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El Pomar Foundation paid Transit Mix $15 million after private meeting over quarry came to light

Source: 
Colorado Springs Indy
Author: 
Pam Zubeck
Date: 
Friday, July 17, 2020

El Pomar Foundation took the unusual step of paying $15 million to Transit Mix Concrete Co. in late 2018 after the company apparently alleged foundation officials attempted to block approval of the controversial Hitch Rack Ranch quarry by acting outside the legitimate public process.

In early 2018, the Department of Natural Resources staff recommended approval of the permit for the 239-acre aggregate quarry 10 miles southwest of Colorado Springs. But after foundation officials met with then-Gov. John Hickenlooper’s staff, the Mined Land Reclamation Board voted to deny the permit in April 2018.

State law prohibits agencies from receiving or considering comments or materials from anyone without notice to other parties, to assure that all parties to an agency decision are afforded due process.

The payment only now is coming to light after the Indy obtained documents through a records request surrounding the permit and El Pomar’s contacts with state officials.

Asked about the payment, El Pomar issued a statement that didn’t acknowledge or deny the payment.

Rather, El Pomar senior vice president and general counsel Maureen Lawrence noted the foundation got involved to oppose the project based on its “commitment to protect, enhance and promote awareness of the beautiful natural assets of the Pikes Peak region.”

The Hitch Rack Ranch application process spanned more than two years and drew sharp opposition from neighbors, environmental groups and El Pomar, which is set to inherit a tract from the Ingersoll Trust that’s to be preserved in its natural state, located near the quarry site.

Hundreds of opponents provided written or verbal comments to the state through normal channels in state procedure. But Kyle Hybl, El Pomar’s president and CEO who served as chief operations officer at the time, sought a meeting with Hickenlooper, who’s now running for the U.S. Senate.

It doesn’t appear Hybl met with the governor himself, but documents show he and El Pomar Chief Financial Officer Thayer Tutt Jr. did confer with high-ranking Hickenlooper aides, including his general counsel. Hybl then sent a follow-up message to those officials outlining his arguments against the quarry — all outside the formal public comment process.

Transit Mix’s parent company at that time, Chicago-based Continental Materials Corp., apparently later accused El Pomar of meddling behind the scenes, and reported in a government filing that it received a $15 million payment on Dec. 29, 2018, “in resolution of a business dispute.”

One nonprofit legal expert says charitable organizations can sue and be sued and there’s “nothing inherently wrong” with settling a lawsuit, though the question could arise as to whether such a payment is a sound use of resources.

El Pomar has held sway in the Pikes Peak Region for decades and, by awarding grants to a far-reaching collection of agencies, probably touches more lives in Colorado than any other single entity outside of government.

The foundation gave out some $500 million under the leadership of President and CEO Bill Hybl, who served for 46 years. Paid $554,797 in compensation in 2018, Bill Hybl stepped down on Feb. 28, 2019, two months after the payment to Transit Mix was made, though he remains chairman of the board.

Hybl’s son Kyle, who joined El Pomar in 2000 as general counsel, was paid $269,582 in salary and benefits in 2018 as chief operating officer and succeeded his father in the top job at El Pomar.

Lawrence, with El Pomar, says in an email the leadership succession had been “long planned” and “was in no way connected to any of the events surrounding the Foundation’s opposition to the proposed mine on Hitch Rack Ranch.”

She also notes the elder Hybl remains in an active role at the foundation, where he led “one of our country’s most innovative and impactful philanthropic organizations.”

Transit Mix initially applied for a quarry permit in 2016, but it was denied under heavy protest from neighbors who worried about hundreds of trucks coming and going, dust pollution and blasts used to chip away at the rock. Moreover, many noted, it would be located near Aiken Canyon, a preserve overseen by The Nature Conservancy. Adjacent to that canyon is a 293-acre tract known as the Ingersoll Trust.

Upon the late Buck Ingersoll’s wife’s death, the property is to be split between The Nature Conservancy and El Pomar, which intends to preserve the parcel as open space.

As Lawrence states, El Pomar’s interest in the quarry stemmed from that future bequest.

“The gift from the Ingersoll family was made with the clear intention that the property’s natural beauty be preserved and used for environmental, educational and charitable purposes in the future,” she says. “El Pomar’s commitment to protect the environmental integrity of the Ingersoll Ranch and fulfill the donor’s wishes drove our decision to oppose the quarry mine, which we felt was incompatible with those goals. El Pomar’s involvement also aligns with our commitment to protect, enhance and promote awareness of the beautiful natural assets of the Pikes Peak region.”

El Pomar submitted written comments against the quarry permit, but none of its officials spoke at the two-day hearing in October 2016, according to the hearing transcript.

The Mined Land Reclamation Board (MLRB) voted 3-2 against the application, noting impacts of the quarry on wildlife and other conservation issues, potential damage to water supplies, concerns that roads in the area weren’t adequate for truck traffic, and blasting that would cause a key road to close periodically.

