A Federal Case?
Will the feds investigate Deedee for potential fraud in Giftgate?
By Lynn Packer
OCTOBER 27, 1997: Anita DeFrantz lets out a loud, hearty laugh. Her chuckles come bellowing over the phone in response to Utah's multi-million dollar question: "Who picks up the tab if the Winter Olympics lose money in 2002?"
"I don't know," replies DeFrantz, vice president of the International Olympic Committee, "I just know it's not going to be the IOC."
DeFrantz isn't the only member of the Salt Lake Organizing Committee (SLOC) who can't provide a clear answer to what many Utahns consider a simple question: Who pays the piper if the Games follow in the footsteps of past Winter Olympics and wind up in the red? Who's on the hook, the private business interests profiting from the Games or the taxpaying public, who organizers promised would not get left holding the bag?
"That's a good question," says fellow IOC member George Killian, who doesn't venture a guess but instead presses for public confidence in the new, improved SLOC.
Since the summer, this group has tried to fold itself into a full-tuck position and race away from the recent past. After former SLOC President Tom Welch pleaded guilty to a domestic violence charge, the Olympic flame dimmed amid a volley of bad press. Questions about public oversight, conflicts of interest among board members and liability for any Olympic debt were raised but never fully answered. Today, Gov. Mike Leavitt and most SLOC board members hope to move beyond all the negative talk about Utah's Games and re-ignite the state's Olympic spirit.
But at the same time that SLOC claims to have made a fresh start, it also insists that nothing's gone sour except Tom Welch's marriage and the Olympics' public image. The SLOC has a new president, a new board chairman and a new state Olympic coordinator, but no new answers to several old questions.
BOOK OF PROMISES
"The state is like the insurance for the Olympics," bemoans Salt Lake City Councilwoman Deeda Seed. Like others keeping tabs on SLOC business, Seed knows what can happen when Winter Olympics don't go as planned.
Whether it's the 1960 Winter Games in Squaw Valley, the 1988 events in Calgary or the competition set for Nagano, Japan in February, the Winter Olympics have depended on public subsidies to help cover runaway budgets. Ballooning cost estimates plagued the proposed 1976 Olympics in Denver. Colorado voters eventually passed a referendum to prevent organizers from spending public funds. At the time, then-State Rep. Richard Lamm described the Winter Olympics as "rich-men's games paid for with poor-men's taxes." Lamm went on to become Colorado's governor.
That's how Salt Lake City Attorney Roger Cutler reads the shifting landscape of Olympic lending agreements and legalese. From Cutler's point of view, SLOC's budget has a $99 million back-up in case its balance sheet doesn't balance.
"Before the state gets involved, they'll use that up," says Cutler, explaining how Gov. Leavitt believes Utah has a "moral obligation" to cover any excess expense left over after 2002.
Organizers and those counting on that $40 million legacy fund don't share Cutler's take on Olympic contracts. Randy Montgomery with the Utah Sports Authority says that out of the $555 million in broadcast fees due to be paid by NBC Sports, Utah taxpayers will automatically receive $99 million $59 million to cover the public's investment and $40 million to feed the "legacy fund" for winter sports.
Like a growing number of legislators, Rep. David Ure wants to make sure taxpayers recoup their costs and the Games leave a positive financial legacy. That's why Ure says he's been pushing for greater public oversight of Olympic business.
The dairy farmer from Kamas recalls how early on in the Olympic effort the public was granted a "Book of Promises" that pledged to protect taxpayers from any Olympic-related expense. But now, says Ure, "With virtually everything in the Book of Promises, the SLOC has said 'Go to heck on.' If the Olympics lose money, it becomes taxpayer money."
Ure emphasizes his wish "not to tear down the Games" but simply make sure the state isn't saddled with any cost over-runs. Networking with certain Olympic organizers and fellow lawmakers, Ure has begun to push for a state audit of SLOC's books.
The legislator says he became concerned when SLOC President Frank Joklik told reporters he couldn't make promises about the Games finishing on budget.
"There was some long thinking that went on before he made it public," says Ure.
Joklik has since changed his tune and offered nothing but optimistic forecasts for SLOC's financial future. "It's all about marketing," explains one organizer, and with the recent appointment of Bob Garff as chairman of the SLOC board, Utah's Olympic stock has risen.
