Bar complaint filed against Stevens County prosecutor Tim Rasmussen

By: 
RaeLynn Ricarte
Editor

A complaint against Stevens County Prosecutor Tim Rasmussen is under review by the Washington State Bar Association regarding his involvement in financial transactions made by former auditor Tim Gray.

At issue is Rasmussen’s efforts in December 2018 to help Gray recoup personal funds paid to the IRS to cover the penalties for late payroll payments. “The prosecutor’s failure to counsel the commissioners to determine all that was improperly done and failure to advise the Board of County Commissioners to consider reporting the same to the state auditor and state attorney general, and, instead, deciding to settle with Mr. Gray for the full amount through the county insurance career, neglects its first duty to duly advise the commissioners of the possibilities and courses of action,” wrote Terry Williams, special deputy prosecutor appointed by the county in March 2019 to look into the matter.

Williams further stated: “That is what lawyers are supposed to do for their clients when an issue presents itself. Further, it has the appearance of an ‘end-around’ to assist Mr. Gray more than address the potential legal ramifications for the county as well as the duty to the county to question questionable procedures.”

He also included the thought that, “I’m not ignoring the simple approach that Tim [Rasmussen] tried to do a ‘good thing,’ although he did it illegally. In light of the animosity between the prosecutor and commission, the moment Mr. Gray sought a solution from the prosecutor and Mr. [Jim] Moffitt [risk manager], it may have been best to turn the matter over immediately to outside counsel...”

The “animosity” Williams referred to surfaced when

Rasmussen, a Republican, drew fire from his own party for backing Gray, a Democrat, in the 2018 election. The commissioners, all Republicans, backed Larsen, also a Republican.

Tensions rose even higher between Rasmussen and the commissioners when the prosecutor filed a lawsuit a few months after the Gray incident in regard to the county’s expenditure of homeless funds.

Rasmussen prevailed in that case and the seated commissioners — Wes McCart, Don Dashiell and Steve Parker — had to vacate their offices last summer after a judge found them guilty of wrongdoing.
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An interim commission was appointed to conduct county business until the Nov. 3 election was certified. That board, made up of elected department heads, voted to reimburse Gray the bulk of the $27,000 — minus about $6,000 for unidentified costs — after the IRS waived penalties.

The interim board then received Williams report and voted unanimously to send it to the Bar Association.

That group was chaired by Sheriff Brad Manke, and included Coroner, Lorrie Sampson, Assessor John Olson, Auditor Lori Larsen, Treasurer Leslie Valz and Clerk Julie James, who was absent when the decision on the complaint was made.

McCart has since won re-election to a new four-year term in his District 1 seat. He is serving with Mark Burrows, appointed by Gov. Jay Inslee to fill one year of the unexpired term of Dashiell in District 2, and Greg Young, who bested Parker for the District 3 position.

Rasmussen said of Williams’ report on Monday: “By holding the former commissioners accountable for their misuse of homelessness funds, I have made some enemies. The author of the document the interim board sent to the state bar is apparently is one of them.

“I did nothing unethical, dishonest or improper in my handling of any of the issues surrounding the homelessness matter or the claims made by the former auditor, Tim Gray. The interim board decided to pay his claim because it was the right thing to do.

“To respond to the bar grievance, I hired an attorney in Seattle who has filed my response with the state bar. I choose not to comment on the substance of the grievance at this time because I believe it is best to allow the state bar to follow their process.

“If I have done something unethical, they will address it. If not, they will dismiss it. I am confident they will reach the conclusion that the grievance is groundless.”
Findings of Report

Williams, who was paid $2,528 for his work, recommended the complaint be filed with the Bar out of the belief that the actions taken by Rasmussen to assist Gray were “illegal.”
In his report, Williams laid out the following timeline for what happened:

On Dec. 28, 2018, Commissioners McCart, Parker and Dashiell were presented with financial vouchers to sign. In the stack given to Dashiell was a voucher to reimburse Gray. Attached to the voucher was a letter to Kim Pietroburgo, insurance fund manager, and Moffitt, stating that two checks had been deposited in the Insurance Services Fund, and a letter from Gray to Rasmussen referring to an IRS notice where Stevens County was being assessed $27,470 from September 2016 and January 2017 for late federal deposits.

