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The Conflicts of Colorado's Public Trustees
Thursday, August 2nd, 2012
Robert Wechsler
Luis Toro, director of Colorado Watch, wrote an
interesting Huffington Post post yesterday about ethics issues
relating to Colorado's public trustee system.
Public trustees (one per county) oversee the foreclosure system in the state. They work things out between lenders and homeowners. Most of them are elected county treasurers, and ten of them are appointed by the governor (for some of the larger counties). The funds they spend are not tax dollars, but they are public funds.
The biggest problem is that the public trustees do not appear to be subject to any ethics program, state or local. Nor are they subject to procurement rules or any oversight of their performance. The result is that their contracts (primarily their computer systems) are mostly no-bid contracts, and the principal contractor is a firm owned by the state's principal foreclosure lawyer (he works for the lenders). The same lawyer funds the public trustees' association, drafts proposed changes to the foreclosure laws for the association, and even testifies in favor of raises for the public trustees.
Fortunately, the association is subject to state ethics laws. Ethics Watch filed a complaint last year against the association for violating the state gift ban by using corporate dollars (mostly the computer systems company's) to pay for hotel rooms for 32 public trustees. This resulted in the largest fine imposed to date by the state EC.
What is wrong with the situation? Taxpayers aren't paying more for the no-bid computer systems; only homeowners who save their homes from foreclosure do. There is no evidence that the public trustees are giving lenders preferential treatment just because they have a special relationship with the lenders' principal counsel. But there is certainly the appearance that they are.
As one homeowners' attorney told the Denver Post last year, "It all looks awfully cozy and certainly a red flag or two. It appears there's a vacuum on the side of the homeowners."
The governor responded to these revelations by requiring his ten appointees to file conflict of interest statements and obtain approval of all purchases or contracts above $5,000. But the state legislature has not done even this much relative to the other public trustees. All it has done is require public trustees to submit budgets for review (but not approval) by county commissioners.
Where public trustees are elected officials (most of them are), there are additional problems involving campaign contributions from those who do business with them in their unelected role as public trustee.
A former public trustee has recommended three possible ways to fix the system. One, instead of being elected or state-appointed officials, public trustees would be full-time employees hired by each county based on qualifications. Two, they could be made part of the finance or the treasurer's office. Three, the county clerk (who keeps the property records used by public trustees) could hire the trustee.
No matter what the approach, the governor's requirements could be extended to all public trustees. And they could be made subject to the state ethics program, and audited by the state.
County commissioner oversight (the state legislature's solution) is not the right approach, because county commissioners don't understand or care about what the public trustees do.
Robert Wechsler
Director of Research-Retired, City Ethics
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Public trustees (one per county) oversee the foreclosure system in the state. They work things out between lenders and homeowners. Most of them are elected county treasurers, and ten of them are appointed by the governor (for some of the larger counties). The funds they spend are not tax dollars, but they are public funds.
The biggest problem is that the public trustees do not appear to be subject to any ethics program, state or local. Nor are they subject to procurement rules or any oversight of their performance. The result is that their contracts (primarily their computer systems) are mostly no-bid contracts, and the principal contractor is a firm owned by the state's principal foreclosure lawyer (he works for the lenders). The same lawyer funds the public trustees' association, drafts proposed changes to the foreclosure laws for the association, and even testifies in favor of raises for the public trustees.
Fortunately, the association is subject to state ethics laws. Ethics Watch filed a complaint last year against the association for violating the state gift ban by using corporate dollars (mostly the computer systems company's) to pay for hotel rooms for 32 public trustees. This resulted in the largest fine imposed to date by the state EC.
What is wrong with the situation? Taxpayers aren't paying more for the no-bid computer systems; only homeowners who save their homes from foreclosure do. There is no evidence that the public trustees are giving lenders preferential treatment just because they have a special relationship with the lenders' principal counsel. But there is certainly the appearance that they are.
As one homeowners' attorney told the Denver Post last year, "It all looks awfully cozy and certainly a red flag or two. It appears there's a vacuum on the side of the homeowners."
The governor responded to these revelations by requiring his ten appointees to file conflict of interest statements and obtain approval of all purchases or contracts above $5,000. But the state legislature has not done even this much relative to the other public trustees. All it has done is require public trustees to submit budgets for review (but not approval) by county commissioners.
Where public trustees are elected officials (most of them are), there are additional problems involving campaign contributions from those who do business with them in their unelected role as public trustee.
A former public trustee has recommended three possible ways to fix the system. One, instead of being elected or state-appointed officials, public trustees would be full-time employees hired by each county based on qualifications. Two, they could be made part of the finance or the treasurer's office. Three, the county clerk (who keeps the property records used by public trustees) could hire the trustee.
No matter what the approach, the governor's requirements could be extended to all public trustees. And they could be made subject to the state ethics program, and audited by the state.
County commissioner oversight (the state legislature's solution) is not the right approach, because county commissioners don't understand or care about what the public trustees do.
Robert Wechsler
Director of Research-Retired, City Ethics
---
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