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Keeping up appearances

Veronica Whitney
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Even when they don’t break the law, elected officials should make sacrifices to avoid the appearance of impropriety, a local attorney said.

Although Commissioner Tom Stone may not have broken the law or breached conflict of interest statutes when he brokered a land deal for ASW Realty – the development company the county hired to build affordable homes at Miller Ranch in Edwards – County Commissioner Arn Menconi said he believes there was a serious ethical lapse of judgment that should be investigated by independent authorities.

The attorney, Rohn Robbins, said elected officials should pass up some financial opportunities that aren’t necessarily illegal.

“Any government official by law has to put the interests of the citizens ahead of his,” said Robbins, who is also a member of the State Bar Ethics Committee. “When you are elected to the office, there are things you have to put aside.

“When there is a potential of an appearance of impropriety, you put aside some of the financial gains,” he added.

Stone, a real estate broker, said he recused himself from voting further on Miller Ranch issues Feb. 4 because he was going to pursue the listing of the more than 250 homes that ASW plans to build in Cotton Ranch.

“I hope to get the listing because that way I can make money,” Stone said.

Stone said he is choosing to pursue the Cotton Ranch listing instead of continuing to vote on Miller Ranch issues because all major decisions on the housing project were made years ago.

In a memo to Menconi and Commissioner Michael Gallagher, Stone said he wanted to avoid the appearance of conflict of interest. Stone’s recusal came a month after the Dec. 23 closing of a $7 million real estate deal with ASW Realty on the Cotton Ranch land. Stone will receive half of a 5 percent commission on the $7 million sale from Cotton Ranch LLC, the seller.

His commission is contingent on the sale of homes, Stone said.

If he sells the homes that ASW builds, that company will pay the commission and there could be a conflict of interest, state law says.

“I’m not a hypocrite,” Stone said. “Now that I might have potential to gain from a new relationship with ASW being the seller, I’m doing what’s right in recusing myself.”

And as far as appearances go, Stone said, that would be like him saying there is a conflict of interest between Menconi and Vail Resorts, which donates about $30,000 a year to the Snowboard Outreach Organization, the nonprofit agency commonly known as SOS of which Menconi is director.

“I wouldn’t ask Arn Menconi to stop being the director of SOS,” Stone said.

Menconi defended himself by saying SOS is a charity.

“That’s the point Stone doesn’t get,” Menconi said. “I want to be charitable. Apparently, Stone has an ethical blindspot.”

Ethical lapse?

In the coming weeks, Menconi, who’s up for election in November, said he’ll officially propose that the county commissioners adopt a code of ethics. Public officials’ work is regulated by state law.

Pete Maysmith of Common Cause, a nonpartisan watchdog and advocacy group in Denver, said there are several benefits to adopting a code of ethics because Colorado’s law is one of the weakest in the country.

“A code of ethics sets clear expectations about ethical standards,” said Maysmith, who helped craft Denver’s code of ethics.

Menconi claims it was through Stone’s county commissioner’s seat that he was able to meet and court ASW and introduce them to a real estate deal.

“The law said it’s not a conflict of interest if there isn’t financial gain, but Stone’s relationship with ASW led to his financial gain,” Menconi said. “I don’t know if he committed a crime. I’m questioning whether it’s inappropriate to receive the funds.”

Stone said it’s accurate to say he met ASW in the course of his job as county commissioner.

“There’s nothing wrong in that,” he said. “I’m not sure what (Menconi) is insinuating.”

Before Stone showed the land in Gypsum to ASW, Tom Moorhead, then the county attorney, said the Cotton Ranch deal wasn’t a conflict of interest because it’s part of Gypsum where Stone has no influence as county commissioner.

Eagle County Attorney Diane Mauriello declined to comment for this story, saying she only counsels the commissioners on legal issues. But at a public meeting of the Board of County Commissioners in August 2002, Mauriello said she didn’t think that Stone’s business deals with ASW breached conflict of interest law.

In the meantime, District Attorney Mark Hurlbert is pondering whether he’ll investigate Stone for a possible breach of conflict of interest laws. Hurlbert has received a complaint from William Sepmeier, a registered Republican who lives in Edwards. Sepmeier couldn’t be reached for this story, and Hurlbert wouldn’t disclose the contents of his letter.

