Springs answers ethics complaint

By Leslie Jorgensen
THE COLORADO STATESMAN

COLORADO SPRINGS — The city of Colorado Springs has hammered out a response to a lawsuit filed by developer Ray Marshall and his company, LandCo Equity Partners, LLP, completing the first step in what the city hopes will be the resolution of a conflict that threatens to move the United States Olympic Headquarters and Training Center to another city.

In a related issue, Ron Johnson, a concerned citizen, followed up on his ethics complaint against Colorado Springs Mayor Lionel Rivera. Johnson accused Rivera of creating the appearance of impropriety because he allegedly served as a finance adviser to Marshall and LandCo, which won a $53 million contract for four separate construction projects for the USOC.

Last week, the city’s three-member Ethics Commission requested specific information and evidence to determine whether Johnson’s complaint falls within their jurisdiction. According to the city’s ethics standards, a complaint must concern actions taken within the past 12 months.

Johnson said he sent a letter Monday with detailed information and agreed that, if subpoenaed by the ethics panel, he would provide documents that name Rivera, a vice president of UBS Financial Services, on investment statements related to Marshall and his limited liability partnership.

The evidence, he said, verifies that Rivera had a conflict of interest in negotiating a deal with the USOC and in reviewing construction proposals offered by four developers for the building project.

Because financial statements are private, the subpoena would protect Johnson and others and create a neutral climate in which to produce the evidence without legal ramifications.

Rivera also has offered to provide information to the ethics commission, but the members have declined to question him until the complaint is officially accepted for investigation. The mayor has been advised by City Attorney Pat Kelly not to respond to media inquiries.

The commission meets later this week to review Johnson’s letter and determine whether to proceed with his complaint.

Meanwhile, the city issued a press statement in response to Marshall’s lawsuit filed against the city and USOC in late March. The city stated that it has ended contractual agreements with the developer for having defaulted
on the contract.

The unsettled lawsuit might impede the city from seeking a new developer to take on the project and renewing a deal to keep the USOC in Colorado Springs.

“It’s very difficult to pursue another contract to continue the project, particularly when the case is pending and you don’t know how much the judgment against the city, if any, will be,” said one attorney, who requested anonymity because of the political and economical ramifications.

Although the lawsuit also names the USOC, the committee has no financial obligation to the developer or the city.

The agreement, signed by the city, LandCo and the USOC on March 31, 2008, granted a contract to Marshall and LandCo for work on several projects to keep the USOC from moving to Chicago or another city.

Under the contract, the developer was to add four floors to a two-story building at 27 S. Tejon Street for
USOC headquarters and remodel office space at 19 N. Tejon St. for temporary offices. Both properties are owned by Marshall and his limited liability partnerships.

In addition, the developer was contracted to renovate the old Colorado Springs Utilities Building at 30 Cimino Drive and provide $16 million in upgrades to the Olympic Training Center on East Boulder Street.

The USOC backed out of the agreement with the city and Marshall on April 30. A few weeks earlier, the USOC had expressed dismay that Marshall had not presented plans for the $16 million improvements to the training center.

Marshall had circulated plans for the improvements and sought bids from several contractors, said sources who reviewed the drawings.

“One plan for a canopy was submitted to the Pikes Peak Regional Building Department for review, but we didn’t receive any other,” said Bob Croft, special projects coordinator for the building department.

The city’s list of grievances with Marshall include:

• Possible failure to complete the additions to a building at 27 S. Tejon Street by July 30.

• Liens against that building filed by contractors who have not been paid.

• Filing documents with El Paso County that created at least seven condominiums in the 27 S. Tejon Street building in November 2008 and deeding them to the South Tejon Commercial Condominiums LLP, another Marshall partnership, without approvals from USOC or the city.

• Nonpayment of 2008 taxes on the building.

• Failure to provide $16 million in upgrades to the training center.

• Filing a lawsuit against the city, USOC and entities in the agreement.

• Allegedly misusing construction loan money to pay “amounts not related to construction of the headquarters building.”

The city’s four-page statement also ventured into a civil area, which some attorneys said was outside their jurisdiction, but sent a message to Marshall.

The statement, issued by City Attorney Pat Kelly, said Rivera and Assistant City Manager Mike Anderson “have suffered substantial injury and damages as a result of the conduct of LandCo and its assorted breaches of the agreements. Each reserves its or his right to pursue any and all of its claims to the full extent of the law.”

To date, there is no evidence that Marshall, LandCo or his other partnerships have made statements that defame the character of either Rivera or Anderson.

Marshall and his numerous partnerships also are under investigation by the 4th Judicial District Attorney Dan May for possible criminal activity.

The investigation stems, in part, from several lawsuits filed by investors against Marshall in 2007 and 2008.

As Johnson’s ethics complaint against Rivera moves forward, sources are talking about the lawsuits and allegations of the mayor’s involvement. According to law briefs, which have now been sealed because of the criminal investigation, the investors’ money was diverted from specific development projects to others — and some money was allegedly invested and lost in stock and securities investments.

“The problem in getting to root of all of this. It’s a good old boys’ club, and it’s political,” said one investor who lost money in a Marshall partnership.

“They had to have known that Marshall had financial problems before they gave him that contract for the (USOC),” he said. “By ‘they,’ I mean Rivera and members of the City Council.”

Yet, it doesn’t appear that all of the City Council members were apprised of the situation.

City Councilman Randy Purvis said in March that the city should examine rumors that Rivera had business dealings with Marshall that could pose a conflict of interest. That request went unheeded until Johnson officially filed his complaint this month.

However, signs of Marshall’s financial struggles were obvious to members of the Pikes Peak Regional Building Department Advisory Board.

Several complained that the commission overseeing the building department — Colorado Springs Vice Mayor Larry Small, El Paso County Commissioner Jim Bensberg and Manitou Springs City Councilmember Marc Snyder — granted a rebate for plan review and permit fees to Marshall.

According to the July 23, 2008, minutes, “Vice Mayor Small said he received a letter from Raymond Marshall, LandCo Chairman of the Board and Assistant City Manager Michael Anderson requesting that the building plan review and permit fees be waived.”

Several thousands of dollars in plan review and permit fees had already been paid by Marshall. The permit fees covered the costs of building inspections on the projects.

“Vice Mayor Small said he does not want to set precedence, but this is an important project to the community. He said this is an opportunity for (the building department) to contribute to this project,” the meeting minutes stated.

The rebate was capped at $100,000 — and approved unanimously by Small, Bensberg and Snyder. The handout did set a precedent for the fees-for-services enterprise that had never comped services for real charities such as Habitat for Humanities.

“They rammed this through the commission instead of following the bylaws, which required that the request be reviewed by the advisory committee before the building commissioners,” said a member of the advisory committee.

“They essentially gave $100,000 to Marshall when a third of the building department had or was being laid off,” he said. “It made no sense.”

Folks are talking about the debacle — off the record or not for attribution. There’s a fear among contractors, developers and government employees that if they’re quoted by name, it will result in a loss of clients, job or reputation.

“It’s very difficult,” one said. “And I expect this ethics complaint will be buried, and we’ll never know the facts.”

Folks could be surprised — the Commission might hear the complaint, and Rivera might provide evidence that clears him of the charges.

Leslie@coloradostatesman.com