By Ray Stern
By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
--The Arizona Veterans Service Commission Mission Statement
Superior Court Judge Pam Franks glared into the courtroom gallery on March 2 and got to the point.
"I'm going to deny AVSC [Arizona Veterans Service Commission] all costs and fees in connection with this accounting because this case has been horribly mismanaged," Franks said. ". . . I am horrified of the way this was handled. It's handled as a flat-out lie."
Franks is known as a stickler for detail. That's a fine quality for a judge at the helm of Maricopa County's Probate/Mental Health department. (Technically, "probate" means legal approval of a will. But Probate Court jurists do more than that. A key part of Franks' job has been to determine if paperwork involving a deceased or incapacitated person's estate is in order.)
Franks gets high marks from attorneys for being courteous. But the normally amiable judge went ballistic after she caught AVSC in a "flat-out lie" apparently designed to hide its bungling of Korean War veteran William Cousino's modest estate.
AVSC was created by state law in 1951, and its mission is to provide incapacitated veterans and their families with a guardian and/or conservator--the legal equivalent of a parent, responsible for its wards' financial obligations and physical well-being.
In that capacity, AVSC serves about 450 "wards," all of whom are incapacitated and lack anyone able or willing to care for them. In return, the wards pay AVSC 5 percent of their yearly incomes, if they have any.
The short version of why Judge Franks was so irate with AVSC about the Cousino case:
William Cousino died in August 1996 at the age of 64, leaving behind a house in west Phoenix and a 1992 Dodge Spirit. Cousino was a divorce with a history of combat-related mental problems, and his survivors included three sons and a daughter, three brothers and a sister--none of whom had been in contact with him for years.
After his death, AVSC neglected for almost a year to put Cousino's vacant residence on the market. For nine months after he died, the agency continued to remit Cousino's $584 monthly mortgage payment and $226 monthly home improvement loan payment.
Trouble was, Cousino's estate went into the red a few months after he died. To cover his bills, AVSC took money from other wards whose funds sit in a pooled trust account.
Books on probate law call that "commingling."
Pam Franks calls it stealing.
That the agency did this, and still hasn't repaid the unsuspecting wards, troubled one AVSC accountant so much that she quit her job in January. Dawn Miller sent a copy of her resignation letter to Governor Jane Dee Hull, U.S. Senator John McCain and Judge Franks.
"The reasons for leaving are due to unethical practices . . . in my department," Miller wrote. ". . . I do not condone these actions nor will I partake in these procedures."
Miller tells New Times that AVSC fiduciary unit supervisor Susan Cooper instructed her to manipulate the ledgers so that Cousino's $9,000 debt would be covered by other wards--and the judge wouldn't have to know about it.
Says Miller, "I told her, 'You just can't take money out of someone else's account and pretend that you didn't. You need to account for it, or you're stealing.' If you're losing money for your client, it's just as bad in my opinion as if you're taking it for yourself. She informed me that we had to take care of the situation. This was a hush-hush thing."
AVSC director Norman Gallion said Cooper would not respond to phone calls or faxed questions seeking her side of the story on this and other issues.
"As soon as I was made aware of the accounting problems associated with theCousino estate," Gallion said in a faxed reply, "we immediately contacted our banking institution requesting assistance to rectify the problem. . . . They are helping the commission bring closure to all of the reconciliation issues associated with the conservator account."
Judge Franks didn't know about AVSC's "procedures" until after the agency submitted accountings for court approval January 2. By law, such accountings are supposed to be filed annually, but AVSC hadn't completed one on Cousino's behalf for more than two years.
When Franks finally scanned the new paperwork, she noted that the sole listed asset was Cousino's home, at $66,975. She then looked at AVSC's previous accounting, completed in 1995. It, too, listed $66,975 in assets. But in its 1995 accounting, AVSC valued the house at $61,000 and the Dodge at $5,975.
Cousino's car had disappeared from the paperwork.
"My first question is, what happened to the car?" Franks asked AVSC's Susan Cooper at the March 2 hearing.
"The car was returned to the lender," Cooper replied.