“I’m looking at the material I’ve got,” Hurlbert said Friday. “Most likely, I’ll make a decision next week.”

Law adequate?

Contrary to the appearance of a conflict of interest, Stone said his real estate experience has been helpful to the county.

“Everybody knows I’ve been a real estate broker for 27 years,” Stone said. “It’s because I’m a real estate broker that I came up with the concept of affordable housing at Miller Ranch. Because of my experience as a real estate broker, I know what bad and good developments are.”

Gallagher, the chairman of the three-member board, said he isn’t concerned about Stone’s business with ASW as long as he didn’t violate the law. State law defines conflict of interest as a conflict between public duty and private interest.

“I look at violations of the law and, from what I’ve seen so far, I haven’t seen any problems,” Gallagher said.

Although Gallagher is correct to say that if the law hasn’t been violated there isn’t a legal conflict, Robbins said there are still two different issues to be addressed.

“One is the legal conflict of interest. The other one is: Is there an appearance of conflict?” Robbins said. “That’s not a legal issue except that any government official has a fiduciary responsibility that means putting the interest of your constituency ahead of your own personal interest.”

Robbins said he believes Stone is doing the right thing in recusing himself.

“The question is should he have done so earlier?” he said.

Citizens’ concern

Maysmith said Stone should have recused himself at the time he started showing the land to ASW.

“The law is inadequate,” Maysmith said. “The questions in this issue are: Does (Stone’s business with ASW) raise a reasonable concern among citizens that there could be a potential conflict of interest? Are any decisions being made that are influenced by private financial considerations?

“If that’s a reasonable concern, and it sounds like it was, that’s why (Stone) should recuse himself and that is a strong argument for the county to pass an ethics code,” Maysmith said.

Three years ago, the Denver City Council passed its first code of ethics. Former Denver Councilwoman Susan Barnes-Gelt said the key differences between the law and a code of ethics is the difference between a compliance-based organization and an integrity-based organization. There’s a line between what is legal and what’s the right thing to do so that the governmental organization can be most effective in its internal and external dealings, she said.

“Public officials are charged with representing the public’s interest, which requires the confidence and trust of the public,” Barnes-Gelt said. “Thus, the requirement to avoid conflict of interest and the appearance of conflict of interest is key to the ability of public officials to do their jobs effectively and competently.”

Barnes-Gelt said she agrees with Maysmith in that state law isn’t enough to regulate the work of public officials.

“The state laws are very floppy,” she said. “Our code of ethics has worked because the rules were clear, and it’s nice for public officials to know what the rules are.

“A good, strong, transparent code of ethics makes life easier for elected officials and it also gives voters more confidence in the government.”

Still, a code of ethics would be a guideline and not law. That means that the punishment for violating it would be different to what it would be for violating the law. Menconi, who said he hasn’t yet thought of punishments for breaking his proposed code of ethics, said Denver seemed to have an acceptable punishment.

“In Denver,” Barnes-Gelt said, “if you’re an elected official, there is no punishment. Only the voters can do something if an elected official is found in violation of the code, and it would have to be a serious violation. Then the board of ethics would make it public and the voters could recall the public official.”

An ethics code must be backed by a board of ethics that administers it, she added.

“The board of ethics determines if the complaint is valid,” Barnes-Gelt said.

Menconi sought Stone’s removal from issue in 2002

These are taped excerpts from the Aug. 20, 2002, county commissioners’ public meeting. This discussion occurred during and after a vote on a Berry Creek issue that involved ASW Realty, the county’s partner in developing the affordable housing project at Edwards’ Miller Ranch. First, Eagle County Attorney Diane Mauriello told Commissioner Tom Stone and his colleagues her opinion whether there was a conflict of interest:

Mauriello: Any time that a question of a conflict is raised that’s obviously something that very serious, and so the attorney’s office took it seriously, and I am aware of the opinion given by Tom Moorhead that there was no conflict with respect to your involvement in dealing with these agreements. And I agree with Mr. Moorhead’s opinion and the reason for that is that the Colorado Revised Statutes set out very specific rules of conduct governing the conduct of public officials, elected officials, and based upon my understanding of the facts and a review of those statutes, there is no conflict. And again, I think that just further supports what Mr. Moorhead had indicated earlier.

