A little-noticed government account that is paying ongoing legal bills related to an ethics complaint against U.S. Senate candidate John Hickenlooper is facing renewed scrutiny even as the Democrat’s allies continue to block requests for an audit of the spending.

In its final months, the former governor’s administration used federal funds from a 2003 account to cover a prominent Democratic attorney $525-an-hour fee and spent $13,385 for a legacy website designed to tell the story of how the governor and his team “paved the way for Colorado’s journey and growth.”

A Republican state senator requested an investigation of the spending in December and again Tuesday at the Legislative Audit Committee only to see Democratic lawmakers defeat both attempts in party-line votes.

But the questions surrounding the spending continue. Hickenlooper’s top rival in the Democratic U.S. Senate primary is joining the call for the audit. And now a Democratic lawmaker is pursuing legislation to get better answers about the off-budget spending by the executive branch.

State Sen. Dominick Moreno, D-Commerce City, told The Colorado Sun and CBS4 Denver that the Joint Budget Committee would draft a bill this year to require the governor’s office and state agencies to disclose millions in spending from dozens of federal accounts that exist outside the normal appropriations process.

One of those accounts is the Jobs and Growth Tax Relief Reconciliation Act account that the Hickenlooper administration used. The fund started in 2003 with $146 million in federal stimulus money designed to help the state balance its budget after the 2001 recession. The Hickenlooper administration planned to close it, but new details show it remains active with a nearly $1 million balance.

“We can certainly debate all day whether (Hickenlooper’s spending) was an appropriate use of funding — that’s a valid debate,” Moreno said. “My concern is really more about what is the scope of all these funds and how can we make sure we get a better handle on them.”

State Sen. Dominick Moreno, D-Commerce City. (Handout)

A veteran budget writer, Moreno said he didn’t learn about how federal funds were spent under the prior governor until Republicans raised the question before the audit committee in December. Now, Moreno wants answers. The account in question, he said, “is not the only fund that has fallen in this weird purgatory space where no one really has control over it.”

In a December interview, Hickenlooper told The Colorado Sun that he was unaware of how his administration spent the federal funds, despite it being controlled by his chief of staff and a chief administrative officer.

“I don’t know,” he said. “I can’t describe how many different accounts there are. They don’t come to the governor and say, ‘We are going to use this account, going to use that account.’”

An ethics complaint filed by Republicans led to bigger questions

The questions about the Hickenlooper administration’s spending extend from an ethics complaint filed in October 2018 alleging the governor accepted free flights and other travel expenses in violation of the state’s gift ban. The complaint was filed by the Public Trust Institute, an organization founded by a former Republican lawmaker that doesn’t disclose where it gets its funding.

A preliminary investigation by the state’s Independent Ethics Commission found Hickenlooper only repaid the owners of the aircraft in one of the situations in question. And regarding travel to the Bilderberg conference in Italy, a compliance officer reported to the commission, in documents reviewed by The Sun, that the participants did not pay for all the costs.

Earlier, Hickenlooper said that he paid for the travel, or accepted them as gifts from friends which are exempt from disclosure. Asked about the contradiction, Hickenlooper told The Sun in December that he believed he paid all the costs related to the Bilderberg trip and suggested the complaint amounted to a “clerical error.”

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“The question I tried to ask myself anytime that I was in any of these (situations): Is this somehow a special benefit to me, and am I going to benefit or make money out of this?” he said. “In this case, I don’t see any special benefit to me. I tried to (comply with the rules) — I did everything the best I could.”

His case is scheduled for a hearing that starts March 24, right in the middle of the Democratic caucus nominating process in which Hickenlooper is competing with a handful of rivals to qualify for the party’s U.S. Senate primary in June. A spokeswoman for the Public Trust Institute told The Sun on Thursday that they plan to call Hickenlooper to testify at the hearing.

The cost of Hickenlooper’s ethics defense adds to the controversy surrounding ethics case

The cost of Hickenlooper’s defense against the complaint became an issue after The Denver Post reported in late 2019 that the remaining money in the federal recession recovery fund was tapped to pay his legal bills and cover the cost of his legacy website.

The legal bills from Mark Grueskin, a prominent Democratic attorney at the law firm Recht Kornfeld, topped $40,000 through mid-November, according to records reviewed by The Sun, and are expected to increase significantly as the case continues.

Because the complaint related to the governor’s official duties, the state became obligated to pay for his defense. Then-Attorney General Cynthia Coffman, a Republican, appointed Grueskin as a special assistant attorney general in October 2018, instead of assigning one of her lawyers to handle the case. The hiring of outside counsel is a common arrangement.

A week later, Hickenlooper’s office agreed to pay the $525-an-hour rate as part of a contract with Grueskin, who declined to comment on the matter Thursday.

A review by The Sun and CBS4 discovered the rate is well above what it would have cost the state to assign a deputy attorney general. For the current fiscal year, the estimated cost for legal representation from the attorney general’s office is $111.93 an hour, according to an agency spokesman. The General Assembly caps outside attorney fees at $200 an hour, which the chief legislative attorney says is below the current market rate.

Asked if the $525-an-hour rate was appropriate, a Hickenlooper spokeswoman did not respond directly to the question.

Colorado state Sen. Rhonda Fields, D-Aurora, speaks during a rally to kick off the Democratic presidential campaign of former Colorado Gov. John Hickenlooper in Denver’s Civic Center Park on March 7, 2019. (Andy Colwell, Special to The Colorado Sun)

Hickenlooper ally comes to his defense as source of spending questioned

In addition to the cost, Republican lawmakers are raising issues about the source of the payments to Hickenlooper’s attorney.