"Why is the car not reflected in this accounting anywhere? The last accounting shows the total of $66,975 as being the value of the house and the car. In this accounting, miraculously, the house is shown all of a sudden as being worth $66,975. I never would have even known there was a car had I not gone back and compared it to the prior accounting. . . . I want to know what happened to that car. I want to know the equity that was in the car."
Three days after the hearing, Franks sent a stinging letter to longtime AVSC director Norm Gallion. In it, she referred to "shocking evidence" about the agency's actions in the Cousino case.
"I have decided that this court simply cannot continue to appoint AVSC as a conservator for protected persons," Franks told Gallion.
That's because the Cousino case is no aberration. In preparing this story, New Times examined more than 80 files and uncovered numerous inaccuracies, misstatements, routinely late filings and other basic shortcomings.
"We have been asked by AVSC to approve some of the most slipshod filings you've ever seen in case after case after case," Franks tells New Times, "and I was very frustrated. Then came the Cousino hearing, and I find out it's not just poor bookkeeping, but it's stealing out of other wards' assets to cover their mistakes. The whole reason for their existence is to serve veterans. But I've just never seen such appalling mismanagement."
Most of the wards have modest estates, but the amount of money AVSC controls is substantial. In September 1997, the balance in its fiduciary-unit checking account totaled $1.9 million. The unit processes about $600,000 monthly in cash receipts and disbursements.
Franks knows her decision will have ramifications for many Maricopa County veterans, and is likely to put a strain on the county Public Fiduciary, which will get some of the veteran referrals that formerly went to AVSC.
But she is resolute.
"This court will not appoint AVSC on new cases," the judge says, "until AVSC provides accountings showing that it has repaid the many wards the money it owes them due to improper accounting practices, and provides the court with proof that new, proper accounting procedures are in place."
Franks' decision came on the heels of a damning February 20 report on AVSC by the state auditor general.
"[AVSC] has not met its fiduciary duties or its statutory responsibilities. . . . The fiduciary division did not satisfy its legal obligations to administer and protect the assets of those veterans or their dependents that the court has deemed unable to handle their own affairs."
In other words, AVSC's record of looking after its wards--some of society's most vulnerable citizens--has been dismal. And, until recently, those with oversight over AVSC--the courts, elected officials, the Governor's Office, the federal Department of Veteran's Affairs--did little to try to right the ship.
Director Gallion says he is "very concerned" about the auditor general's findings, and with Judge Franks' decision.
"We take our fiduciary responsibilities very seriously," he says. "Our clients served their country when called upon to serve, and we shall continue to provide the best possible service to them with compassion and dignity within the constraints of personnel staffing and appropriate funding."
AVSC board chairman Carroll Fyffe concedes AVSC's track record has been less than stellar. But he promises it will improve dramatically.
"Things have happened that make us look sort of bad, that's very clear," says Fyffe, a Sierra Vista resident and past president of the Military Order of the Purple Heart.
"But we have to get the problems solved. We're not a bunch of thugs out to take money from veterans. We're working closely with the Governor's Office to correct things, and quickly, by 1 July. We've done some things wrong, but unintentionally, without maliciousness. I believe in my heart that no veteran has suffered because of us. And I also believe [Judge Franks] jumped the gun with the moratorium, and I think her letter of March 26 to Sue Cooper is an admission of that."
Fyffe is referring to Franks' apology for berating Cooper concerning another case in which a vet's annual accounting hadn't been filed on time. AVSC attorney Harold Merkow's explanation in that case led to her narrowly framed letter of apology.
"It irritates me no end that [Fyffe] would tell you that my letter to Ms. Cooper shows that I 'overreacted' when establishing the moratorium," Franks says. "If anything, I delayed too long in doing so because this court and Arizona's veterans need AVSC. With the current chaos and mismanagement, however, I remain firmly convinced that I would be doing more harm than good if I appointed AVSC as a veteran's conservator. It would be a breach of my fiduciary duty to the protected person."
Franks points out that the fiduciary duty--the word comes from the Latin fidez, which means faith, honesty, confidence, trust, honor--is profound: "You just can't blow away someone's assets like AVSC has done. It's against the law, and it hurts people."
AVSC first came to the public's attention in a New Times story about Donald Ellison's tragic and preventable death ("A System Gone Mad," October 24, 1996).
