LITTLE ROCK — The state Board of Finance decided Thursday to find an investment consultant to analyze the state treasury’s investments and make recommendations for improving investment policies and practices.
Auditors for the Legislative Audit Division had recommended the move.
Last month, the division’s auditors said the state had to collectively forgo about $434,000 in earnings based on the state treasurer’s office selling 30 bonds before they matured. They faulted the treasurer’s office for selling the bonds early based on advice from brokers and for failing to properly analyze the sales.
They suggested that the board hire an outside expert to analyze the state treasurer’s $3 billion investment portfolio. During the board’s threeminute-long meeting, Board Chairman Richard Weiss said the auditors’ other recommendations “are kind of contingent on us getting someone in place to do a comprehensive analysis.”
The auditors also recommended that the board and the treasury consider having outside money managers make investment decisions within certain criteria; the board consider developing a new treasury investment policy based on recommendations from an investment consultant; and the board and treasury “develop procedures that facilitate the board serving a more active role in oversight of treasury investment activities.”
Weiss, who is director of the state Department of Finance and Administration, said he wants the board to ask investment consultants to submit their qualifications to the state “so we don’t have any conflicts out there and we can get some unbiased third party to look at it.” One of them will be selected and will analyze the investments and policies.
State Treasurer Martha Shoffner, who serves on the finance board, asked Weiss, “When can we get this moving forward timewise?”
Weiss said he wanted the board to begin the process that very day. Moments later, it voted to begin the search.
The five-member board also includes the governor, state auditor, and the state banking commissioner. Gov. Mike Beebe and State Auditor Charlie Daniels usually send their own representative to the board’s meetings who can vote on their behalf.
Afterward, Elizabeth Mentgen, a buyer in the state procurement office, said an investment consultant could be hired as early as late March or April.
Weiss said he expects it will take an investment consultant several months to complete this task and he would like the work to be completed before the Legislature’s 2014 session.
Last month, the Legislative Joint Auditing Committee voted to send the division’s audit about the treasurer’s office bond transactions to state and federal authorities.
The audit concluded that the state treasurer’s office’s decisions cost the state about $434,000.
Last month, Shoffner told lawmakers that her office “didn’t consciously show preference” to a Russellvillebased bond broker, although Shoffner’s chief investment officer, Autumn Sanson, told them that Shoffner instructed her to do more business with that firm.
Auditors found that eight early bond sales involving St. Bernard Financial Services of Russellville resulted in forgone earnings for the state of $783,835, Deputy Legislative Auditor Jon Moore has said.
Robert Keenan, chief executive officer for St. Bernard Financial Services, has disputed Moore’s figures and said the state made profits on the transactions.
The state treasurer’s office purchased $1.69 billion in bonds from broker Steele Stephens of Apple Tree Investments from May 2008-May 2009 and from St. Bernard Financial Services since June 2009, almost double the amount purchased from any other broker, Moore has said.
The majority of business handled by broker agents Steele Stephens and his father Steve Stephens — through St. Bernard Financial Services — is with the state treasurers’ office, state Securities Commissioner Heath Abshure said last month.
The Legislative Joint Auditing Committee sent copies of three reports on the state treasurer’s investments to U.S. Attorney Chris Thyer, FBI Special Agent Randall Coleman, Arkansas State Police Director Stan Witt and Prosecuting Attorney Larry Jegley, according to a letter dated Dec. 14.
Moore said FBI agents “have asked us some questions and that’s all I know.
“Really, all they were asking for was stuff that has been available to everybody,” Moore said. That included calculations regarding the treasurer’s office bond transactions, he added. He said the FBI asked for this information “quite a while ago” and he doesn’t recall when that was.
A spokesman for the FBI said she couldn’t confirm or deny that the FBI is conducting an investigation of Shoffner.
Chief Deputy Treasurer Debbie Rogers said Thursday that Shoffner hasn’t been contacted by any law enforcement officials about the state’s investments, nor asked for records about them. She said Shoffner hasn’t been asked to provide any campaign finance records either.
Last month, Shoffner told lawmakers that she has received campaign contributions from several people who do business with her office. But she said she hasn’t received these contributions in the form of cash. She also denied receiving any compensation from the Russellville-based broker or other brokers.
Keenan said, “None of us have ever been contacted by any county, state, or federal law enforcement offices.
“There is no money missing or dead bodies lying around, so I would be shocked if they did,” he said. “And don’t forget that there were no losses in the state treasury, just a lost opportunity number that I dispute.”
“So, from where I sit, this all looks like a political assassination being done to perfection,” Keenan said. He said he doesn’t have “a clue” who is orchestrating it.
Shoffner, a Democrat, has been the state treasurer since 2007 and her term finishes at the end of 2014.
Arkansas, Pages 9 on 01/11/2013