Further analysis of her activity on the internet found that she engaged in 239 days of real estate activity between October 23, 2018, and October 23, 2019.

Despite Carroll’s apparent personal activities while working on the state’s dime, she received no discipline other than a stiff warning from Chief Judge J. Steven Patrick of the Seventh Judicial District. The judge sent a letter telling Carroll to stop “any and all activity related to your outside employment during business hours” or face potential termination.

Carroll declined comment.

Hotline information

Those details and dozens of others were patched together by The Gazette’s survey of all state agencies. But the Gazette struck out when asking the state auditor’s office for fraud hotline documents.

The only hotline information the state auditor’s office provided was its annual report detailing the number of hotline reports and summarizing how the allegations were handled.

For the fiscal year running from June 2019 through June 2020, the state auditor reported receiving 57 fraud hotline tips. Of those, the auditor’s office forwarded three on to the Colorado Attorney’s Medicaid fraud control unit, and another 11 on to state agencies for review.

The remaining 33 reports did not require any referral because there was insufficient information or the allegation did not involve a state agency (for example the allegation was lodged against a local government, which is beyond the scope of the jurisdiction of the state auditor’s hotline). The auditor reported that just two of the referrals to state agencies during that time frame resulted in any employee discipline.

Upon receipt of a credible hotline report, the auditor’s office is required by state law to alert the state agency where the fraud allegedly occurred, but the auditor’s office is barred from sharing any of those records or details with the public.

The auditor’s office can share hotline investigative information with law enforcement when necessary, but in such instances, the auditor does not publicly disclose that law enforcement has been alerted.

After receiving a fraud hotline referral from the auditor’s office, the head of a state agency can either investigate the allegations internally, have state auditors investigate or jointly investigate with the assistance of state auditors.

The investigation into the Secretary of State’s Office is one of three instances since 2017 in which state agencies opted for state auditors to conduct the probe.

Judicial investigation

Details about another ongoing state auditor investigation, which began in May 2019 following an anonymous whistleblower letter alleging spending abuse and fraud in the state’s Judicial Department, previously were made public in news reports.

The Judicial Department whistleblower alleged wasteful spending, staffers receiving pay despite not showing up at work for months and employees paid consulting fees for speaking at conferences on paid time.

The state auditors investigating the Judicial Department have expanded their investigation into a leadership training contract worth up to $2.72 million given to a firm owned by Mindy Masias, the former chief of staff of the Colorado Supreme Court.

Christopher Ryan, Colorado’s former top court administrator, has alleged the contract, which later was terminated, was given to Masias to prevent her from filing a tell-all lawsuit that would divulge long-held secrets regarding sexual discrimination and harassment in the state’s judiciary. Masias and Ryan have declined to comment. The Judicial Department denied the contract was given to Masias to buy her silence.

This year, state auditors, at the behest of the Colorado Department of Transportation, agreed to probe fraud hotline allegations of misspending in the area of maintenance in a southern region of the state, but in that case the work of the state auditors has only just begun.

Secretary of State investigation

In the secretary of state investigation, former officials who worked in former Secretary of State Wayne Williams’ administration said they had no details about what had been alleged. Both former Deputy Secretary of State Suzanne Staiert and the former legislative liaison for the office Timothy Griesmer, who is now chief of staff for the Colorado Senate Republicans, said they had not been contacted by the state auditors and did not know what they were probing.

The administration of current Secretary of State Jena Griswold, who defeated Williams in his re-election bid, confirmed the existence of the ongoing fraud audit investigation in response to a Colorado Open Records Act request but declined to reveal key details. After The Gazette pushed for more transparency, Griswold’s office released a memo that gave a few additional details.

Griswold in the May 16, 2019, memo wrote that she had been contacted by the Colorado State Auditor’s Office about a “report of potential occupational fraud by a former department employee.”

“The report concerns potential actions taken by an employee that occurred both before I was elected and during the period between being elected and assuming office,” Griswold stated in her memo, written to Kathryn Mikeworth, her director of administration and human resources.

In the memo, Griswold tasked Mikeworth as the “primary contact person” to work with the state auditors probing the allegations. Griswold wrote in the memo that she had chosen to have the office of the state auditor to lead an independent investigation to “ensure neutrality and impartiality.”

“Please ensure the full cooperation of the Department of State,” Griswold wrote to Mikeworth. “I understand that some past questionable behavior was not documented, under instruction from the former secretary of state. Considering this, please provide any necessary information, documented or otherwise, related to the investigation upon [Office of the State Auditor] request.”

The memo provides no further details as to what had been alleged.

Griswold did not return telephone messages seeking comment, and members of her staff, including her chief of staff Michael Whitehorn, said they were constrained from divulging any more information or records about the investigation because it was ongoing. Mikeworth did not return telephone calls seeking comment.

Williams said that when he asked Griswold what was being investigated, she told him she could not divulge details because state auditors had not finished their investigation.

Other investigations

Other examples of fraud hotline allegations and investigations include the following:

• An anonymous complaint alleged in July of 2018 that officials at the Colorado Department of Local Affairs’ housing division were not requiring matching documents and were violating accounting principles when financing housing projects.

“Uh, between those kinds of things, and, uh, you know we don’t need to get into the sex club or any of that,” the caller reported. “We are very concerned about being told to violate generally acceptable accountable practices on a daily practice.”

To investigate, the department’s legislative liaison, Bruce Eisenhauer, reported that a sample of 12 randomly selected files were reviewed. The review did not indicate “any violation issues,” though Eisenhauer reported “there are a couple things that have been discovered that we can improve on.”

• An employee in the Colorado Department of Transportation in July of 2018 had his pay reduced by 5% after a fraud hotline investigation by the agency determined that the employee was using a state vehicle to make personal trips in Colorado Springs.

“You said that you were aware that the use of a [Colorado Department of Transportation] vehicle for personal use was not permitted, and that you had not received authorization from your supervisory chain to use the vehicle in such a manner,” said a disciplinary action letter the agency provided that redacted the name of the employee.

• A hotline complaint in January 2019 alleged that two members of the Colorado Water Conservation Board used their positions to secure future employment with the Chatfield Reservoir Mitigation Company, which is overseeing a controversial reservoir expansion. The company had a contract that required the state conservation board to place $50 million into an escrow account managed by the company that ended up hiring the two state employees.

An investigation by the Colorado Department of Natural Resources “discovered a nearly two-month overlap” between the hiring of one of the employees by the Chatfield reservoir company and his last day of employment with the state.

Tobin Fullenweider, the department’s investigator, determined “that the overlap was due to the uniqueness of setting” up the reservoir, and further found that it “seems unlikely” the two employees used their state positions to secure their employment with the company.

Fullenweider, in a letter to the state auditor, said that the Natural Resources Department had revised employee hiring and exit processes to emphasize that employees must refrain from holding dual positions while working for the state and should not start working for a company doing business with their state agency until six months have passed from their last day of employment with the state. The names of the employees hired by the reservoir company were redacted from the document the agency provided to The Gazette.

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