By Katie Kerwin McCrimmon

Managers at Connect for Health Colorado have used taxpayer dollars to pay several private lawyers fees as high as $575 an hour for legal work for the exchange.

The exchange hired one of the lawyers, Mark Grueskin, to do research on a potential audit of the exchange. Grueskin testified in the Colorado Senate on Wednesday that the state auditor has no right under Colorado law to conduct a comprehensive audit on the taxpayer-funded exchange.

Senate Democrats then voted to kill a bill that would have allowed a far-reaching audit. Republicans reacted with fury to the vote since the bill had emerged with bipartisan support from the audit committee and had passed the House with nearly unanimous support.

Republicans were irate to learn that along with other potentially questionable spending, the exchange had hired a lawyer who helped quash the audit.

“It raises more concerns now that they have killed that measure,” said Rep. Dan Nordberg, R-Colorado Springs, who had sponsored the audit measure in the House.

“We have no clue where this money is being spent or how it’s being spent. If this (exchange) is going to be the vehicle that’s being used for Coloradans to get their health insurance, we need to be sure that taxpayer money is being put to good use.”

Nordberg said the vote in the Senate Health committee on Wednesday was “absolutely shocking.”

“This measures passed the House by a vote of 60 to 1, then it dies in the Senate Health Committee? What do the Senate Health Committee Democrats know that the rest of us don’t? What are they trying to hide?”

Sen. Irene Aguilar, D-Denver, who chairs the Senate Health and Human Services Committee and voted against the audit bill, was unavailable to comment early Thursday on the legal fees.

Health News Colorado late Wednesday obtained records through the Colorado Open Records Act related to the exchange’s spending on private lawyers.

Managers say they have hired nine private attorneys between 2012 and mid-March of this year. They say they have paid between $225 and $575 per hour for the lawyers, although one contract with Hogan Lovells would allow fees as high as $825 an hour. Exchange officials said that was boilerplate language and that they have not paid fees that high.

So far, over the past two years lawyers from various firms have racked up fees of $318,931.57, exchange officials said. Taxpayers have paid 100 percent of the cost for these legal fees. The exchange thus far has been funded through $177 million in federal grants along with some state funds from Cover Colorado, the now defunct fund that used to cover people who could not get health insurance.

The attorneys that the exchange has used are Marty Barrack, Barbara Crawford, Beth Roberts, Marianne Hallinan, Katherine Keating, Jill Chalmers, Mark Grueskin, Kevin Paul and Gary Bacher.

Grueskin defended the choice to use outside lawyers.

“Governmental entities in a start-up mode need legal advice to get properly launched,” he said in an email response to questions. “I’ve advised clients about governmental audits and finance issues for years.

“At both legislative committee hearings on House Bill 14-1257 (in the House and Senate health committees), no one knew that current state law prohibits state audits where the federal government has already done such an audit — until I testified.  That kind of basic information is always helpful to government officials.’’

Connect for Health officials said they could not immediately answer exactly how much they were paying Grueskin since they had not yet finalized a contract with him. Grueskin also did not specify his fees.

Connect for Health spokeswoman Linda Kanamine said in a written statement Thursday that Connect for Health has hired outside attorneys to “interpret and follow the law.”

Exchange managers just posted a job for a general counsel. Kanamine said a staff attorney would help “meet organizational needs moving forward.”

Connect for Health is a public entity, but is not a state agency. State agencies use the Colorado Attorney General’s office for legal work. Attorney General John Suthers’ salary is $80,000 per year.

A spokeswoman from Suthers’ office, Carolyn Tyler, said Colorado’s exchange originally used lawyers from the Attorney General’s office and that Connect for Health is “eligible to use the legal services of the Attorney General’s office.”

Kanamine said the exchange board approved the decision to use outside lawyers.

“We appreciated the advice and counsel of the Attorney General’s Office early in our formation. Since Connect for Health Colorado is not a state agency, as we began building the Marketplace for Coloradans, with Board approval, we sought expertise across a wide range of issues to ensure we met the law and adhered to the complex regulations,” Kanamine said in a written statement.

Exchange board member Ellen Daehnick, who joined the board in July, said exchange managers did not tell board members that they had decided to hire a general counsel or explain why. And while she’s not an expert on legal issues, Daehnick wondered why the exchange had not used Suthers’ office.

“I think the AG would have been a really reasonable choice. There may have been good reasons to opt to use private counsel, but the AG’s office has a lot of experience,” Daehnick said.

She said the spending on private lawyers may be problematic.

“What value specifically tied to our mission did Connect for Health receive for those expenditures? Were we paying attorneys to reach and enroll more people, especially people who have had trouble getting health insurance? If we’ve spent that money to play defense or to discourage legislation that might shine a potentially critical light on Connect for Health operations, then I would find that troubling.”

Daehnick said she’s a lifelong Democrat who has supported President Obama and the Affordable Care Act. She’s also a small business owner and is concerned that the decision in the Senate will harm Democrats.

“I was surprised that it was killed in committee. The bill had passed with a lot of support. I think it’s a shortsighted decision that’s going to come back to haunt the Democrats in the next six to 12 months.”

Longtime Republican consultant Dick Wadhams also predicted that Democrats will suffer at the ballot box in November.

“There will be recourse in November. I think this kind of heavy-handed action — killing a bill that was passed by the House — will not go unnoticed by taxpayers,” Wadhams said.

“What does the Colorado health exchange have to hide? This notion that the exchange is not subject to a state audit means taxpayers have no access to what’s really going on in a state-funded entity,” Wadhams said.

“It just screams that something is wrong…We don’t know what this is (yet) but this is one of those instances. Where there’s smoke, there’s probably fire.”

Wadhams said he didn’t object specifically to the decision to hire outside lawyers.

“I personally don’t have any problem with them hiring high-priced lawyers,” he said.

What he objects to is attempts to “conceal what is going on.”

“They can hire as many lawyers as they want and try to justify that,” Wadhams said. “I think their mission ought to be opening up their records so the taxpayers know what they’re funding. That’s what they ought to be seeking and not concealment.”