Risky Business

A former employee says Maricopa County is better at covering up than cleaning up its environmental hazards. And that could get the county in trouble for financial fraud--again.

Michael Walters worked with worst-case scenarios every day. It's ironic, then, that he still wasn't prepared for the one coming at him until it hit.

On November 22, he sat in the office of his supervisor, Roland Bergen--a guy he'd considered his best friend--and listened as Bergen read from a prepared script informing Walters he was fired. Then, while security stood by, Bergen escorted Walters out of the Maricopa County Administration building. "He hugged me by my car," Walters recalls, "and he told me, 'It would be better for you if you'd keep quiet about this.'"

And then Walters' employment with the county was officially over. He didn't even have a chance to clean out his desk. All for doing what he thought was the right thing.

"I was devastated," he recalls. "That friends would turn against you, that associates would work with you for years, and then not stand with you, but in fact, stand against you . . . everything just went topsy-turvy."

As an analyst in Maricopa County's division of risk management, Walters had been the office's golden boy. His performance evaluations came back with the highest possible ratings. He'd been singled out for praise in e-mails by Deborah Larson, the county's chief financial officer, who was known for more acidic comments. He was, he says, a happy bureaucrat, content with his place in county government.

Walters was hired, in part, to help the county assess its environmental liabilities--the amount of money it would cost to clean up its waste sites, health hazards and pollutant spills. So he created a spreadsheet -- with imaginary numbers--for the county to use as the starting point for an audit of those risks. Walters plugged in a probable range of $33.3 million to $48.6 million for the county's total liability, a number that came literally from nowhere because the county had never assessed its environmental cleanup costs. The real number, Walters stresses, could be anywhere from "a million to a billion" dollars.

Months later, Walters says, he discovered the county had published the hypothetical numbers--in official financial statements and bond documents--as if they were real. That could be fraud, according to Securities and Exchange Commission disclosure guidelines.

If the numbers are baseless, as Walters contends, it could mean the county has once again failed to disclose significant information required by federal regulators. A similar failure got Maricopa County in trouble with the SEC just two years ago when the county was charged with fraud for not reporting its budget deficit.

Moreover, it raises questions about how the county will pay for a rash of environmental problems. According to county employees' e-mail obtained by New Times, those problems are serious--and costly. Internal county messages describe years of environmental, health and safety violations at the county hospital, "an environmental catastrophe waiting to happen" in the Maricopa Medical Examiner's Office, and problems with asbestos exposure in county buildings.

Maricopa County could also face thousands of dollars in fines and penalties if outside agencies determine county employees were covering up health hazards, as the e-mails suggest.

And Walters himself has filed a $4.7 million claim against the county for wrongful termination.

Speaking up about the county's liabilities turned Walters into one. "We must find a way to quietly eliminate him," Deborah Larson wrote in an e-mail about Walters. Two months later, Walters was fired.

Maricopa County insists its financial statements are accurate and that it's dealing with environmental problems in a safe and timely manner.

But if Walters is right, some real problems are buried deeper than toxic waste in the county's budget--and it's Maricopa County taxpayers who'll cover the cost.

Michael Walters is the kind of guy you'd want working for the government. Hired by Maricopa County in 1992, he is bright, hypereducated and friendly--180 degrees opposite the stereotype of the cranky, slow and overpaid civil-service hack.

For a long time, Walters' bosses appreciated this, or seemed to. In 1995, Bergen, then the county's environmental liability manager, gave Walters an "exceptional performance" rating--the highest possible. In January 1996, Walters was commended for helping the county save $210 million and given a cash award.

Even Deborah Larson, who in 1995 was brought in to clean up the county's fiscal mess, praised Walters in some e-mails. (Last year, Larson resigned after biting comments she made in e-mails about county employees and contractors were made public.)

In a private message to Walters in April 1996, Larson gushed: "Your work has done so much to buy down future liabilities, and this is probably recognized only among the ranks of managers and attorneys . . . so others deserve to know, too." (Ellipses in original.)

But shortly after Larson sent him that message, Walters went from golden boy to marked man. Risk management was moved into the offices of the finance department, and Walters saw, for the first time, the numbers the county was reporting as its environmental liability.

Environmental liabilities include landfills, toxic-waste dumps, underground storage tanks, contaminated groundwater and other varied ecological nightmares that the county is required to clean up. The projected costs of those cleanups are supposed to be reported in the county's annual financial reports.

Walters recognized the numbers the county was using. After all, he'd made them up himself.

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