Garff, a former Speaker of the House, also has ties to big business and the Mormon Church. The owner of several car dealerships, Garff has distinguished himself in civic circles and commands a lot of respect, much like Joklik and other members of the SLOC board.
In addition to Garff, Gov. Leavitt also appointed John Fowler to act as the state's Olympic coordinator. The first candidate for this public watchdog seat quit before he even started. Bountiful city manager Tom Hardy walked away from the job after accusing Joklik of closing the boardroom door on state oversight.
Hardy's immediate resignation came on heels of chief financial officer Gordon Crabtree's farewell and raised suspicions about SLOC finances. When the board met on Oct. 9, those concerns were supposedly put to rest as organizers huddled for the first time with new state coordinator Fowler and Garff. During the meeting, board members were told that an internal audit had revealed no irregularities during the past few tumultuous months.
After sharing that good news in a room packed full of reporters, the board welcomed Gov. Leavitt to the meeting. Leavitt had just come from delivering a state-wide radio address aimed at restoring the public's confidence in "our Games."
"It was to call for a lengthy period of calm," explained Leavitt, as he described his radio address to the board. Noting the recent appointments of Garff and Fowler, the governor hoped the two new SLOC members would help provide "an opportunity for renewal to unite our citizens."
Pomp and circumstance aside, there remains a clear lack of unity in how different groups interpret an agreement signed in 1991 by then-Gov. Norm Bangerter. The contract directs the state to indemnify or insure Salt Lake City against a loss if there are unpaid bills left once the games have come and gone.
However, Rep. Ure and others believe it's unconstitutional for Utah to indemnify any of its cities and worries that, "Legally, the state is off the hook and Salt Lake City's got it all. But morally, we've got to pick up the tab."
Another elusive answer to the "who owes?" question also appears buried in a recently-released audit report of SLOC business.
"The Organizing Committee has agreed to indemnify and hold harmless Salt Lake City, the State of Utah and the (Utah Sports) Authority from any and all liability and loss associated with the Games," reads the audit, as if to say, "Don't worry, SLOC will settle any lingering bills."
Such a clause might be reassuring if it meant taxpayers were off the hook. Instead, by promising to insure itself, organizers have presented the public with what Ure calls "a shell game."
If the Olympics happen to finish up over budget, then organizers might not have the resources to honor their own indemnity agreement.
"It might be that they won't have any money to back it up," says SLOC board member Henry Marsh, who wonders if, "the state will still have a financial liability."
If the state stands to lose any money on the Olympics, then several lawmakers want to know what's going on with SLOC's day-to-day business. As part of a larger effort to remake the Olympic's public image, Joklik recognized the Legislature's concerns when he appeared before the state's Sports Oversight Committee.
Mixed in with Joklik's reassurances and happy chat, Rep. Jordan Tanner interjected a few biting comments and observations. The Republican from Provo told Joklik, "There's got to be a huge amount of fence-mending done to bring the people of the state back in support."
Tanner also recounted a harsh conversation he had at a recent dinner party.
"I was frankly taken aback by some of the comments," Tanner told Joklik, describing the "outright hostility" some voiced toward Olympic organizers.
The hearing went on to mention concerns about high salaries collected by SLOC staff and the need to clarify how and when the state will be repaid for its cash investment and municipal services.
Joklik responded by promising to foster a renewed partnership between the private and public interests organizing the games. However, the SLOC president's cooperative tone in front of lawmakers contrasted starkly with gripes voiced by SLOC board member Jim Easton.
The same day Joklik tried to make nice with Utah politicians, Easton responded to questions about Olympic business with stern words for the public sector.
"I'll tell you what the story is," remarked Easton in an interview with City Weekly, "It's the huge conflict of interest with politicians trying to get into positions of power."
Easton says the concerns raised over conflicts of interest between board members and SLOC are "penny-ante bullshit" and that the public should be worried about politicians "trying to 'snork' in and pork barrel."
At the Summer Games in Atlanta, says Easton, the only real failures could be linked to local government. Along with others on the SLOC board, he believes, "You've got to keep these things as business-like as possible" and keep out those who are "circling this thing, like it's their lunch for the future."
Lawmakers may be keeping a closer eye on the SLOC's finances, but that's because many have heard an earful from their constituents.