Colorado received the money from the federal tax relief in 2003, and the law gave then-Gov. Bill Owens, a Republican, the ability to spend it on “essential government services” or the costs to comply with federal mandates — requirements that were codified in an executive order. The only limitation outlined in the federal law restricted spending to “types of expenditures permitted under the most recently approved budget for the state.”

The federal dollars went to a litany of miscellaneous expenses in the past two decades, according to a Sun/CBS4 review of the spending, including salaries, travel, technology and membership dues to organizations like the National Governors Association.

Henry Sobanet, who served as budget director for Owens and Hickenlooper, said it all fell within the parameters of the law. In addition, the timing of the payments to cover the governor’s legal bills came in between appropriations cycles.

“I think when you look at the federal enabling statute, and take into consideration the direction in the executive order, general government expenses are allowed in the provisions in law,” he told The Sun. “The flexibility here is unique, and concerns about the choices don’t equate to cheating or violating the law.”

But state Sen. Paul Lundeen, R-Monument, wants a more thorough review of the spending. In December, he requested an audit of the spending from the federal account, but the evenly split audit committee rejected it on a 4 to 4 vote.

At the meeting, a vocal critic of the audit was Sen. Rhonda Fields, an Aurora Democrat. Fields is a key ally of Hickenlooper who spoke at the launch of his now-abandoned presidential bid. As The Sun reported previously, her daughter, Maisha Pollard-Fields, worked for Hickenlooper’s presidential campaign as a paid staffer and remains a member of the team for his U.S. Senate bid.

Fields said the audit request was “out-of-bounds” and not appropriate. “I don’t think we should be using our audit professionals in that department to do this kind of investigation,” she told The Sun and CBS4 in an interview this week.

Likewise, she defended her vote, saying she didn’t consider it a conflict. “This is not about her, it’s not really about her occupation. It’s about me, and my ability to be able to make very good decisions and judgments for the state of Colorado,” she said.

Fields declined to comment about whether Hickenlooper’s spending was appropriate, and she dismissed other questions. “This topic is just not all that important to me because people are struggling on all sides,” she said.

GOP lawmaker renews call for audit, saying “where there is smoke, there is fire”

The question about Hickenlooper’s spending from the account reemerged this week as Lundeen made another request for an audit at Tuesday’s committee meeting, citing new details and a call from The Post’s editorial board for transparency.

“I am somewhat embarrassed that we, as the representatives of the people at the helm of leadership of the state government, are not necessarily doing our job … to be accountable and transparent in what’s going on in state government,” Lundeen said. “I believe that in fact, that government must police itself first and foremost.”

Fields did not attend the meeting because she was leading a different committee hearing at the same time. But Democrats rejected it by the same split vote.

The new spending details Lundeen referenced involved the more than $13,000 paid to a Denver marketing firm, Merritt and Grace, to develop Listenharderco.com, a website that no longer exists.

In Hickenlooper’s final full day in office in 2019, a Hickenlooper spokeswoman touted it as a “legacy website” that provides you “just the tip of the iceberg, as the governor says, but hopefully it serves as a case study for how to listen and bring people together to make progress, all while restoring our faith that government can be a force for good.”

Lundeen suggested the spending did not meet the fund’s requirements and questioned what else an audit would find. “I think sometimes where there is smoke, there is fire,” he said.

U.S. Senate candidate Andrew Romanoff listens to remarks by John Hickenlooper at a Democratic U.S. Senate forum held at Centennial Middle School in Montrose on Oct. 20, 2019. (William Woody, Special to the Colorado Sun)

The audit becomes a political point in U.S. Senate primary

In 2018, the Hickenlooper administration planned to close the tax relief account after 15 years, and state lawmakers gave him $562,000 in state tax dollars in the 2019 fiscal year budget to cover payroll and operating expenses that were once paid by federal dollars.

The task remained for Gov. Jared Polis’ administration when it took office in January 2019. A review of state records shows the Polis’ office took steps to move the money spent on the legacy website and other operating expenses to a new account.

But a memo to state budget writers issued Wednesday indicates the federal tax relief account still remains operational and the current balance is $845,619. It continues to cover the cost of Hickenlooper’s legal bills from the ethics complaint.

Polis sidestepped a question Tuesday about whether he supports an audit. “This is a legislative prerogative,” he said at the Big Ideas forum hosted by The Sun, CBS4 and the University of Denver. The governor added: “They of course can audit whatever they want, and we fully respect their right to do that.”

One of Hickenlooper’s Democratic rivals in the U.S. Senate primary is more definitive. Andrew Romanoff, the former state House speaker, said Hickenlooper should call for the audit himself because the questions only benefit Republican incumbent Cory Gardner.

“If I were in John’s shoes, I would welcome an audit — request an audit and put this to rest,” he said in an interview this week. “Transparency is in the taxpayers’ best interest, and we should all be open and accountable for how public dollars should be used.”

Even though it’s appropriate for the state to pay for the defense of a governor acting in their official capacity, Romanoff said other elements are questionable. “You can ask how much we ought to be paying for that legal defense … that’s one question, and the second is whether (the website) is the kind of essential service this fund had in mind,” Romanoff said.

When asked if Hickenlooper supports an audit, his campaign spokeswoman Melissa Miller said the decision is “up to the legislature.”

“Anyone who looks at the federal flex funds will see that 94% were spent by Republican and Democratic governors before John Hickenlooper took office and that, of the small amount spent by Hickenlooper, the majority went to cover payroll-related expenses for state employees,” she said in a statement.

Staff writer Eric Lubbers contributed to this report.

Shaun Boyd is a political specialist at CBS4 in Denver, a reporting partner of The Colorado Sun.

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