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Velasquez files $1 million claim against city

August 30, 2011

Former Colorado Springs city employee Terri Velasquez has filed a $1 million claim against the city, alleging she was fired for blowing the whistle on a string of financial improprieties and ethical violations that involved the main players at City Hall.

Velasquez, the city’s former director of finance and administrative services, is also alleging gender discrimination.


“Ms. Velasquez was targeted because she was a strong female and did not fit the stereotype of a weak and compliant female that (Chief of Staff Steve Cox) and perhaps (Mayor Steve Bach) and others wanted,” Velasquez’s attorney, William Finger, wrote in a governmental immunity notice filed with the City Attorney’s Office on Aug. 23.

“Her termination was also motivated by bringing to light fiscal improprieties and the waste or misuse of funds. She would not support proposals for using funding in an inappropriate or illegal manner,” Finger wrote in the notice, which is a precursor to filing a lawsuit against a public entity.

Velasquez, who was fired July 28 after being placed on a 30-day paid administrative leave, is a longtime city employee who rose through the ranks of city government to become chief financial officer before Cox demoted her and took away some of her responsibilities.

Some of her allegations have been reported but others detailed in the 15-page notice filed with the city are new.

“Prior to July 28, 2011, Mr. Cox and others at the City, including perhaps Mayor Steve Bach, had made a concerted effort to force Ms. Velasquez from employment by threatening her with termination and tendering to her in June 2011 two Severance Agreements which contained a full and complete release of the City and its official (sic) and employees,” the notice states.

After Velasquez went public with some of her allegations, the mayor’s office called her claims “without merit.” But three days later, Bach called for an independent investigation, which is ongoing, said Cindy Aubrey, the city’s chief communications officer.

Finger said Velasquez met with the city’s investigator, Elizabeth Rita of the Denver-based law firm Kelly, Stacy & Rita LLC, for about five hours Aug. 17. He declined to go into details.

In her claim, Velasquez details a series of alleged financial wrongdoings that she says led to her termination, including:

Retirement benefits

Velasquez claims Cox tried to boost his pension benefits and those of other public safety employees almost immediately after he became interim city manager in April 2011.

Velasquez said Cox ordered her to increase the Deferred Retirement Option Program, or DROP, from five years to seven years. The program allows police officers and firefighters to announce their retirement but work five more years while accruing pension benefits. Adding two years to the program could boost the amount of money accumulated in an employee’s DROP account by tens of thousands of dollars, she said.

“Steve Cox wanted uniform employees, including himself, to have two more years to accumulate funds in their DROP accounts,” Velasquez claims in the notice.

When the city contacted the Fire and Police Pension Association of Colorado about efforts to increase the number of years in DROP, the pension plan administrators informed the city “that no other plans had enhanced their DROP plan,” she said.

“This information was forwarded to Steve Cox,” Velasquez claims. “Per Steve Cox’s directive, staff continued to pursue the DROP enhancement and began the process of obtaining an actuary study.”

In September 2010, Velasquez said she received an email from Cox saying he wanted to proceed with the enhancement and to prepare documents to present to the City Council. Velasquez said she received information from her assistant that the item “would be placed on a City Council agenda for approval.” However, the issue was moved to a closed executive session on Oct. 10, 2010.

It’s unclear what happened next because Velasquez’s attorneys redacted certain portions of the notice filed with the city.

Cox did not return a call for comment Tuesday.

Payroll overpayments

On Nov. 23, 2010, Donna Kaiser, the city’s pension administrator, told Velasquez that she had discovered a nearly $5,000 payroll overpayment to Cox that would have increased his pension calculation by $162 a month.

Cox, who eventually repaid the money, was fire chief before becoming interim city manager and then Bach’s chief of staff on a “transitional” basis.

“Per my direction, payroll staff looked for and found similar overpayments,” according to Velasquez, who reportedly recommended moving the Fire Department to the payroll system used by the rest of the city “to prevent future errors.”

Cox opposed the move and blamed Kaiser for the mistake, Velasquez claims.

Velasquez said she immediately notified City Auditor Denny Nester about the payroll overpayments.

“In two meetings on the morning of November 24, 2010, Steve said I don’t know why but I am just so angry and I just want to choke someone,” Velasquez claims.

When Cox discovered that other employees were also overpaid and may have to repay the money, he told Velasquez that now-retired Deputy Chief Dan Raider wouldn’t have to because he was going to retire sooner than planned, according to the claim.

“Cox then went to the City Attorney to find out how far back the city could go to request overpayments,” Velasquez claims. “Dan Raider did not have to pay back his overpayment.”

