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A new legislative audit says a Utah Transit Authority board member may have broken state law and misused official information by trying to benefit from a potential UTA commuter rail station by buying rights to develop land around it.

While the audit never names that board member, it made clear it is Terry Diehl. It recounted controversial actions previously examined by the news media about how Diehl pushed a deal with the UTA and Draper for a "transit-oriented" retail/housing development around a proposed FrontRunner stop.

The UTA disagrees with the audit about whether Diehl broke any laws. It says he used public information available to anyone, and would have violated laws about misuse of official information only if he had used insider information available only to UTA officials. Diehl, meanwhile, declined comment on the audit.

The Legislative Audit Committee, consisting of the Legislature's top four leaders, chose not to follow an audit recommendation to refer findings to the attorney general to consider potential misdemeanor charges against Diehl.

House Minority Leader David Litvack said he agreed with legislative staff attorneys that the law is clear and was probably violated — despite what UTA said. But Litvack added that Diehl appeared to have done all that was asked of him by UTA lawyers — so the Democratic lawmaker didn't feel comfortable pursuing charges against him.

Meanwhile, the audit also ruled that Diehl properly disclosed his conflict of interest under rules in place at the time and abstained on votes and discussion related to the station. But it said his action to buy development rights now would be prohibited under recently strengthened laws and UTA policy.

The audit also said it could not substantiate allegations that Diehl used his influence to steer the site selection of the Draper/Bluffdale FrontRunner stop to a location most favorable to him, and it also found no evidence that he improperly used any non-public information.

The audit gave a time line of Diehl's actions. It said Diehl began working in September 2008 as a consultant for Whitewater Seven, a company formed to buy and develop property where a future FrontRunner station might be built.

He formally disclosed a conflict of interest to the UTA board on Nov. 3, 2008, in a letter that said he also had made earlier verbal disclosures, and that he might seek to become a principal of Whitewater Seven.

On Nov. 30, 2008, UTA, Whitewater Seven and Draper City entered into a development agreement on 144 acres that bordered the Union Pacific railroad spanning 12800 to 13500 South. On Dec. 10, 2008, Diehl became the owner of Whitewater Seven.

In August 2009 because of environmental and ancient-artifact concerns, the state signed a conservation easement that prevented a proposed station at 13500 South. On Nov. 4, 2009, UTA officially selected 12800 South as the new location.

The audit said Diehl sold his development rights for an undisclosed amount in December 2009.

The audit says law and UTA policy in effect at the time required Diehl to disclose the conflict of interest in a UTA board meeting and to abstain on votes about it. It noted that two UTA board meetings occurred between when Diehl became involved with Whitewater Seven and when he disclosed that in writing.

It said that Diehl's attorney told auditors that "at the time he understood that verbal closure was sufficient." When UTA amended its rules to require written disclosure, Diehl provided it within eight working days.

State law and UTA policy have since been changed so that if a UTA board member owns property on or near a site being developed by UTA for transit purposes, the member must either resign from the board or sell the property. So it said that if Diehl's activities occurred today, they "would be prohibited under the strengthened policy."

The audit said Diehl may have committed a misdemeanor violation of the Public Transit District Act. It said the Office of Legislative Research and General Counsel interprets that law as banning board members from acquiring any interest in any property when UTA is contemplating an action that may affect the property.

But the audit said "UTA's general counsel interprets the statute differently," and said UTA believes that a violation "requires the use of non-public information" to make and benefit from such purchases.

The audit adds that throughout 2008 and 2009, "it was public information that UTA was in the process of selecting a site for a FrontRunner station in the Draper/Bluffdale area and we have no evidence that nonpublic information influenced the trustee's decisions to acquire a property interest."

Still, John Fellows, the legislative general counsel, argued to the committee that UTA is wrong and the law is clear and was violated — and he even presented a diagram of the law's sentences to the committee to try to prove his interpretation.

Litvack, for one, agreed that the law is clear and that the UTA's interpretation is wrong, but said he struggled in pursuing any criminal charges because Diehl appeared to try to follow advice of the UTA's lawyers. —

What doesthe law say?

A trustee, officer or employee of a public transit district, in contemplation of official action by the trustee, officer or employee or by the district or in reliance on information to which the trustee, officer or employee has access in an official capacity and which has not been made public, commits misuse of official information if the trustee, officer or employee:

Acquires a pecuniary interest in any property, transaction or enterprise that may be affected by the information or official action;

Speculates or wagers on the basis of the information or official action; or

Aids, advises or encourages another to do so with intent to confer upon any person a special pecuniary benefit.

Source: Utah Code 17B-2a-814(5)