"The power of the public outcry has been heard down to everybody's tippy toes," says one organizer, who worries about Olympic business being done in the back room, without regard to taxpayers. "There is still a group of people who think this is a private affair and the public is just a creditor."
Between Olympic organizers and the individual cities and towns that have invested in Utah's Games stands Ken Bullock. As executive director of the Utah League of Cities and Towns, Bullock has kept tabs on the exact investment made by each community.
Little hamlets like Snowville, for example, have forked over about $4,700, while Salt Lake City has put up $5.1 million. That's no small change, especially if additional costs get tacked on later when the Olympics require municipal services like traffic control and security.
"The communities throughout the state are not getting back their original investment," says Bullock, unafraid of locking horns with other SLOC board members.
"He will challenge anything he thinks might not be good judgment," says Dick Shultz, executive director of the U.S. Olympic Committee. Shultz has seen Bullock pick apart the SLOC's budget line by line and question certain expenditures.
When Bullock noticed a paltry $12,000 slated for "Youth Programs," he began to question SLOC priorities. Funds for travel and entertaining Olympic dignitaries commanded massive sums, while programs benefiting local kids only got peanuts.
Bullock started attending executive committee meetings in an effort to leverage his pro-community agenda. He also teamed up with fellow board member Randy Dryer, who runs the Utah Sports Authority.
Both zeroed in on just a tiny portion of SLOC's budget, and this year, after "scratching and biting," as one observer puts it, the two managed to boost the original $12,000 for youth programs to $350,000.
"He is the hero to the programs because Ken Bullock has determined on his own that SLOC should be involved," says fellow organizer Bob Bills. The manager of the Oquirrh Park Speed Skating Oval, Bills shares Bullock's goal of seeding Utah's Olympic legacy in the state's youth.
And now, thanks in part to sponsorship money from Seiko, Bills plans set up coaching programs, competitions and facilities that keep on giving after the games have gone. He also believes that under Frank Joklik's leadership, SLOC will do what it can to support local athletes.
"The board members have an opportunity to really affect the future," says Bills, as he passionately explains the benefits of funding "a fully developed" speed skating center at Oquirrh Park. "If they don't develop a facility that will be used by the athletes, they will create a white elephant."
When asked about boosting the SLOC's youth programs budget and finishing work on the skating oval, Joklik appeared anxious about the bottom line.
"We have nothing in our budget for developing athletes," he said, stressing how, "We've got to get into this. It's an issue that hasn't been properly addressed."
At 69, the regal, Austrian-accented Joklik remains an avid skier. He's known to frequent Snowbird's backcountry, and those who ski with him say Joklik genuinely wants to see more SLOC support for youth and sports programs.
And if speed skating and other sports opportunities for kids also generates reams of positive press, then that would also please Joklik. At the beginning of a recent board meeting, Joklik reported there'd been "good progress with the daily news and the press." He recalled his visit with the Sports Oversight Committee and said he hoped to "reduce the impression" that Olympic organizers only go to the Legislature when they're in trouble and need something.
"They're seeing all that has happened as a perception problem," says Glenn Bailey with a coalition of groups called Impact 2002 and Beyond. The collection of community organizations continue to engage Joklik, discussing different ways the organizers can provide a positive return on the public's investment in the Olympics.
"We need a legacy that does more than provide arcane sports venues," says Bailey. "If that's the only Olympic legacy, then that's not much in return. That's not much of a public benefit. You can argue that there's going to be tremendous private benefit. And that some of those who do benefit privately will do so through their seats on the SLOC board."
Keeping an eye on SLOC's every move, Impact 2002 continues to raise questions about conflicts of interest between certain board members. It's a sore point for some involved with the SLOC, who say "we get beat up because there's a perception that trustees are scratching each other's backs and padding each other's pockets."
Impact 2002 certainly shares that perception. It's requested an ethics review of the lucrative severance package given to Tom Welch and a multi-million dollar deal involving SLOC board member Earl Holding. These and other items of SLOC business have become infamous for raising eyebrows and provoking negative press.
Impact 2002's Bailey says non-profit groups like SLOC should "scrupulously avoid any appearance of a conflict of interest" and in no way offer opportunities for its members to profit.
