June 08, 2007 04:59 PM UTC

State: Jeffco Must Ditch Illegal Paschall Investment

•  
• by: Colorado Pols

As the Rocky Mountain News reports:

Jefferson County must divest about $64 million in risky investments made by former Treasurer Mark Paschall shortly before he left office.

In August, a state law went into effect prohibiting local governments from owning such bonds – called collateral mortgage obligations – unless they were rated at the highest level by at least two national rating agencies.

CMOs are securities based on mortgages that are pooled together and repackaged by agencies such as Freddie Mac or Fannie Mae, then sold as bonds…

Denver Post columnist Jim Spencer asks the next logical question: cui bono?

The state attorney general’s office has questioned the legality of Paschall’s purchase of $64 million worth of unrated securities on his way out the door in December 2006. Any technical violation pales in comparison to the fact that a county official estimates brokers Adam Alves and Jerry Manning made at least $100,000 in the deal.

Alves and Manning seem to be Paschall’s favorites. County records show they got $139 million of the county’s investment business in 2006, while the next-highest broker got just $18.8 million.

Paschall, already charged in a kickback scheme involving employee bonuses, could not be reached for comment…

That’s a disproportionate amount of money going to the same brokers, isn’t it? Wonder if anyone else in Jefferson County government found that odd? After all, the commissioners at the time–Jim Congrove, Dave Auburn, and Kevin McCasky, were supposed to exercise some kind of cursory oversight over these things–weren’t they?

It’s already come out that Congrove and McCasky met with Paschall in 2005 to discuss “removing” $200 million in funds from a bank that employed one of Congrove’s political enemies. That indicates they were fully aware of the status of accounts under Paschall’s control. The Denver Post also reports today:

The DA investigators also wanted to know about connections between Paschall, brokers Alves and Jerry Manning and Capital Securities…

Given that Paschall is alleged to have been looking for a piece of the action from his former office in other more overt ways, that’s an excellent question, along with the question of who else knew what he was doing.