• Original Reporting
  • On the Ground
  • Sources Cited
Original Reporting This article contains new, firsthand information uncovered by its reporter(s). This includes directly interviewing sources and research / analysis of primary source documents.
On the Ground Indicates that a Newsmaker/Newsmakers was/were physically present to report the article from some/all of the location(s) it concerns.
Sources Cited As a news piece, this article cites verifiable, third-party sources which have all been thoroughly fact-checked and deemed credible by the Newsroom in accordance with the Civil Constitution.
Colorado Department of Public Health and Environment Executive Director Jill Hunsaker Ryan speaks at a news conference on COVID-19, the coronavirus, on March 3, 2020. (Jesse Paul, The Colorado Sun)

Colorado’s top health official testified in Denver District Court this week that she failed to grasp the significance of a 2019 legal opinion that led to massive cuts in the state’s HIV prevention funding.

Jill Hunsaker Ryan, executive director of the Colorado Department of Public Health and the Environment, said she didn’t understand the implications of legal guidance from the state Attorney General’s Office that resulted in nearly $3 million in lost funding for prevention programs, angering HIV advocates. 

“I don’t know if I knew the implications it would have,” Hunsaker Ryan said. “I was nine months into my job so I didn’t grasp the full nuances.”

The admission came as part of a whistleblower lawsuit that says Hunsaker Ryan fired the state’s head of disease control, Tony Cappello, in the middle of the COVID-19 pandemic. Cappello says his firing was retaliation for disclosing financial mismanagement related to how the state was administering federal money aimed at helping people living with HIV and AIDS. 

The courtroom drama included testimony from Cappello that the state’s HIV office was running “shadow operations” as a way to dodge federal regulations, and tears from a former employee after reviewing text messages from the agency’s fired Chief Financial Officer, David Norris.

During her time on the stand, Hunsaker Ryan often appeared confused about questions at the heart of the case, namely how the state could lawfully spend supplemental drug rebate funding under the federal Ryan White HIV/AIDS program and the consequences that would have for local public health agencies.

Meanwhile, Cappello, the former head of the division of Disease Control and Public Health Response at the agency, testified earlier in the week about discovering “significant mismanagement” of finances at the division’s HIV branch within months of taking the reins. As he and the division’s finance and operations manager, Shannon Flowers, tried to learn more, he said they encountered stiff resistance from the branch’s leadership.

“Shadow Ops”

Flowers said HIV branch management was “incredibly hostile” and “very defensive” when “trying to get information or understanding out of their staff about the way things were operating.”

After one of the branch’s financial managers came forward in late 2017 to disclose shady practices, Cappello and Flowers worked to correct the financial troubles at the HIV branch. Cappello described the attempts to understand the problems and find solutions as an “ongoing” process.

“Almost every month we turned over another stone,” Cappello said. Fearing how deep the rabbit hole went, he said he requested an external audit of the HIV branch from agency leadership, but no external audit was done.

Cappello said he discovered that financial managers were running “shadow operations” within the division’s HIV office. Part of it meant branch financial managers held “very large” rebate checks on their desks “for weeks, months at a time” as a way to skirt federal regulations by delaying official recognition of the funding. 

He said there was “major concern” among HIV branch managers that the election of former President Donald Trump could mean cuts to HIV-related funding as well as the repeal of the Affordable Care Act, and so the HIV branch managers wanted to have a “slush fund on the side” for agency purposes.

Money used to “curb teen vaping”

Cappello said that the “shadow ops” resulted in a “significant amount of unspent funds in the program … creating a fiscal issue on the books.”

He and department leadership worked on a plan to spend that money, which ultimately included half a million dollars in funding for an anti-vaping program aimed at LGBTQ youth. Cappello said that was an idea from executive leadership as part of a way to “support (Gov. John Hickenlooper’s) executive order and CDPHE’s campaign to curb teen vaping.”

He said he relied on an internal legal review determining that the money could be spent with few restrictions, and that the agency had historically spent supplemental rebate money on things like prevention, outreach and education programs.