It described how AVSC--Ellison's guardian/conservator--and the mental-health agency known as ComCare had failed to care for the seriously mentally ill Vietnam veteran. Ellison collapsed on a Phoenix street on a 109-degree day in July 1996, one day after his release from Maricopa Medical Center's psychiatric ward. He died a few days later.
AVSC also squandered thousands of dollars of Ellison's meager assets in his final years.
In a subsequent story ("Sins of Commission," November 21, 1996), an attorney hired by AVSC in late 1995 to run the agency's fiduciary unit told how director Gallion had ignored her complaints about the agency's slipshod accountings, haphazard case management and an oppressive case load.
"The Legislature and the Governor's Office should be investigating our agency," Barbara Valdez said at the time, before resigning from AVSC to return to private practice. "The waste of our wards' assets is staggering. Mr Gallion has no clue what a guardian/conservator's responsibilities are."
Valdez complained that AVSC's social workers are responsible for more than 100 wards each, far more than the maximum of 40 recommended by the National Guardianship Association.
"If you take on new cases you can't handle, you're breaking the law," Valdez said. "But they've gotten away with it."
She theorized that Gallion would continue to accept new cases because they brought in more revenue, and he didn't want anyone to suspect his agency was incapable of doing the job.
Gallion referred to AVSC's case load in his recent response to New Times' questions: "A case load of 400-450 clients is manageable given the number of social workers that are authorized in the Fiduciary Division. . . . There have been times when the Fiduciary Division was not at authorized strength in the social worker classification."
Gallion and AVSC have a greater degree of independence than does, say, the Department of Health Services, whose director serves at the pleasure of the governor. Gallion reports directly to the agency's seven-person commission, whose members represent various military organizations.
Speaking for the commission, chairman Fyffe gives Gallion a vote of confidence--"Norm's done more for veterans than anyone I know," he says.
But the state auditor general didn't spare Gallion in its critical February report, saying ". . . The Commission has not made a commitment to plan, design and maintain a reliable and effective accounting system and internal control procedures. . . . Management's philosophy should create a positive atmosphere that reduces the risk of fraud, waste, abuse and financial misstatement."
The report didn't refer to evidence of AVSC employee theft of wards' assets, but it warned, "There were essentially no controls in place to prevent employees from misusing or misappropriating ward monies."
After publication of the Ellison stories, Judge Franks asked the senior Probate Court accountant to take on a project outside her normal duties and review all AVSC cases, new and old. The accountant, Kathy Stephens, sent Franks a memorandum in April 1997 that contained historical background and a status report.
"The office of the Probate Court accountants have not reviewed all of the accountings before the Probate Court for approval due to the limited staff in this office," Stephens wrote. "Because AVSC and the Maricopa County Fiduciary are audited government agencies set up to administer estates, I have considered these agencies to be low-risk on the scale of all fiduciaries appointed by the court."
No longer. Stephens soon learned what she and her team of volunteers--the court's staff was too small to handle the task--faced.
"When I first spoke with [AVSC's] Susan Cooper," she wrote in her memo to Franks, "she informed me that she would fax a list of the cases to me right away. However, weeks have passed, and I still have not received the list."
For various reasons, the huge accounting project has stalled. But what Stephens did find before she left her position last year was sobering. Dozens of annual AVSC accountings were late, some by as much as six years. Stephens' preliminary findings comported with the auditor general's, which also uncovered a slew of serious errors and omissions.
"I think we at the courthouse had the hopeful presumption of competence and honesty in that agency," says court commissioner Bob Colosi. "That obviously was the wrong presumption. If you want to point a finger at the judicial system, point it. But we're not going to assume anymore that people are going to do what they're supposed to, and legally mandated to, do."
Phoenix resident Gerri Hofius knew little about AVSC's problems in late 1996, other than the Donald Ellison story, which she says agency officials pooh-poohed when she asked them about it.
By that time, however, Hofius was convinced her mentally ill brother, Guy White Jr., had gotten fleeced for about $25,000 by Crystal Lodge, the supervisory care home where he'd lived for almost a decade.
Hofius informed AVSC--White's guardian/conservator--and waited for a response. None came for months. When it finally did, Hofius considered it so unsatisfactory that she sent a letter of complaint about AVSC to Governor Hull last December 10.
