116 3rd St SE
Cedar Rapids, Iowa 52401
Before they divulge to the state auditor secret records involved in a huge $1.165 billion public-private partnership at the University of Iowa, attorneys for the Board of Regents this week sought cover from the Iowa Supreme Court.
'Once you have a subpoena in hand that says, ‘Yes, this is an audit and the auditor gets the confidential information,' then the risk shifts from agency to auditor,” Iowa Solicitor General Jeffrey Thompson, representing the regents, told the high court during an appeal of a lower-court ruling compelling the UI to hand over details of the massive deal - including names of investors that have been kept private.
'It's still risk that the state has,” Thompson said. 'And disclosure can cause issues.”
Justice Christopher McDonald asked why that's a preeminent issue for the board and the UI.
'Your client's statutory duty is to comply and provide the information,” McDonald said. 'Now whether or not your client believes that the auditor has too many press conferences and does too many reports and leaks information is not a statutory ground to fail to give information.”
'I totally agree,” Thompson said - something he did often during the hearing when questions from the justices seemed to poke holes in the UI argument against its comply with Auditor Rob Sand's subpoena.
The auditor has been asking for broad swaths of information 'relating to bidding and conflicts-of-interest” behind the public-private deal for operating UI utilities, approved by the regents in December 2019 and closed in March 2020.
During the hearing, Thompson indicated the regents have complied with the subpoena and only appealed to set the record straight and because of the precedent lower court decisions in this case might set.
'They are willing to comply. In fact they have complied,” he said.
'But at this point,” he continued, 'what we're asking the court to clarify is this idea that an email to a board member is enough notice to begin an audit?”
Sonya Heitshusen, an auditor's office spokeswoman, told The Gazette that neither the regents, the UI or its partners have complied with the subpoena 'while the case has been on appeal.”
The university and regents, via Thompson, argued before the court this week they're confused about whether they're protected in providing confidential information, worried about liability and aren't clear if the auditor's subpoena was legally sound.
'The factual record here creates doubt in the mind of the recipient and person trying to decide what they need to do to comply,” Thompson said. 'And the lack of clarity and the confusing signals puts an agency in a position of trying to understand what their legal obligations are.”
Thompson said the board needs to know when an audit begins and ends to comply with a subpoena. He said his clients need to know if the records are for an audit or an examination to ensure they're legally covered in turning over private information. He indicated the board didn't have all the records Sand wanted.
And he suggested the board couldn't provide the documents because the deal wasn't closed.
'Let's assume that the transaction had been completed and, independent of the fiscal year audit, the auditor just said, ‘I'm interested in auditing this particular transaction or conducting an examination,'” Justice Matthew McDermott said. 'Would that have been permissible?”
'Yes,” Thompson said, jumping back to the question of whether Sand was conducting an audit or an examination and suggesting the answer determined whether the board could comply.
Justice Susan Christensen, though, questioned that theory - that Sand had to have officially started an audit and mapped out a scope to request documents.
'This whole thing started with your client going to the auditor and saying, ‘Hey, we got this thing cooking,'” she said. 'And so then, not surprisingly - it's probably one of the biggest financial deals ever in the state - the auditor turns around and says, ‘I've got a few more questions for you.'
'If we would accept your argument, why wouldn't all state agencies orchestrate transactions to keep the auditor out of their biz?”
Thompson said that's not what happened here, and his client has confidentiality obligations to worry about - even as Justice McDermott noted Iowa Code 'says the auditor of state shall annually and more often if deemed necessary audit the state and departments.”
'Would it be permissible for the auditor here to deem it necessary to audit this particular transaction?” McDermott asked.
'Yes,” Thompson said, but added, 'This transaction had not occurred yet, and much of the information that they were seeking literally didn't exist. There were no investors that had been selected by the private partner.”
Christensen called Thompson out on that answer - citing a document the UI issued in December 2019 reporting that 21.5 percent of the new utility collaborative's private placement financing came from Iowa-based investors.
'You've got to know something,” she said, adding, 'No matter if it's called an evaluation or an audit or whatever during this fiscal year or that fiscal year, it seems to be undisputed that they're entitled to it.”
To the point of confidentiality, Christensen seemed to ask why the board sees itself as the decider of what gets released to the public.
'I can see everybody wanting to hold back - nobody likes the idea to have confidential documents handed over,” she said. 'But are you the one who gets to decide whether you even hand it over?”
Justice McDonald noted earlier court orders could protect the board and the UI from liability.
'Don't those risks and concerns go away when there's order enforcing a subpoena, and a declaration that there's an audit?”
'Yes,” Thompson said.
'So I understand your client's concern about confidentiality,” McDonald said. 'But at this point, it seems like their duty of being transparent and complying with the statute resolves that.
'They have cover, so to speak.”
'Absolutely,” Thompson said, noting the need for a high court ruling for the 'factual record.”
Justice questions of Sand's attorney, John McCormally, involved the breadth of the auditor's request and assertion of power.
'I mean, you basically say that the auditor is entitled to any information in the possession of any state agency at any time,” Justice Edward Mansfield said.
In the midst of the court's questioning of McCormally, however, the livestream system - the only record of the hearing - froze and the courts' technical crew 'could not restart without losing the video,” according to Steve Davis, spokesman for the Iowa Judicial Branch.
He said the glitch lost five to 10 minutes of Sand's office response and another five minutes of the regents' rebuttal.
'There is not an official record for Supreme Court oral arguments, so I do not have a summary,” he said. 'Unfortunately, the first time it failed was during a case of great public interest.”