Bailey doubts that any evidence of insider dealing will surface from the pending SLOC ethics review. "It's a dodge that they come in and out of," says Bailey, describing how SLOC wavers between being both a public and a private group. "They're public when they need our help, and they're private when you ask questions."
For Bailey and Claire Geddes, a watchdog for all seasons who works with United We Stand America, there remains a long list of unanswered questions about connections between board members and SLOC business. Starting at the top, Geddes points out Joklik's connection to Park City Mountain Resort. Joklik is the president of MK Gold and MK Gold is owned by the same parent company that owns Park City. Because the SLOC board makes financial decisions that have an impact on the resort, Geddes wonders if someone less connected would make a better committee president.
"I can't believe everybody has something to do with a ski resort," says Geddes, who characterizes board members as "all intertwined together."
A money trail from First Security bank forms another common link between the organizing board and Olympic business. First Security owns Anderson Lumber, and according sources inside SLOC, probably owns the vote of board member James Beardall, president of Anderson Lumber. "If [First Security CEO] Spence Eccles says vote one way, Jim's going to say 'Yes sir,'" says one board member, while another organizer calls the insiders at SLOC "an old man's club."
Four of those "old" men sit on First Security's board of directors, which also controls SLOC's line of credit. That cash flow in turn goes to big contractors like Layton Construction. Along with Earl Holding, Alan Layton's role as both a board member and contractor with SLOC has already drawn scrutiny in the press.
So far, Alan Layton's company has remodeled the SLOC offices and is currently constructing a colossal addition to Rice Stadium at the University of Utah. Layton Construction also remains in the running to build the athlete's village at the U. of U. Like other board members, the contractor must excuse himself from any official discussion that may impact his company's bottom line.
"My attitude is disclosure is the best policy," says Nolan Karras, a former state representative appointed to the SLOC board by Gov. Leavitt. It was Karras who insisted SLOC organizers install a regulated procurement process in order to avoid the appearance of inside dealing. The private financial consultant was also a candidate for the chairman's job, but apparently threatened those uneasy with full disclosure of Olympic business.
Karras says SLOC's decisions will always be open for challenge, and when it comes to the committee's budget, "I think it will take Solomon to know how to cut the baby up."
In small, tightly knit places like Utah, it doesn't disturb Karras to see local institutions like First Security getting a big piece of the action. Karras says he has great respect for his fellow board members and thinks creating a connection-free SLOC would be next to impossible. "You'd have to have someone from Mother Teresa's convent come over and serve."
The 40-person SLOC board draws representatives from the U.S. Olympic Committee, the International Olympic Committee, government, civic groups and private business. There are also former Olympic athletes on the board, and connections between members cast an interesting web of social, professional and athletic ties.
Board member Maria Garciaz had no ties to the SLOC board and it took nine months of lobbying before organizers opened a seat for her. Garciaz works as executive director of Salt Lake City's Neighborhood Housing Services. For Bailey's Impact 2002 coalition, Garciaz's place on the board provides a contact inside SLOC. Bailey says Garciaz offers a positive perspective because she's interested in community development and "not another rich, white male."
When the SLOC contracts to build housing for visiting members of the media, Garciaz will push for a plan to turn that space into affordable homes for Salt Lake City's low-income residents.
These are the Utahns found at the bottom of the Olympic totem pole. Their sales tax went to fund the state's investment in the 2002 Games, but few will be able to afford tickets to the events.
No matter, insists Gov. Leavitt, who gushed on during his recent radio address about how the state expects "to receive in excess of $30 million just in taxes from those who visit the Olympics. The additional money will be used to pay for schools, roads and to help the poor."
These are the pre-Tom Welch Olympics the mom, America and apple-pie Olympics. Before Welch was arrested for assaulting his wife, this is how the press often portrayed Utah's Games. Now that organizers have weathered several months of bad publicity, this is the only public image the governor and other boosters want to promote.
Under the surface of SLOC's revived Olympic fanfare, however, observers like Rep. Ure and Impact 2002 continue to scratch at several big questions. Ure says he hopes to clarify the cloudy issue of indemnification of who owes what if the Games run a debt.
Likewise, Impact 2002 eagerly awaits the results of the pending ethics review of how organizers cut deals between themselves. Either outcome could add a positive wrinkle to the Olympic's fresh, new face. Then again, the results could also prove that nothing's really changed.
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