LONGMONT — Incompetence is not a crime, according to prosecutors who have wrapped up a criminal probe into the St. Vrain Valley School District’s $13.8 million budget shortfall.
Although school officials bungled budgets, mishandled information and sent the district into a financial spin, no laws were broken, according to investigators.
District Attorney Mary Keenan sent a letter to state Treasurer Mike Coffman and St. Vrain Superintendent Randy Zila on Monday stating that her office would not pursue criminal charges after a seven-month investigation.
“This decision should not be interpreted to mean that all personnel acted appropriately and responsibly. They did not,” Keenan wrote. “However, I do not believe, based on the state of evidence, that we have a reasonable likelihood of success at trial against the culpable individuals.”
After a series of budgetary errors left the district facing a $13.8 million deficit last fall, Coffman requested that the district attorney’s office examine whether there was any criminal wrongdoing by the school district’s finance staff.
He also requested that prosecutors determine if there was any fraud committed by district officials by intentionally deceiving voters before the $212.9 million bond issue was approved in last November’s election.
“I’m not entirely surprised at the outcome of the (district attorney’s) investigation since, under current law, individuals need to personally profit from misrepresentation and fraud to result in a criminal indictment,” Coffman said Tuesday.
Assistant District Attorney Pete Maguire and two investigators spent the last seven months poring over documents and conducting interviews with 25 district employees and others familiar with the district’s financial situation.
Maguire said there is no evidence that anything was stolen or that any of the budget mishandling was used for personal gain.
“Basically, there is nothing missing,” Maguire said. “It has all been misappropriated.”
Maguire’s 29-page report was especially critical of former assistant superintendent for business services Ken Kirkland and former district finance director Walker Nielsen.
Kirkland was fired and Nielsen resigned as a result of the financial fiasco.
According to the report, Nielsen was aware early in June 2002 that he may have miscalculated salaries for the budget by at least $10 million but hid the fact from supervisors while he searched for accounting mistakes.
According to the report, Nielsen was underqualified in the job he started on Aug. 1, 2000, was unfamiliar with the district’s computer system and followed questionable accounting practices passed down by his predecessors.
According to the report, Nielsen also was not able to determine the actual number of people employed by the district, adding to the budgetary miscues.
Nielsen underestimated the number of employees on the district payroll by 150. Using the smaller — and incorrect — staff total, the district agreed to district-wide pay raises that were too large, helping to lead to the deficit.
Prosecutors determined that Nielsen withheld information about the deficit to save his job, but not to mislead officials or voters, which would have been necessary to convict him of a criminal act.
“Although it might be emotionally satisfying to criminalize incompetence or mismanagement, in the long run it would not be in the public interest to do so,” Maguire wrote in his report. “I believe that there is little likelihood of conviction of Nielsen when his role is placed in the greater political context.”
In his report, Maguire also included an arrest affidavit for former school board secretary Dawn Hobson.
Hobson pleaded guilty in February to bilking the school district out of almost $25,000 from May 1999 to December 2001.
Maguire said he included the information to demonstrate the atmosphere surrounding the school district when the financial woes began.
In the affidavit, Maguire notes that “the management style, the problems with morale, and general atmosphere of fear and distrust that existed within the administrative headquarters of the St. Vrain Valley School District may have played a large role in the failure to bring the (financial) problems to light.”
Kirkland was characterized in the report as an ill-informed manager who refused to provide specifics to school board members and Zila as the financial crisis came to light.
“Despite Zila continually raising the budget issue on the agenda, Kirkland continued to avoid providing specifics and would only provide ambiguous general answers,” according to the report.
Maguire wrote that keeping the district’s financial condition from voters may have affected the November bond election, but not to a criminal extent.
In an interview with investigators, Nielsen admitted that he and Kirkland conspired to keep the budget situation “under wraps” prior to the election.
“Obviously, we both knew that if it had gotten public that the district was losing $10 million or whatever, it would ... affect the election. It was obvious to both of us,” Nielsen told investigators.
Board members and Zila were not made fully aware of the crisis until late October, days before the election, according to the report.
For criminal charges to be filed, school officials would have had to “knowingly made or circulated false statements,” according to the report.
“The statute does not address the situation where the board members may have had information in the days prior to the election but failed to inform the electorate,” Maguire wrote.
School board Vice President Rick Samson said he was glad investigators determined that there was no election fraud.
“None of us were engaged in criminal conduct,” Samson said. “The information we had, when we had it, I’m not sure what we would have done with it.”
Coffman noted that a new law enacted during this year’s legislative session will address similar situations in the future. The new law require school districts to publicize specific information about their financial condition prior to future bond elections.
Failure to provide that information, or making material misstatements about the government agency’s finances, could lead to a court overturning the results of a successful bond election.
Kirkland declined to address specifics of the report because of a pending lawsuit he has filed against the district. He is suing the school board for personal humiliation and mental anguish following what he says was an illegal dismissal.
Commenting only on the outcome of the investigation, Kirkland said the right decision was made not to pursue criminal charges.
“I suppose it’s a vindication of sorts,” Kirkland said. “I’m glad that the investigation is over and that they reached the conclusions that they did.”
Maguire concluded his report by saying that the impact of the crisis will be felt for many years.
“The financial repercussions will be lessened over time. People who harbor a deep distrust (of) government and public officials have had their opinions validated,” Maguire wrote. “Regaining the public trust will not be easy.”
Zila, who was out of town Tuesday, issued a statement through district spokeswoman Nancy Herbert saying that the district is working hard to fix all the problems that have stemmed from the crisis.
“The solutions have been challenging, but together we have persevered. Our next step is to rebuild,” Zila said in the statement. “That starts with rebuilding financial credibility, rebuilding staff and community relations, re-establishing community trust and moving forward with clear goals.”
Nielsen could not be reached for comment.
Times-Call staff writers John Fryar, Trevor Hughes and Paula Aven Gladych contributed to this report.
Report from Peter
Maguire to Mary Keenan
Letter to Mike
Coffman from Mary Keenan