The letter stated that the funds had been paid from Gray’s mother’s bank account through a secure access portal that was used for all county federal deposits. The letter asked Rasmussen how Gray could get the funds returned to him. Williams noted in his report that Dashiell thought the voucher “seemed very odd and unusual,” so he showed it to McCart and they determined the voucher did not have the proper audit trail, that documents were missing. They also noted that the commission, which has legislative authority, had never been informed about any late IRS payroll deposits or the subsequent penalties and interest.
So, they pulled the voucher for further investigation to determine whether it was a valid claim.

“We found the attempted payment tucked into a batch of 200 or so normal bills that were delivered to our office on the last working day of the year,” recalled Parker.

“The request was so startling with no explanation attached that it was pulled and payment refused until we were given a complete paper trail to show conclusively that it was proper. Tim Gray was immediately notified that we were stopping payment and Tim Rasmussen shortly thereafter.

“We also immediately contacted the state auditor’s office and gave them full disclosure. The auditor saw serious ethical violations on the part of Tim Gray and Tim Rasmussen and promised to report it, and we determined to also investigate at our end.

“Many may wonder if our action influenced the prosecutor in the way he purposed to punish us for our mistake in procedure regarding the homeless fund since he went to such questionable lengths to cover up the facts for Mr. Gray. I cannot give a definitive answer to that question.”

McCart and Dashiell declined to comment on the issues involved in the bar complaint. After the voucher was pulled in December 2018, McCart notified Larsen on her first day in office about the situation and asked her to gather information. Moffitt came to the commissioners’ office a few days later and McCart noted in Williams’ report that the risk manager “appeared very upset.” Moffitt reportedly said that a voucher had never been pulled in all the years he had worked at the county. McCart replied that it was the responsibility of the commission to look into the matter.

Background Info

On Jan. 3, 2019, McCart met with Valz to learn what she knew of the situation. She explained that Nick Force, chief civil deputy prosecutor, had asked her to come and speak with Rasmussen in his office on Dec. 24, 2018. She arrived to find Moffitt also present.

Rasmussen then allegedly updated Valz on the situation. She told Williams that her advice to Rasmussen was that he contact the state auditor to find out what should be done about the situation.
She said Rasmussen then stated that he was going to ask Moffitt and Pietroburgo for a voucher to reimburse Gray for the funds he had expended.

“I asked Jim Moffitt how that would even be possible since the insurance service funds had nothing to do with the IRS and both Mr. Rasmussen and Mr. Moffitt argued with me,” Valz is recorded by Williams as saying before she left the meeting.

Valz said, on Dec. 28, 2018, she had gone to Gray’s office to retrieve his keys as it was his last working day in office. He asked if she knew about the IRS situation and she replied that she had some knowledge.

“Tim Gray went on over the next hour to describe to me how he had begun paying the IRS late over the course of about a year and a half,” reads Valz’ statement to Williams.

“He would typically contact them and they would remove the finds. He said that this went on for a number of months and, at one point, he had overpaid via a severance check that he had paid out to one individual and had over-reported the amount of withholding and remitted that incorrect amount.

“The IRS then drew down this amount to pay Stevens County’s penalties and interest. I was not following Mr. Gray as he explained what had happened with the account in 2017. He indicated that he had changed a 941 form to remit to the IRS to try to adjust the amount of fines and penalties that we would continue to accrue as he attempted to straighten it out.

“He indicated over one weekend that he went home and opened another IRS account through Key Bank using his personal bank account and transferred the money to the IRS of $27,000.”
‘Crossroads’

After the voucher was pulled, Sue Harnasch, former human services director for the county, contacted an IRS agent to get information about what had happened with Gray’s payment.
Williams reported that the agent told Harnasch that Gray blamed the late deposits on the county commissioners because they had refused to provide him with adequate staffing so he could not get the job done correctly.

