The Colorado Secretary of State has a variety of jobs that include keeping corporate registration records, keeping the state's personal property lien records, licensing notaries public, and administering bingo and raffle laws. But, only one of those jobs explains why we have an elected official, rather than a senior civil servant charged with carrying it out.
The Secretary of State is the chief elections officer for the state in the State of Colorado. Since the actual balloting is handled by county clerks and recorders, the main responsibility of the Colorado Secretary of State in elections is to administer the state's campaign finance disclosure laws.
Scott Gessler was the registered agent and attorney for the Colorado Independent Auto Dealers Association political committee, from its inception in 2006 until September 20, 2010. During this period, the Colorado Independent Auto Dealers Association ran up $528,500 in fines for failing to file campaign finance reports. The Colorado Secretary of State dispatched 55 non-compliance and fine notices from the time that the trouble started. They went out every month, often multiple times, and in many cases by certified mail, starting January 25, 2008. All of the letters until he resigned as registered agent had Scott Gessler's name in the address line.
Gessler had other choices. He could have resigned as the Committee's registered agent because his firm wasn't being paid for its services, which would have set off a red flag with the Committee. Or, he could have continued to do his job without resigning by calling attention to the mounting problem to his client. If he had, this could have dramatically mitigated the damages of the entire book keeper fraud mess that his client was experiencing that extended far beyond missed Secretary of State filings.
Instead, he did neither. He did nothing because his firm wasn't getting paid. The trouble is that lawyers aren't allowed to be passive-aggressive and simply stop working because they aren't getting paid.
Lawyers Have To Quit Or Do Their Job
Lawyers are allowed to fire their clients if they aren't getting paid, if it can be accomplished "without material adverse effect on the interests of the client," if "the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled," and if "lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred." (Colorado Rule of Professional Conduct 1.16.)
But, when you are a lawyer, until the representation is over, you have a duty to "act with reasonable diligence and promptness in representing a client," even if you aren't getting paid. (Colorado Rule of Professional Conduct 1.3.) As the comment to the rule creating that duty explains: "Unless the relationship is terminated as provided in Rule 1.16, a lawyer should carry through to conclusion all matters undertaken for a client."
In this case, as long as Scott Gessler was the Registered Agent for the Committee he had a duty to let his client know that the Secretary of States was sending until until he resigned from the job. Resigning isn't hard. They have a form for that at the Colorado Secretary of State website. But, despite being an election lawyer, he didn't utilize that option.
This Was No Technicality
I'm no stranger to this process. I've served as a treasurer for a political candidate in Mesa County, for the Democratic Party of Denver, and as attorney and/or registered agent for other candidates and political organizations.
Small fines from a failure to meet a deadline by a day or two are not uncommon and can result from a simple clerical error. Even big fines can be technicalities. For example, I once represented an organization that had ceased operations and filed what it thought was its final report, but wasn't closed out in the system because its final report has a clerical error that left it with a non-zero balance in its reported bank account that had to be cleared up.
But, the case that Secretary of State candidate Scott Gessler is embroiled in is no technicality. As the Denver Post story linked above explains:
A request for a fine waiver that the association sent to the secretary of state's office doesn't blame Gessler for the errors. Instead, the request describes internal chaos and alleged financial malfeasance by a bookkeeping contractor as the causes.
The request says the contractor stopped paying Gessler's firm to be the registered agent in late 2006 or early 2007, though Gessler's name remained on official paperwork.
The association rehired Gessler this year, and Mario Nicolais, an attorney at Gessler's firm, has since taken over as the group's official registered agent. . . .
Secretary of state officials sent dozens of letters and invoices to Gessler's office since the start of 2008 notifying him of the overdue filings and fines. It wasn't until last month that the committee, through Nicolais, filed its late reports.
Those reports show the committee collected more than $20,000 in contributions during the period. State records reveal that the committee made more than $12,000 in contributions during that time to candidates and other political groups.
Failing to report contributions and expenditures for an active political committee for a prolonged period and blowing off years of dire notices from the Secretary of State is not a mere technicality. We have campaign finance rules for a reason, and that reason is to inform the public about who is receiving donations and how they are being spent in the political system.
The Notices Should Have Made Gessler Pay Attention
As dry and polite as they seem, a fine notice from the Secretary of State's office is almost as jarring to receive for a registered agent of a political committee as getting sued or receiving a notice of tax audit is for a business firm. It is a big deal. Ordinarily, it arouses a brief bout of panic followed by action to figure out what went wrong and why it happened.
In this case, the Committee formed "to support candidates including John Suthers" filed no reports from February 6, 2008 until September 20, 2010, when it filed a report for the first five months of 2008 (an easy, no activity report, because many candidates aren't allowed to receive political contributions from political committees during the legislative session), and its next twenty-one required campaign finance reports (all overdue) on September 30, 2010 covering April 26, 2008 until September 15, 2010. Its first timely report in thirty months was filed on October 4, 2010.
A three page letter explaining the situation and asking for mercy was received by the Colorado Secretary of State on October 6, 2010.
A new Executive Director was hired in 2005, he outsourced financial compliance duties in 2006, and "Early in 2008 Contractor ceased submitting payroll withholding taxes, employee 401(k) contributions, and political committee reports." The new Executive Director didn't figure out what was going on until early 2010, however, after which he was replaced and his replacement was left to sort out the mess.
The Secretary of State, unlike the Colorado Independent Auto Dealers Political Committee, is very good a sending letters out on time. It sent 55 of them from the time that the Committee became delinquent to the present, many of them by certified mail. The book keeper was covering up past due notices, but Scott Gessler remained the registered agent until September 20, 2010.
We Should Care In This Political Race
Is a serious mistake in grossly mishandling one campaign finance case a deep moral flaw? No. I'm sure that Scott Gessler is a nice guy and a smart attorney. But, he isn't applying for just any job. He is seeking a job as the person in charge of administering the campaign finance system in Colorado. Yet, when it was his job to do his part in the process, he seriously screwed it up in a way that hurt the public interest in campaign finance disclosure and also did serious harm to his client.
This incident casts real doubt on Scott Gessler's qualifications to be Colorado's next Secretary of State. So does his dismissive attitude towards the system he wants to make it his job to administer and enforce:
Gessler said the size of the fine reinforces his argument that the campaign-finance system is set up as a "gotcha" to overcharge groups for clerical lapses.
If he doesn't get it now, he won't when he is in office.