"What in the world is going on here?" she wrote. "This is an awful lot of money that went unnoticed [by AVSC]. Who is doing their job, or not doing their job?"
Hofius said she never heard back from the Governor's Office, which deeply disappointed her. She was surprised to learn that Hull's office now is directly involved in trying to sort out the AVSC morass.
"We see this as a very serious issue," says Hull executive assistant Mike Bielecki, "though we're not in the prosecutorial mode at this point. They [AVSC] admit there should be a lot of change at their shop, and we're seeing action already on their part, which is good."
The oldest of four children, 50-year-old Guy White Jr. has lived in the Valley for most of his life. At northwest Phoenix's Cortez High School in the mid-1960s, he played football and excelled as a student.
White went to Arizona State University as an aspiring engineer, but after his grades slipped, the Army drafted him. White was on his way to Vietnam in 1968, his sister says, when another soldier severely beat him in a bar fight.
His brain injuries were permanent, and he was discharged with a 100 percent service-connected disability. Gerri Hofius says her big brother never was the same after he returned to the States.
"He was diagnosed as a paranoid schizophrenic and had to take all these medicines," she recalls. "He'd plant doorknobs to see if they'd grow. He'd push a car for miles. He thinks he hears things. He couldn't really keep a job. And back then, he had a violent streak."
White's mother cared for him through the 1970s and into the 1980s, no small task. In 1985, the Probate Court appointed AVSC as White's conservator, which gave it control over his money. The agency also became White's guardian after his mother became ill and died in 1990. (White has paid AVSC more than $12,000 in conservator fees since 1985, court records show.)
Hofius was working and raising her two daughters, and says she saw her brother only occasionally until a few years ago, when she kindled their relationship through increased visits and outings.
Since the late 1980s, White had resided at Crystal Lodge, a 54-bed facility in the 2900 block of North 14th Street in Phoenix where many AVSC wards live.
In late 1996, Hofius says, she was visiting White at Crystal Lodge with one of her teenage daughters. She says she'd understood that her brother was paying for a private room, though his belongings always seemed to be in a room with at least one other resident.
On this visit, the daughter noticed White's name taped to the door of his room next to another man's. Hofius now suspected that her brother was paying for a private room but didn't have one.
Hofius says she also noticed a handwritten sign on a wall at Crystal Lodge that said a semiprivate room cost $800 monthly, and a private room cost $1,200 monthly.
Court records show White paid about $875 for a semiprivate room at Crystal Lodge until February 1991, when his room and board increased to $1,200 a month for a private room, according to an AVSC accounting notation. That sum jumped to $1,324 monthly by 1997.
Alarmed at the discrepancy, Hofius says she immediately informed White's AVSC social worker Lisa Blanton. Blanton later told Hofius she'd referred the matter to agency fiduciary chief Susan Cooper.
Proof that she did comes from court records showing that, starting in December 1996, AVSC remitted only $442 monthly for Guy White's room and board until he moved out of Crystal Lodge the following February.
Hofius says she wanted--and still wants--Crystal Lodge to pay her brother back the difference between a private and semiprivate room for almost six years. The math comes to about $25,000.
But months passed and, Hofius says, she never spoke with AVSC's Cooper until early July 1997. Shortly after their conversation, Hofius sent an angry missive to Cooper:
"I had no response, no returned phone call, no acknowledgment from you until I finally got ahold of you concerning another matter. . . . I told you I was not happy one bit with this situation, and I felt as if AVSC did not give a rip. You assured me that this was definitely a matter that is not tolerated, and that you personally would handle the investigation. . . . Seven months has already gone by. I will not allow this matter to slip thru the cracks . . ."
When Judge Franks got wind of the dispute last summer, she appointed attorney Brenda Warneka to represent Guy White. Franks also ordered AVSC to investigate Hofius' claims and to send Warneka its findings by September 1.
That date passed with no word from AVSC. Last September 16, Warneka wrote to Cooper, "Is it your intention to just ignore Judge Franks' order?"
The attorney still heard nothing and, on September 29, asked Franks to set a hearing on the matter. The judge did--for early December.
