Settlement could cost county $375,000

Spokane County commissioners are being asked to approve a $375,000 settlement with a former licensing subagent whose contract was revoked by Auditor Vicky Dalton in 2012.

Alvin and Michelle Paulsen, the owners of the subagency, sued the county in federal court for violating their civil rights by depriving them of their property interest in the subagency contract. They had operated for 33 years in Hillyard, and contend in the suit that their subagency contract was regularly renewed.

Dalton terminated the Paulsens’ licensing contract on June 21, 2012, after the state was notified of fraudulent licensing transactions being run through the Paulsen subagency.

The Paulsens also alleged in the federal lawsuit that Dalton defamed them.

According to federal court records, a Spokane automobile dealer reported to state licensing officials in early 2012 that his brother had been using the Paulsen agency to obtain licenses without a legal right to do so.

The dealer also notified the Paulsen agency that his brother didn’t have authority to license vehicles, according to court records.

An audit of the transactions handled by the subagency also showed errors, and played into the decision by Dalton to revoke the licensing contract, court records said.

The case was turned over to the Washington Counties Risk Pool, a multicounty insurance fund that provides coverage to Spokane County.

Once the case goes to the risk pool, the decision on a settlement is made by pool officials.

“It’s unfortunate, but the county and other governments get sued all of the time,” Dalton said.

She said a criminal investigation has been pending with Spokane police.

“We already did what we needed to do,” Dalton said in defending her decision to revoke the subagency contract.

“It’s really up to the risk pool to make that decision,” she said. “Sometimes it comes down to a business decision.”

The Paulsens earlier this month signed documents agreeing to the settlement. The documents were notarized in Maricopa County, Arizona.

James Emacio, chief deputy civil prosecuting attorney, said that licensing subagency contracts have since been tightened to avoid future claims stemming from a contract revocation.

The county commissioners are scheduled to vote on the settlement during this afternoon’s regular commission meeting.