FLORENCE — A former Pinal County sheriff and chief prosecutor repeatedly did not follow guidelines and procedures while awarding funds to community organizations, according to an audit done by the state.
Sheriff’s Office employees, under the guidance of Paul Babeu, appear to have violated conflict of interest policies by maintaining connections to a nonprofit organization, the Arizona Public Safety Foundation, which was receiving thousands of dollars in grants from the County Attorney’s Office, according to an audit by the Arizona Auditor General’s Office.
These grants were derived from assets that law enforcement seized from criminals through the Racketeer Influenced and Corrupt Organizations Act. The state audited how Pinal County disbursed these funds between 2013 and 2016. PinalCentral recently obtained a copy of the audit’s preliminary findings.
In some instances, the audit concluded these funds were being used on expenditures that benefited county employees.
For example, the audit highlighted how the former sheriff spent $2,880 in 2014 on hundreds of commemorative coins and then asked for a reimbursement from APSF. The foundation’s treasurer, who was noted as being a PCSO employee, issued a check.
Because some employees were substantially involved in the foundation’s operations, the audit determined these employees should have notified the County Attorney’s Office of a conflict. Auditors noted they could not locate any written notifications from these employees.
In a detailed response to the auditor general’s findings, the county says it now requires all RICO grant applicants to sign conflict of interest forms saying the applicant doesn’t have any conflict as an employee of the county.
Regarding conflicts of interest, the letter that current Pinal County Attorney Kent Volkmer submitted in response says his office follows county policy on conflicts of interest which “specifically provides for the disclosure of the potential conflicts of interest and abstention from conflicted matters when appropriate.”
“Further, each member of PCAO’s Executive Team is required to sign an attestation that they are aware of and will abide by Pinal County Policy,” the letter says.
“The foundation was established before I was sheriff by employees of the prior sheriff’s office,” former Sheriff Babeu told PinalCentral. “They’ve done much good for our community and the sheriff’s office has zero authority over a non-profit 591(c)(3).”
He said Friday evening, “In the end, the county attorney and the attorney general are the fiduciary and controller of all RICO funds. Every expenditure was requested in writing to county attorney or attorney general and they determined if approved or denied,” Babeu said. “Democrat Jim Walsh (former county attorney) and Republican Lando Voyles considered and approved every expenditure.”
Volkmer replaced Lando Voyles, who was county attorney during the time examined by auditors, last year.
Voyles told PinalCentral in a statement: “Audits always recommend improvements, which I’ve always welcomed. I knew the audit would prove what every independent audit said, that we’ve vastly improved policies, procedures and reporting.”
After taking office, Volkmer requested the state audit the county’s RICO expenditures.
RICO funds are intended to help community organizations provide services that reduce substance abuse or gang activity. The organization must submit applications to PCAO with information on how it would appropriately use the money.
Auditors said some applications had missing information and, in some instances, no record of an application could be found. Out of 82 RICO awards reviewed by auditors, 75 were not properly monitored by the former county attorney, the report says.
Furthermore, auditors said RICO money was being spent on unauthorized purposes or no documentation existed to prove the funds were appropriately spent.
Some of the expenditures auditors questioned included tickets to charity events, construction of a new dance studio, golf tournament sponsorships and appreciation events for PCSO staff.
The list of RICO grant recipients included the Boys & Girls Clubs of the Casa Grande Valley, Central Arizona College Foundation, various sports leagues and many school districts throughout Pinal County.
Babeu argued these funds were used for purposes that positively impacted the community.
“During my eight years as sheriff, we’ve partnered with dozens of youth sports programs, Project Graduation for almost every Pinal high school, Boys and Girls Club, YMCA, veterans groups and paid for programming for anti-bullying and teen suicide prevention,” Babeu said. “What a great repurposing of over $1.3 million of once-dirty money.”
“Some forget that PCSO had some of the largest drug busts in Arizona history that produced this money,” Babeu continued.
PCAO now requires companies to complete follow-up paperwork and submit “satisfactory documentation” such as receipts to the Attorney’s Office within 90 days of receiving the awarded money. All paperwork now is stored electronically as well as on paper, better ensuring accountability.
The Arizona Public Safety Foundation received the largest share of RICO grants from the county, totaling about $680,000 in funds. The audit states that PCSO employees were involved in disbursing about $151,000 of the these RICO funds through the foundation for purposes “unrelated to the authorized community outreach award purposes.”
By using the foundation to make these disbursements, the audit concludes that PCSO employees “bypassed the county’s purchasing procedures.” In addition to holding officer positions, auditors discovered county employees got involved with the foundation by performing accounting functions, approving foundation transactions and holding foundation credit cards in their names.
Over $87,000 in funds received by the foundation was spent on morale-boosting events that benefited PCSO employees, the report says. A “Star Wars” movie night, baseball tickets and holiday dinners were some of the recreation events paid for with these funds, according to the audit.
Auditors noted they did not find receipts or documentation for $21,973 of the $87,000 spent on the morale, welfare and recreation program.
Current Pinal County Sheriff Mark Lamb has previously told PinalCentral that he’s disassociated PCSO from the foundation, which was formed in 2007 under then-Sheriff Chris Vasquez. When the nonprofit was founded, the audit claims at least three of its incorporating officers were PCSO employees.
The issue of RICO funds became a reoccurring topic of debate toward the end of Voyles’ and Babeu’s tenure, which ended in 2016. They would repeatedly deny wrongdoing when accused of misusing the funds or violating laws intended to prevent misappropriation.
In 2015, a Pinal County woman filed a lawsuit against the county after her truck was seized by the Sheriff’s Office and subsequently sold. Her lawyers argued Arizona’s forfeiture laws were “unconstitutional.” The lawsuit was settled earlier this year.
The bad press on RICO eventually ended with state lawmakers reforming forfeiture laws in 2017, by setting a higher burden on law enforcement officials to prove the assets they seize are involved in criminal activity.
“Reforms have been needed in this area for some time,’’ Gov. Doug Ducey said last year after signing the reforms into law.
“I can handle the baseless political attacks, yet sadly, youth programs and victims services no longer receive this support and our community suffers,” Babeu said.
The audit states that its findings have been submitted to the Arizona Attorney General’s Office for review. A federal grand jury was convened last year; there is no record of a federal indictment having been filed in the case within the last year.