The parent advocacy group that previously accused Denver Public Schools of financial misconduct in court documents has escalated its claims, alleging the district engaged in racketeering through its bond and lease-financing structures.

Mamás de DPS filed a complaint in Denver District Court on Tuesday, accusing district officials of violating the Colorado Organized Crime Control Act. The lawsuit also names the Denver School Facilities Leasing Corp. and Wells Fargo Bank as defendants.

According to the complaint, district officials violated the statute by creating a “shell corporation” and “unlawfully mortgaging” DPS buildings “for the purpose of permitting a bank trustee (here, Wells Fargo) to use public monies to generate investment revenue for private parties.”

The lawsuit contends that the leasing corporation was structured to do what the district itself cannot under the Colorado Constitution: assume long-term debt without voter approval.

The complaint alleges that the leasing corporation constitutes an unlawful enterprise.

Under the Colorado Organized Crime Control Act, plaintiffs must show the existence of an enterprise and a pattern of racketeering activity. The complaint alleges both elements are present in the district’s long-running lease-financing structure.

Scott Pribble, a district spokesperson, declined to comment, citing the ongoing litigation.

Sunny Rodriguez, a Wells Fargo spokesperson, did not respond to a request for comment as of this story’s publishing.

This lease-financing structure is widely used in public finance circles, but is little understood by the public.

Here’s how the arrangement works:

The district transfers ownership of some of its school buildings — often for as little as $10 — to the leasing corporation, which uses the buildings as collateral to raise money by selling what are known as “Certificates of Participation” or COPs.

Investors who buy the COPs are repaid by DPS through school building lease payments. Because certificates of participation are not backed by the full faith and credit of the district, COPs typically carry higher interest rates than voter-approved general obligation bonds.

District officials have argued in court filings that its lease-financing structure is legal because the debt is incurred by the leasing corporation rather than DPS. Lease payments are subject to annual appropriation and therefore do not constitute constitutional debt, the district maintains.

A Denver Gazette review of district budgets shows no stand-alone line item for COP payments, making it unclear how the board separately appropriates those funds each year.

But DPS also contends that the leasing is a “public entity” entitled to governmental immunity from lawsuits.

Colorado courts have upheld certificates of participation as constitutional, ruling that when structured as a renewable lease payment rather than long-term debt, it does not require voter approval, although challengers have argued COPs function like debt in practice.

Finance documents also reviewed by The Denver Gazette show payment schedules that span decades.

While the COP financing mechanism has been used in Colorado for decades — and by DPS since at least 1984 — it has never faced a legal challenge like this one.

The Mamas de DPS lawsuit also argues that DPS’ structure goes beyond what the courts have previously approved, contending that the non-appropriation clause is illusory because a default would allow the leasing corporation to foreclose on 33 school buildings.

In practice, Owen argues, that requires the district to continue making lease payments.

DPS Chief Financial Officer Chuck Carpenter has acknowledged that the buildings could, in theory, be used as collateral.

“The property could, theoretically, become collateral,” Carpenter said.

Carpenter, however, downplayed the risk of DPS losing any school buildings under the COP structure.

“This never happens,” Carpenter said. “It’s not something that is practically possible.”

This is developing news story and will be updated.