“In investigating this transaction, the 941 quarterly returns, deposit information, and other documentation were missing and multiple errors and late payment, penalties and interest payments were accruing,” wrote Williams.

He noted that the commissioners sent a letter to Gray after he had left office asking for further information about the situation, or the whereabouts of all the missing documentation, but he did not provide them with anything.

At this point, Williams said that McCart expressed feeling that the commission was “at a crossroads.” A fraud complaint about the situation had already been filed by a county official with the state auditor’s office.
McCart was also concerned, said Williams, with seeking legal advice from the prosecutor’s office due to an apparent conflict of interest created by Rasmussen and Force’s involvement in the matter. McCart decided to file a fraud complaint with the state auditor’s office. The commission also decided to write a letter to Rasmussen asking for a conflict attorney to consult with on the matter. Although McCart was advised by the state Attorney General’s Office to also file a bar complaint on Rasmussen and Force, he did not do so, according to Williams’ report.

Rasmussen assigned Denis Tracy, prosecutor for Whitman County, as conflict council, said Williams.

In an email to the commissioners, Williams said Rasmussen told the three elected officials that they should have asked him about the situation and he would have advised them to make the payment to Gray.
Williams then gave this opinion in his report: “Since the commissioners were not assigned an attorney outside the prosecutor’s office, it seems that Mr. Rasmussen’s unsolicited opinion was imprudent under the circumstances. The issue was not as simple as unjust enrichment and Mr. Gray trying to do the right thing. It involved his inappropriate actions to rectify his lack of action, which justified investigation.”

After Tracy advised the commission via a letter to contact Gray and try to obtain the appropriate tracking materials, Rasmussen told the commissioners that he had assigned Tracy only to give them a second opinion, which was in direct contradiction to their request for a conflict attorney, noted Williams.

State view refuted

As auditor, Larsen searched through all of the papers that she could locate to create a paper trail about the payment, but could not find several documents, said Williams. She asked the commission for permission to hire a forensic accountant to create an audit trail, which they approved. The cost for that work was $8,500. Among other things, Larsen wanted the investigation to cover Gray’s online submission of a 2018 excise tax form on Jan. 17, 2019, when he was no longer auditor. He sent that form from a non-auditor office computer.

According to Williams, Larsen later learned that the accounting system was being hand manipulated every month to change numbers as it went from payroll to accounting. There was no documentation or audit trail of these transactions, so no one knew if anything was hidden or distributed differently.

The state concluded on June 2, 2020, that, although Gray’s transaction was not handled appropriately, it did not identify a loss of public funds. Williams referred to that conclusion as “utterly useless.” He then gave an analysis of the situation centered on state law that outlined how financial transactions needed to be handled and stated that any report of potential wrongdoing should be submitted to the attorney general.

“It shall be unlawful for any local government or the responsible head thereof, to make a settlement or compromise of any claim arising out of such malfeasance, misfeasance, or nonfeasance, or any action commenced therefor, or for any court to enter upon any compromise or settlement of such action, without the written approval and consent of the attorney general and the state auditor,” states RCW.43.09.260.

Williams said his investigation concluded that Gray had performed his lawful duty in an improper manner, and had performed an unlawful act by submitting the excise tax form when he was no longer the auditor.

He said Gray’s payment of taxes from his personal funds was also an unlawful act and an unlawful gift to the county. In addition, he said that the actions of Rasmussen, Force and Moffitt created a conflict of interest situation that had resulted in the need to hire Tracy and himself.

“The prosecutor should have been advising the commissioners that the county had a duty to investigate Mr. Gray’s mis and malfeasance prior to settling his unjust enrichment claim,” concluded Williams.
Parker summarized by saying, “We commissioners were never notified that Tim Gray and Tim Rasmussen had dreamed up a ploy to cash two checks made out to Stevens County and then issue a personal check back to Tim Gray for that same amount.

“We missed payment deadlines. We should have been notified because the commissioners are the financial authorization for county expenses and required to sign off on all expenses under penalty of perjury.”

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