When he shared this spending plan with members of the state’s HIV advisory boards, some objected to the anti-vaping spending and didn’t trust the internal legal review, asking him to seek the opinion of the Attorney General’s Office, he said.

Cappello said he directed Flowers to do just that in May 2019.

Cappello said he sought a formal legal opinion on how the money could be spent but “was informed this didn’t rise to the level of a formal opinion.” Instead, he received an email from First Assistant Attorney General Jennifer Weaver advising that the agency should no longer use supplemental drug rebate dollars for anything other than helping people living with HIV and AIDS. 

But for years, Cappello said, the state was spending much of that rebate money on HIV prevention through pre-exposure prophylaxis (called PrEP). Cappello also said Weaver and the department’s top lawyer, Ann Hause, told him not to share the email with the public, though Hunsaker Ryan said she directed Cappello to share the document. 

The “perfect storm”

Cappello said he felt he had a duty to inform the advisory boards and the public about this new legal interpretation, which he did in a September 2019 memo explaining that guidance from the Attorney General’s Office was “more restrictive than previous interpretations,” and that spending the money on PrEP was no longer allowed.

He and his staff tried to figure out what the financial repercussions would be as a result of that guidance. By November 2019, he said a “perfect storm” of financial changes had formed to result in sizable cuts to prevention funding, including PrEP. One was the end of a large grant from the federal Centers for Disease Control and Prevention for prevention work. Another was the end of the one-time spending plan. 

But the most controversial change was the new legal interpretation from the Attorney General’s Office that money should only be spent to help people living with HIV and AIDS, not prevention. For contractors who turn that federal funding into work in the field — local public health agencies like Denver Health — that amounted to a loss of funding for more than $2 million in PrEP funding and more than $700,000 in HIV testing.

Cappello informed the HIV advisory groups of all of the changes in a November 2019 memo. But the matter blew up at the next meeting of the Colorado HIV Alliance for Prevention, Care and Treatment, a key advisory group.

Flowers said she knew “it wasn’t going to be an easy meeting and that Alliance members would be upset, but the level of hostility and aggression and the cursing and the banging on tables and things was really upsetting.” She said she was surprised by how department leadership, including Hunsaker Ryan, “so quickly threw everyone in the agency under the bus,” doing nothing to control the meeting.

The Alliance soon held an emergency meeting on the matter, and unanimously agreed to a vote of no confidence in Cappello and his deputy.

“There was cussing, there was aggressive behavior,” Cappello said. “It became very clear and evident there was an attack specifically on my team and myself.”

The Alliance presented Hunsaker Ryan with a list of “requirements,” including an audit of the HIV division, that Cappello said “felt like a reprimand,” but that Hunsaker Ryan ultimately submitted to.

Agency leadership soon removed Cappello from working on HIV branch issues, and did the same to Flowers. 

Hunsaker Ryan’s former deputy, Karin McGowan, testified that the former COO and current deputy, Mike Nugent, said Cappello’s “head would be on a platter” if he didn’t find a way to make up the lost funding elsewhere. 

Flowers in tears

The hearing included an emotional moment when Cappello’s lawyers showed Flowers screenshots of text messages sent from former CDPHE CFO David Norris to one of his former employees. 

Flowers had to wipe away tears to explain that the messages had been sent to a friend of hers inside the accounting department who forwarded them. 

The text messages were not read in court, and it is unclear what they contained. Flowers said “it validated and confirmed the way that he felt about me and the way that he spoke about me and other women.”

Flowers filed a formal complaint of a “hostile work environment” in December 2019 with the head of human resources at the department. Part of her complaint said Norris “continually called into question my skills and competence,” badmouthing her to his boss, his staff, her boss and department leadership.

Cappello said that Flowers had provided him the screenshots, which he then provided to the department’s deputy director of human resources.

Norris, who did not respond to requests for comment, was later fired from the agency, Flowers, Cappelo and Hunsaker Ryan all said. 