The following year, in November 2017, Transit Mix renewed its application after making changes to address those concerns. The application, like the first, won a recommendation for approval on April 3, 2018, from the Department of Natural Resources’ Division of Reclamation, Mining and Safety staff, despite some 567 public comments in opposition, according to public records.

Before that recommendation was issued, Kyle Hybl worked behind the scenes, according to records obtained through the Colorado Open Records Act (CORA).

On Dec. 23, 2017, Jamie Van Leeuwen with the governor’s office wrote an email to Robert Randall, executive director of the Department of Natural Resources, Bill Hybl and Kyle Hybl. She thanked Randall for “a great conversation” about the Transit Mix application and said she was “looping in ... my two dear friends Kyle and Bill Hybl who brought this matter to my attention.

“Any wise advice or consult you could offer would be most appreciated!” she wrote. “I will turn over to you all and let’s go take it from there.”

On Dec. 28, Kyle Hybl thanked Van Leeuwen via email, which also was addressed to Randall, adding, “Hello Bob. May I give you a call to discuss?”

The next morning, Randall wrote back to Hybl and copied others, including Bill Hybl, saying, “hopefully we can find a time that works for you.”

A meeting took place on March 9, 2018, and that same day Kyle Hybl wrote to two governor’s employees — Jacki Melmed, Hickenlooper’s chief legal counsel, and Patrick Meyers, his chief of staff. He also copied Thayer Tutt Jr., El Pomar’s chief financial officer, and Bill Hybl.

“Thayer and I thank you for your time today,” he wrote. “It was and is appreciated.”

He then criticized Colorado Parks and Wildlife and the Department of Water Resources as having made “cursory” reviews of the quarry application, and added, “...we would hope there would be a more intentional look by both agencies.”

Notably, Hybl stressed the quarry’s impact on water supplies, saying, “Blasting and removal of large areas of granite threaten the area’s hydrological balance and the quality and quantity of the water supply.”

Hybl’s email also urged consideration of potential increased traffic on Highway 115. “We certainly hope CDOT [Colorado Department of Transportation] takes a serious and critical look at the potential impacts on HWY 115 and the people who travel it,” he wrote.

Hybl then closed his message by saying he felt “confident that the MLRB will have good reasons to, once again, deny Transit Mix’s application... A clear and transparent review by the Governor and the Governor’s agencies will reveal how disturbing and damaging Transit Mix’s application is.”

After the MLRB denied the permit in April 2018, internal emails between Randall and Melmed were discovered via a CORA request from Transit Mix’s law firm, Hogan Lovells, submitted in June 2018. That CORA sought correspondence, notes, records of meetings and the like involving the governor, Meyers, MLRB board members, Randall, Bill Hybl, Kyle Hybl, Tutt and any other representatives of El Pomar.

In response, the state produced dozens of pages of records, but redacted in full a March 27, 2018, email exchange between Randall and Melmed.

In a letter to the law firm dated July 23, 2018, First Assistant Attorney General Jeff Fugate cited CORA’s “work product” and attorney-client privilege exemptions as reasons for the redactions.
On Aug. 10, 2018, Hogan Lovells wrote to Fugate giving notice Transit Mix intended to ask the Denver District Court to overturn the redactions.

Seven days later, Fugate wrote to Hogan Lovells saying the documents were being provided without redactions because the governor’s office “has released the work product prepared for them.”

Those records show that on March 19, 2018 — 10 days after state officials met with Tutt and Kyle Hybl, who’s an attorney — Melmed asked Randall in an email to “let me know your thoughts” about Hybl’s email describing why the permit should be denied.

On March 27, Randall, a voting member of the Mined Land Reclamation Board, wrote back to Melmed. He noted the upcoming MLRB hearing on April 25 and 26 and said the Division of Reclamation Mining and Safety staff would recommend approval because “the application meets regulatory and statutory standards.”

Randall refuted Hybl’s assertion that state agencies had failed to perform “sufficient examination” of the quarry project and asserted that Transit Mix had addressed every shortcoming of its first application to the satisfaction of staff.

But on April 26, Randall voted in the 3-2 majority to deny the permit based on water quality and quantity issues, specifically the “hydrologic balance” between the proposed affected land and the surrounding area, according to the decision.

“During the hearing on this quarry permit, the Mined Land Reclamation Board heard from those in favor of the mine, and those against allowing it,” Randall said in an email, noting he did not attend a meeting with Hybl and Tutt. “The experts who spoke to the mine’s potential impact on the groundwater and residential wells were more convincing to me than those who said the mine would have no impact. That’s why I voted against approving the mine permit. Governor Hickenlooper and his staff had nothing to do with my decision on this matter.“

Voting with Randall were John Singletary and Jill Van Noord.

The State Administrative Procedure Act says an agency “shall not receive or consider ex parte material or representation of any kind offered without notice.” Ex parte means with respect to or in the interests of one side only or an interested outside party.