On Dec. 6, Human Resources Director Ann Crossey allegedly told Velasquez that Cox was upset because she had notified Nester.

Crossey “said Steve Cox wanted to know if I would take a severance package and resign,” Velasquez claims. “I asked if my job was being threatened and Ann said that Steve had concerns that I had gone to the City Auditor.”

Velasquez told Crossey she was “not interested” in a severance package or resigning.
“Ann told me I should think about it and I said I didn’t need to think about it,” she said.

Velasquez also said that Cox asked Nester to review the Fire Department’s payroll system “based on a management agreement which makes the report internal i.e. not a public audit report,” and Nester agreed.

Velasquez said she never received a copy of the report.

Misuse of El Pomar grant

Around August 2009, Elena Nunez, the city’s former economic development manager, asked Velasquez to certify that a $2 million grant from El Pomar Foundation was used appropriately. El Pomar gave the city the grant as part of a deal to retain the U.S. Olympic Committee.

Velasquez told Nunez in an email that she “could not certify the appropriate usage to El Pomar” and identified some follow-up actions that she required before doing so.

Velasquez said she never received any follow-up information.

In April, the request resurfaced. This time, City Attorney Patricia Kelly sent Velasquez an email “requesting that I prepare a statement certifying the use of funds.”

Velasquez declined and referred Kelly to Nunez, Budget Manager Lisa Bigelow, who had taken over USOC projects, and Nester.

On May 5, Kelly sent Nunez an email with a copy to Velasquez thanking Nunez “for tracking down the information and preparing a majority” of a letter for former Mayor Lionel Rivera to send to El Pomar.

On May 20, Kelly sent Velasquez another email regarding an investigation by the District Attorney’s Office and a request for records. Velasquez and other city employees “met with the DA’s office and provided all the records that Finance had” in mid-June.

“At the end of the meeting, the DA thanked us for our cooperative (sic) with their investigation and they said they had previously met with Elena Nunez and Pat Kelly and they had not received much information,” Velasquez claims.

After the meeting, city employee Debbie Wutt told Velasquez that Nunez and Bigelow were in her office and that Nunez had told Bigelow “to destroy the USOC records.”

“Staff and I provided copies of the information that we had and gave this to the DA electronically on a thumb drive,” Velasquez claims.

Nunez now works for Colorado Springs Utilities as a customer manager. Nunez declined an interview request, and Bigelow did not return a message seeking comment.

On June 21, Velasquez received a follow-up question from the DA’s Office via email.

Velasquez replied by saying that she couldn’t answer the question “but that perhaps Pat Kelly could since it was related” to the LandCo Equity Partners settlement. LandCo is the development firm that was involved in the original USOC deal.

On June 27, Velasquez said she was placed on paid administrative leave “and offered a four-month severance to resign or be terminated.”

TABOR compliance

Velasquez is also alleging that Bigelow tried to circumvent the legal requirements of the Taxpayer’s Bill of Rights. At issue was whether to include in the 2010 TABOR calculation funds that were used to pay for a construction project as part of the expansion of Woodmen Road.

Velasquez claims Bigelow argued against including the funds despite the opinion of Pat McDivitt in the City Attorney’s Office.

“At the time, this transaction would place the City over the TABOR Cap and a refund to the citizens (of about $113,394) would be required,” according to Velasquez’s claim.

Velasquez claims Bigelow said she was willing to take the risk and that no one would know the funds were excluded “unless someone told.” Velasquez also claims Bigelow was willing to go to court and said it was “no big deal” if the city lost and had to refund the money since there would only be a 10 percent penalty.

On May 6, Bigelow informed Velasquez via email that Cox, Rivera and City Council President Scott Hente agreed to exclude the funds from the TABOR calculation after she asked for their support.

“I was concerned that the decision was made without all the facts and that it was not a public City Council decision,” Velasquez claims. “I was also concerned that Finance staff was providing the TABOR calculation to the external auditors and that the TABOR calculation did not comply with the law.”

Velasquez said she decided to meet with external auditor Evelyn Law to explain her concerns. About two days later, Law left Velasquez a telephone message saying she “agreed with my concerns” and that the funds should be included in the TABOR calculation. The message was forwarded to the City Attorney’s Office, which issued an opinion June 10 calling for the funds to be included.

On June 13, Velasquez asked for a revised TABOR calculation from Bigelow, who said it was under discussion by Cox, Rivera and Hente. Velasquez brought the issue up with Cox, who emailed her the next day to inform her that Bigelow “was asked to comply with the legal opinion.”

The inclusion of the funds initially placed the city over the TABOR cap. But during a review, a city employee discovered two mistakes that resulted in the city remaining below the TABOR cap, according to city documents.


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