On October 7, Cooper wrote to Franks, concluding, "The rates charged at Crystal Lodge did not indicate a pattern of being overcharged."
Cooper also enclosed letters from Crystal Lodge's owner and several staffers, which claimed White had a habit of wandering into other people's rooms. That, the employees said, accounted for Hofius' misguided impression that her brother didn't have a private room.
The claims aren't implausible, in that White's records include references to his habit of wandering.
But that doesn't answer why White's name tag apparently was tacked next to another man's on a door that opened into a supposedly private room.
Hofius asked the owners of two adult-care homes where White resided after Crystal Lodge to inform Judge Franks about her brother's habits. Both owners wrote that White didn't wander much or move his belongings from room to room as Crystal Lodge had alleged.
On December 7, Judge Franks had a conference call with an attorney for AVSC and with Guy White's lawyer. After the hearing, the judge again ordered AVSC to get to the bottom of the overcharging issue, this time by January 15.
Remarkably, 17 months after Hofius first expressed her concerns to her brother's AVSC social worker, the issue still hasn't been resolved.
Franks' latest order to AVSC in the White case requires the agency to file court papers about its investigation into the overcharging issue by May 5. By that date, AVSC also is supposed to report about the room-and-board status of all other AVSC wards who reside at Crystal Lodge.
Guy White now is living in a supervised home with three other men, and his sister says he's doing well. But Gerri Hofius says she intends to see that her brother gets reimbursed.
"The service [AVSC] is a good thing on paper," says Hofius, "but if you're gonna do something, do it properly. They shouldn't have free rein to screw up anyone else's money. That should be a crime just as if it would be if I or some other citizen did it. How many vets are out there who don't have anyone like me, who made a stink about her brother and stuck with it? They've got to be easy pickings."
AVSC hired Dawn Miller as a temporary accountant in March 1997, and soon offered her a full-time position. The job sounded great to the New York native, a former truck driver who moved to Arizona in 1992.
"Most of the people we serve are old and incompetent," Miller says, "and our goal is to keep them as alive and well as possible. The idea that you're helping people who can't help themselves is wonderful, and the court appointed us because they thought we were competent to take care of these people. But I learned that AVSC is incompetent at best."
Miller says she became alarmed at her supervisors' brazen requests to manipulate accountings.
"I told the auditor [general] that they should be more afraid for the guy getting $500 a week in benefits than the $100,000 people," Miller says. "Those are the ones in the biggest trouble for having AVSC handle their finances."
The William Cousino case brought things to a head between Miller and her bosses.
"I worked on Cousino for a while," she recalls. "But when it got bad, I told them I wouldn't work on it anymore."
Cousino's story is compelling: Born in Detroit, he served as an Army medic from 1947 to 1953, including a stint in Korea during the war. The heavy combat he saw earned him military honors but also left him with a serious hearing problem and a chronic posttraumatic stress disorder--severe anxiety and depression.
By the mid-1990s, Cousino had been out of contact with his family for years. It's uncertain how AVSC came into his life, but a court investigator's report indicates he was known as an easy target for financial exploitation. In 1994, AVSC applied to become his conservator, which the Probate Court approved that October.
At first, Cousino seemed a shining example of how AVSC can help veterans in need. With the agency's aid in early 1995, Cousino bought a home in west Phoenix. He lived a decent life, taking karate classes, bowling, paying his own bills, sponsoring a child from Equador from his monthly allowance.
A court investigator's report of January 1996 said Cousino welcomed AVSC as his conservator. Cousino also heaped praise on his caseworker, Sue Cooper--the same woman involved in many of the agency's most blatant missteps of late.
Cousino died after a short illness in August 1996. But court records indicate that AVSC continued to pay the dead man's $312 monthly car payments for two months after he died.
Worse, the agency continued to pay his house payments through May 1997--nine months after he died--neglecting even to put the empty residence on the market.
But Cooper wouldn't own up to a thing in responding to court commissioner Gary Donahoe's questions on November 10, 1997. Instead, she tried fancy footwork after Donahoe ordered AVSC to explain why it hadn't filed a "final accounting" in the Cousino case.