The rule, the act states, is designed “to assure that all parties to any agency adjudicatory proceeding are accorded due process of law.”

The Indy sought comments from Melmed and Meyers but the Indy had not heard back by its deadline.

But a former Hickenlooper staffer familiar with the situation said via email, "The opponents of the permit reached out to the office and raised complaints about the process before the mining board. We looked into it and determined that those complaints were with out merit and from that point on we were not involved in the process and certainly not the decision. Gov. Hickenlooper was never a part of any of these discussions."

A spokesperson for the Hickenlooper campaign says via email the former governor “did not weigh in on the decision made by the independent [MLRB].”

Transit Mix executive director Jerry Schnabel, Transit Mix consultant Daniel Cole and Hogan Lovells declined to comment.

It’s unclear what led El Pomar to make the payment. No lawsuit was ever filed, and Lawrence didn’t directly address the payment and how it was funded. But nonprofits are free to settle legal claims, says Eric Gorovitz, an attorney in San Francisco who specializes in nonprofit and tax-exempt legal issues.

“There’s nothing inherently wrong with a charity settling a lawsuit,” Gorovitz says. “When you’re facing a suit, it can be the best use of your resources to make that problem go away. If they thought they were going to lose, you avoid the cost or uncertainty of a trial [by settling].”

Gorovitz says such a payment could come from an insurance carrier, rather than the foundation itself. (El Pomar’s 2018 IRS Form 990 filing reflected no $15 million payment was made, although Continental Materials, Transit Mix’s parent company at the time, reported in a Securities and Exchange Commission (SEC) filing the payment was received on Dec. 28, 2018.

However, Continental Materials reported in another SEC filing the payment was “realized” in early January 2019. El Pomar’s 2019 Form 990 has not yet been filed.)

“Most organizations have officers and directors insurance and general liability insurance,” he says. “If the claim was within the scope of the insurance policy, they certainly would seek coverage, and it would be bad management for them not to seek coverage.”

The bigger issue, Gorovitz says, is what a nonprofit might have done to trigger such a legal threat. While a payment itself wouldn’t jeopardize an organization’s nonprofit tax status, “It’s possible what [a nonprofit] did might, if what they did was improper for a charity,” Gorovitz says.

IRS auditors would delve into such a matter only upon receipt of a complaint, news of a payment in the public realm that called attention to the situation, or “if their [IRS’] analytics spit out this return for potential review and someone looks at it and says, ‘We’re going to review this,’” Gorovitz says.

Ex parte communications involving a regulatory agency are barred for a reason, says John Freeman, distinguished professor emeritus and John T. Campbell Chair in Business and Professional Ethics Emeritus at the University of South Carolina School of Law.

“The whole concept of ex parte, one-sided communications, is you get to bend the ear and the other side doesn’t get to respond. They’re kept in the dark,” Freeman says in an interview. “The reason they’re banned is there’s a level of corruptness about it.”

While people have a First Amendment right to petition the government, he says, “if you’re sneaking around, going in the back door, then it’s not looking like you’re playing by the rules. It looks like you’re doing something sleazy, and what’s wrong with playing by the rules?”

If it were proven an entity bent the rules, he says, “That opens a whole new avenue of problems for the people who were bending the rules a little to get their way. That’s something you litigate for the next five years.”

Richard Levy, a law professor at the University of Kansas School of Law, said a nonprofit might be exposed to a lawsuit for “tortious interference with contract or business opportunity or a similar action for damages,” notably if it caused an improper denial of a permit that resulted in substantial damages.

But there was no litigation in this case, and El Pomar’s board of directors authorized the payment.

After Continental Materials received the money, it scrapped plans for the Hitch Rack Ranch quarry and, on Feb. 1, 2019, sold Transit Mix Concrete and all of the real property of that company to Aggregate Industries – WCR, Inc., a Colorado company, for $27.1 million according to an SEC filing.

The filing noted the sale didn’t include Pikeview Quarry in Colorado Springs, the company’s aggregates mining business in Pueblo, the sand and gravel mining business in Fremont County, and the retail building materials business in Colorado Springs and Pueblo.

Under the name of another subsidiary, Castle Concrete, the company negotiated a deal to sell two quarries to the city of Colorado Springs:

  • Black Canyon Quarry, about 193 acres adjacent to Williams Canyon west of Cedar Heights and Garden of the Gods Park. It’s been closed since 2015, and reclamation is largely complete, the city reports on its website.
  • A 148-acre frontage property of the Pikeview Quarry located immediately south of Blodgett Peak Open Space and west of Allegheny Drive and the Oak Valley Ranch neighborhood. Another 100 acres of the quarry could be acquired at the city’s discretion as a donation from Castle Concrete later, on condition the state signs off on the reclamation work, which is pending.

That $8.9 million deal was approved by City Council in June and is funded with Trails, Open Space, and Parks tax money with assistance of The Conservation Fund.

Editor's note: This story has been updated to include comment from a former Hickenlooper staffer.

Faculty name: 
Richard Levy