Hunsaker Ryan said she had relied on a financial report from Norris about the office as part of the reason why she “lost trust” in Cappello, but Flowers testified that there were serious problems with the conclusions of the report. She said that the prediction of a funding shortfall was massively overstated because it relied on data in the state’s accounting system that wasn’t properly tracking the HIV branch’s finances. 

Hunsaker Ryan said she didn’t know about problems between Flowers and Norris until the spring of 2020. 

Attorneys for Cappello noted that a subsequent internal audit that came out in April 2019 — which Hunsaker Ryan said she relied on in her decision to fire Cappello — had similar problems to Norris’ report. Auditors noted in their report that they were “unable to remove substantial doubts” about the accuracy of the financial data they were reporting from the state’s accounting system. The audit highlighted serious financial problems at the branch — which Cappello and Flowers said they had started to identify in 2017 and were in the process of fixing.

Hunsaker Ryan said she understood that Cappello inherited financial problems from before his time, but that even though Cappello and Flowers were continuing to work on fixing those problems, violations of state fiscal regulations remained.

Hunsaker Ryan said she shared the audit with Lisa Kaufmann, chief of staff to Gov. Jared Polis, and Kaufmann supported her decision to fire Cappello. 

Cappello fired

Cappello said agency leadership continued to strip him of responsibilities after the emergency November meeting. 

In February 2020, Cappello said he was “leading the response” to COVID-19, designing a more unified command structure to respond to public health incidents. He said he was the “incident commander” at the time, informing Hunsaker Ryan and the governor’s office about what was happening. But almost immediately after his new command structure took effect, he said he was “completely sidelined” from participating in COVID-19 issues.

The next month, he said CDPHE Chief Medical Officer Eric France told him that he would no longer oversee the operations and finance branch that Shannon Flowers supervised. He filed a claim under the state’s whistleblower protection statute soon after.

“The continued harassment and retaliation that only occurred immediately after the Nov. 19 alliance meeting had continued to get worse and I was scared for my job,” he testified.

On June 1, 2020, Cappello said Ryan called him to fire him and “gave me the reason that I had lost the trust of the HIV/STI community and received the vote of no confidence from the Alliance.”

But Cappello said he was just “doing the right thing” by disclosing the Attorney General’s legal interpretation about federal restrictions on spending supplemental rebate funding.

But when it spawned outrage among the HIV community, instead of getting the support he expected from agency leaders like Ryan, he said, “I feel that I was retaliated against.”

“Connecting all the dots”

Hunsaker Ryan said she had trusted Cappello, held him in “high esteem” and had even promoted him in 2019. 

In the end, though, she said Cappello “had lost my trust because he hadn’t made me aware of how bad things were.”

Hunsaker Ryan said she didn’t really understand the connection between the legal interpretation from the Attorney General’s Office limiting how supplemental rebate dollars could be used and the huge cuts to funding for HIV testing and PrEP that it led to.

Cappello’s lawyers grilled Hunsaker Ryan on previous statements she made in depositions suggesting she did understand the problem. Even though she was copied on emails explaining that the legal interpretation meant rebate money couldn’t be used for prevention efforts like PrEP, she said she “was not connecting all the dots” at the time, and admitted that she hadn’t inquired further about the problem. 

Judge Shelley Gilman pressed her on the issue, asking “hadn’t you read the (Attorney General’s) opinion?” 

Hunsaker Ryan said she only connected the opinion to the agency spending the money on the anti-vaping program, and that she “didn’t understand” that the supplemental rebate money was supporting PrEP efforts.

“I wasn’t in the weeds that much,” she said. 

Ryan’s memory of what happened appeared fuzzy at times. She used the phrase “I don’t recall” at least 20 times during her testimony. She also said she didn’t understand that the issue members of the HIV community were so upset about was the loss of funding for testing and PrEP as a result of the new legal interpretation. 

Ryan said she had conflated the cuts to HIV prevention funding with the end of the CDC prevention grant, and thought that the HIV community was upset about that loss as well as the money spent on vaping. She said she didn’t realize at the time that the legal interpretation was really the source of the funding problem.

“All of this happened very quickly and it was very confusing,” she said.

Daniel Ducassi is a former Colorado Sun staff writer.