Aspen School District loan for $30k tied up in bankruptcy court
While the Aspen School District has parted ways with a human resources director because of her questionable past, there is still a matter to settle in court.
On Jan. 10, an attorney for the tax-supported School District filed a proof of claim in the personal bankruptcy case of Elizabeth Hodges for a $30,000 loan the district provided her March 15, 2017. Hodges received the money as part of the district’s employee-housing loan program.
The loan, however, will not receive high repayment priority from the U.S. Bankruptcy Court in Denver because of the School District’s failure to file a deed of trust — similar to a mortgage in Colorado — in the Garfield Clerk and Recorder’s Office, which holds jurisdiction over property records where Hodges’ Carbondale home is located.
Due to that oversight, the bankruptcy court considers the Hodges loan an unsecured debt because her property was not used as collateral. Similar to a property lien, had a deed of trust been filed, the loan would be secured.
“At the time the loan was made and processed in the District, the promissory note was signed but we later discovered that the District’s standard deed of trust form was inadvertently not signed,” Superintendent John Maloy said in an email to The Aspen Times, which contacted both Maloy and the district’s attorney on the matter, William Ahlstrand of Boulder. “Since it was unsigned, it could not be recorded, which is why our claim is unsecured. Nevertheless, Ms. Hodges has verbally told us that she fully intends to repay the loan.”
The school district discovered the oversight in November as part of a renewed background check into Hodges, Maloy said. The responsibility of filing a deed of trust belongs to the district’s Financial Department and chief financial officer, Maloy said, adding the same oversight hasn’t been made with previous home loans to staff members.
The Board of Education was made aware of the lapse in November, said board President Dwayne Romero.
“I can say the board was extremely disappointed upon finding out this information, and the board had a direct conversation with the superintendent on this error,” he said. “And the board sees it as an open case. It’s now caught up in the bankruptcy proceeding, so the final outcome is in front (of) us, and we are in a stay-tuned posture.”
The board is looking at measures to prevent another such oversight, according to Romero.
“When we’re dealing with the district’s resources, and in this case, the district’s money and therefore the community’s funds, there may be some ways to ensure that these types of mistakes, which become potentially very material, don’t happen,” he said. “It would be under the category of enhanced checks and balances, so that no one particular human mistake can cause material loss.”
Ultimately the responsibility should fall with the superintendent in the future, Romero said
“The board works with the superintendent, so any adjustments or improvements in the process, the board would have to look to the superintendent to take responsibility for it,” he said.
Hodges’ Grand Junction attorney representing her in the bankruptcy case, Phillip Jones, did not return a telephone message Thursday. Jared Walters of Eagle, the trustee overseeing Hodges’ finances in the bankruptcy, declined comment, saying the case’s file speaks for itself.
The bankruptcy lists another home loan Hodges received — on March 3, 2017 — as $530,000 and secured.
Ownership of the property Hodges used to secure the school district loan is a point of contention in the Chapter 7 case, where Walters has taken adversary actions against Hodges and her wife, Nicole. In June, Walters filed an adversary case claiming Elizabeth Hodges concealed assets by fraudulently transferring 50 percent ownership of her Carbondale home to her wife. The cases against both Hodges are pending.
Elizabeth Hodges, who became the district’s full-time human resources director in July 2016, resigned from the position Jan. 31 after being placed on administrative leave, with pay, Dec. 10.
The district launched a review of Hodges’ background near the beginning of the academic year, around late August or early September, after it learned in July through an anonymous letter that the state of Missouri disbarred Hodges in April.
Additionally, Hodges pleaded guilty to one misdemeanor count of deceptive business practices in December 2016, following a Kansas City, Missouri, grand jury’s indictment for felony forgery May 2016.
The disbarment and conviction were a result of Hodges’ selling a deceased couple’s Kia Soul to a dealership without reporting proceeds of the sale in their probate case. As an attorney, Hodges helped the couple with their estate planning.
Hodges declared Chapter 7 bankruptcy in February 2018, listing a $1.1 million court judgment as her largest debt. That judgment was the result of a lawsuit the couple’s survivors filed against Hodges over her estate planning.
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State department of transportation crews are well on their way to clearing Highway 82 to Independence Pass, which should open on schedule May 27 at noon.