Commissioner Michael Gallagher: I’d ask you if there are anything in the relationship between Eagle County and ASW concerning the Berry Creek Fifth, be it a design review function or understanding the sales price or the rent price or setting those or anything like that, that would be a conflict of interest.

Mauriello: No, none that I’m aware of.

Gallagher: Thank you very much. The chair is satisfied that there does not appear to be a conflict of interest …

Later in the meeting, Commissioner Arn Menconi raised his concerns about Stone’s relationship with the development company:

Menconi: I have some discussion with regards to the conversation on conflict of interest. I’d like to state for the record that I have read through the statutes. I don’t, it’s not my personal opinion that there is a conflict of interest here with Commissioner Stone in voting on this item. I do think that if the case is correct that he’s receiving a financial benefit from ASW with regards to the Cotton Ranch property that from the time that that contract was initiated further I would recommend that he recuse himself from any dealings that would show a profit of some sort to ASW. So that if there is a discussion on deed restrictions or anything that would revert back as profit to the developer, that Mr. Stone recuse himself for that and bow out of any appearance of impropriety.

Gallagher: The chair would ask why you want him to recuse. Would you clarify that please?

Menconi: I would simply state that I think it would be my opinion to uphold the integrity of the Board of County Commissioners and the people that we represent.

Gallagher: So you are not saying that there is a conflict of interest? You want to do this for appearance purposes?

Menconi: Yes.

Gallagher: Thank you.

Stone: If I could respond, Mr. Chairman?

Gallagher: Please.

Stone: Well, first of all, something that Mr. Menconi stated is incorrect and he apparently doesn’t understand how real estate transactions work, which kind of surprises me since he is a licensed real estate broker, and that I’m not going to be receiving any financial gain from ASW. In this particular situation I am acting as a transaction broker on behalf – working for Slifer, Smith & Frampton Real Estate – and as part of that, part of this transaction, if it’s successful and it does close, then I will – my company, Slifer, Smith & Frampton will – receive a commission not from ASW but from Cotton Ranch Land Company. And so just wanted to make sure that the record is accurate that Mr. Menconi’s comment about receiving financial gain from ASW was incorrect.

And secondly, as far as the matter of appearance, I think that perhaps you’re joining in on this Mr. Menconi, but to promote that there is an appearance would be like me suggesting and promoting that there is an appearance of conflict of interest on any dealings that we have with Vail Resorts when it comes to you.

I think that it could be said that you have a conflict of interest because of the close ties that you have with Vail Resorts through Snowboard Outreach Society. Now I’ve never said this before because I really don’t think that’s the case. I don’t think that you’re necessarily gaining any financial gain through Snowboard Outreach Society, getting gain from Vail Resorts, although I’ve read that in the press and I’ve heard that from people. And so I think it’s about the same conflict of interest that someone could accuse you of, which I’m not doing right now – a conflict of interest with Snowboard Outreach Society and Vail Resorts. And so I think that what it really boils down to is what interest you may or may not have in promoting your professional or personal agenda.

Gallagher: I’d suggest that this conversation has probably gone far enough for this forum. I’m satisfied that there is no conflict of interest. There is a motion and a second. There’s been a proposal by Mr. Menconi to limit Commissioner Stone’s activities concerning ASW. I’d ask Mr. Stone whether or not you’re willing to do that.

Stone: No, I’m not willing to do that because of numerous attorneys’ positions or decisions or opinions that there is no conflict of interest. I think it would actually be in the best interest of the people of Eagle County, whom we all represent, that I perform my duties fully in discussions, in decisions, in processes, and if there ever comes a time when I think there is a conflict of interest, I would gladly recuse myself. I have done that just on one occasion in the entire time, in the last three-and-a-half years as county commissioner, and I would be willing to do that again in the future if I think it’s necessary. But I don’t see any appearance except for what people would like to make out of it, nor do I think there is any legal conflict of interest.

Gallagher: There is a motion and a second to approve the documents. Is there any further discussion. All in favor?

Three commissioners: Ay.

Source: Eagle County Clerk and Recorder’s Office.

Veronica Whitney can be reached at 949-0555, ext. 454, or at vwhitney@vaildaily.com.


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