"Mr. Cousino passed away during the month of August 1996," Cooper wrote, "and AVSC had the house located at 2027 West Corrine Drive, Phoenix, Arizona, valued at $61,000, put up for sale by a realtor agency to liquidate this asset for revenue to be returned to the estate of Mr. Cousino."
Unfortunately, Cooper continued, the house had not been sold by August 1997, and the house was in the process of being returned to the mortgage company.
Cooper's letter made it appear that AVSC had put Cousino's home up for sale promptly, but just couldn't find a buyer.
In fact, the agency's incompetence had caused the vet's estate to go $9,087 into debt. Cooper again wrote Donahoe last December 26, attempting another spin.
"During the period of time this property was listed for sale, the Arizona Veterans Service Commission put forth funds to keep the property solvent, and the AVSC was to [be] reimbursed from the proceeds of the sale of the house."
That was a lie. The money to cover the estate's shortfall had come from other wards, not from AVSC.
Months later, on March 2, Judge Franks gathered many key players in the Cousino case in her courtroom. She asked accountant Dawn Miller to attend after reading a copy of Miller's resignation letter from AVSC.
First on the stand was Cooper, who tried to explain why mention of Cousino's car had vanished from AVSC's latest paperwork.
"It [the paperwork] should have reflected that the car, upon Mr. Cousino's death, was returned to the lender," Cooper answered.
"I think this is yet another AVSC accounting where I am missing pages," Franks said. "I don't think I've seen an AVSC accounting recently that was complete. . . . This one obviously makes no sense."
Franks asked Cooper exactly when her agency contacted a real estate agent to list Cousino's home for sale.
"I believe that was in August," Cooper replied.
"Of what year?"
"Of that same year?"
"I think you're wrong." (Cooper was wrong, by almost a year.)
"Whatever the dates are, you are telling me that what happened is that AVSC thought the realtor had it listed for sale. The realtor didn't have it for sale, and so the house sat around for a long time not being listed for sale and nobody doing anything with it. Is that correct?"
"And whose fault is that?"
"I would say AVSC's for not monitoring it."
"I think you are probably right."
Cooper then revealed how AVSC had "floated" $9,087 from the estates of other wards to cover Cousino's mortgage.
"So are there other protected people that, if we add up what's missing from their various accounts, it's going to come to $9,087?" Franks asked.
"I can't answer that," the AVSC fiduciary administrator replied. "I don't know."
"Well, then, somebody answer it. You know, a lot of this country operates on smoke and mirrors, but fiduciaries aren't supposed to do that. If the money was spent and if it wasn't Mr. Cousino's, whose was it, and where is it?. . . . From the perspective of all of these other protected persons, they still don't have back this money. Right?"
Later in the hearing, Franks asked Dawn Miller to testify. Miller alleged how Cooper had asked her to make the Cousino account look solvent on paper.
"In my conscience, it didn't seem right," Miller said, "because the interest [to the other wards] did have to be paid for all that time it was in the hole. And in our particular system, it would not show any other accounts out of balance. But in the banking system where the money was held, those accounts are minus that money and are not accruing interest on those amounts."
After the hearing, Franks dictated a four-page memorandum, concluding:
"The Arizona Veterans Service Commission has mismanaged this estate. Specifically, AVSC continued to pay expenses on the decedent's house for a lengthy period of time after his death without ensuring that the house was, in fact, listed for sale or that any efforts were being made to sell the house. The AVSC, in fact, spent $9,087 belonging to other wards to maintain the decedent's house.
". . . As the testimony presented at this hearing shows that the AVSC's trust account has been in arrears since December of 1996, the court also has concerns that the AVSC has not only mismanaged this estate, but has also mismanaged the estates of all of its other wards in that money and interest belonging to those other wards has been spent for the benefit of the Cousino estate."
Franks denied AVSC's request for fees. (For its alleged efforts on Cousino's behalf, AVSC had billed his estate $1,733.11.)
Finally, the judge ordered AVSC to provide the court by June 1 with a complete accounting of the trust account from which the agency lifted the wards' money.
"This whole AVSC affair has been pathetic and disappointing," says Franks, who is transferring to Juvenile Court on May 1. "If the stakes weren't so high, it would be laughable."
Contact Paul Rubin at his online address: firstname.lastname@example.org