Shoffner let out of jail; filing cites a bribe Saturday

State Treasurer Martha Ann Shoffner made her first appearance in federal court Monday in Little Rock, two days after an FBI informant secretly recorded her taking $6,000 cash hidden in a pie box in return for the lucrative state business she directed his way, a criminal complaint says.

The payoff allegation is contained in the complaint lodged against Shoffner by the FBI and U.S. Attorney Chris Thyer that accuses Shoffner of attempt and conspiracy to commit extortion under color of official right. The complaint says that since 2009, she has accepted cash payments of at least $36,000, as well as $6,700 in cash campaign contributions, from an unnamed bond broker in return for directing the lion’s share of state bond business to him.

The broker is identified only as Confidential Human Source #1, who has been granted immunity from federal authorities in exchange for his cooperation, the charging document notes. The document avoids describing the informant’s sex, using “he/she” when referring to the broker.

U.S. Magistrate Judge David Young signed the 7 ½-page document in open court Monday, agreeing there was probable cause to bring the charge against Shoffner. But he didn’t ask her to enter a plea of guilty or innocent because the charge must first be aired before a federal grand jury. The next regular meeting of the grand jury for the Eastern District of Arkansas will begin June 4.

If the grand jury decides to indict Shoffner on the extortion charge, she will face up to 20 years in prison and a fine of $250,000 if convicted.


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Shoffner, 68, was escorted into Young’s courtroom from a secure interior hallway late Monday morning by a deputy U.S. marshal after being transported earlier in the day from the Pulaski County Jail, where she spent Saturday and Sunday nights after her arrest.

Wearing a black pantsuit over a crisp white shirt, Shoffner looked more as if she were dressed for work at the state Capitol than a woman who had spent the past two nights in jail.

Before sitting at a courtroom table beside her attorney, Charles Banks of Little Rock, she waved to a small group of family and friends who sat in the front row. The small group had been waiting outside Young’s third-floor courtroom for two or three hours alongside a throng of reporters.

The hearing itself was brief, with Shoffner answering “yes” in a deep voice when asked if she understood her rights and Banks then waiving a reading of the complaint.

Assistant U.S. Attorney Jana Harris, the lead prosecutor on the case, told the judge that the government didn’t object to Shoffner remaining free on her own recognizance for now, and the judge released the state treasurer under a set of conditions that include surrendering her passport, checking in regularly with her attorney and pretrial service officers, and staying away from guns and excessive amounts of alcohol.

Although one routine condition requires defendants to remain actively employed or actively seeking employment, it wasn’t clear Monday if Shoffner intends to resign while her charges are pending. Banks said late Monday afternoon that, after Shoffner has had time to rest and visit with her family, he intends to discuss with her on Tuesday the perception and ramifications of her continuing to work as treasurer while preparing her defense.

“It won’t be my decision to make,” he added.

After the hearing, Shoffner spoke briefly to reporters on the courthouse steps only to say that she doesn’t plan on resigning.

At a news conference in the nearby U.S. attorney’s office a short time after Shoffner’s court appearance, Thyer used the occasion of Shoffner’s arrest to announce the formation of a new public-corruption task force. Joining him was Conner Eldridge, U.S. attorney for the Western District of Arkansas, and four law enforcement officers - Randy Coleman, special agent in charge of the Little Rock office of the FBI; Pulaski County Sheriff Charles “Doc” Holladay; Maj. Henry Lamar of the Arkansas State Police; and Assistant Little Rock Police Chief Hayward Finks.

The task force, Thyer said, has been set up over the past few months to deal with public corruptions “in a more holistic manner” across the state.

Thyer said that during the course of an FBI investigation that is continuing, federal agents learned that Shoffner has been using one particular bond broker significantly more than others, if not exclusively, to handle a large portion of the state’s investment activity, breaking with the state’s tradition of dividing the business equally among about 10 brokers.

At any given moment, Arkansas has $3.5 million to $4 million in outstanding bonds that are controlled by the state treasurer’s office, Thyer said.

When confronted about favoring one broker, Shoffner told authorities that the broker in question has “done nothing for me” and that she trusts the person she’s doing business with, the prosecutor said.

“A major breakthrough in the case came in January of this year,” Thyer said, noting that he granted immunity to Confidential Human Source #1, the broker, who gave investigators detailed information about Shoffner and her office.

In referring reporters to FBI Agent Richard S. Mc-Lain’s affidavit for details about payments the source reported making to Shoffner over the years, Thyer noted that at least two of the payments were made at the Capitol, two at Shoffner’s home in Newport and two at her Little Rock apartment.

According to the affidavit, aside from two payments - one for $2,000 and one for $4,700 - that the broker made toward Shoffner’s campaign, the broker paid Shoffner $6,000 about every six months so she could pay for a $1,000-a-month apartment in Little Rock, even though her main home is in Newport. The broker acknowledged that during this time, the broker’s bond business “increased in value substantially,” and knew it was because of the payments made to Shoffner.

Another person who had previously worked at the treasurer’s office, and identified in the affidavit as a cooperating witness, told federal agents in April 2012 that Shoffner had begun using the unnamed broker more than other brokers during the same time in 2011 that the treasurer was looking for a new place to live in Little Rock, after learning that a downtown building in which she had been living for free was about to be sold.

The witness reported that Shoffner had often made comments about being broke, and during this period, made frequent remarks about not being able to afford a place in Little Rock to avoid commuting from Newport on a daily basis. As treasurer, Shoffner is paid $54,304.80.

The former treasurer’s office employee told agents that Shoffner soon moved into a Little Rock apartment that the witness knew Shoffner couldn’t afford. At about the same time, the former employee “noticed the major shift in the bond business” to the unnamed broker and believed that the broker might be paying for the apartment, according to the affidavit.

FBI agent McLain noted in the affidavit that he later confirmed through business records and the broker in question that “the allocation of the state’s bond portfolio to [the broker] actually began increasing in or around early 2010.”

On Jan. 18, the broker admitted to giving Shoffner a $2,000 payment as a campaign contribution at a campaign event in Little Rock, followed by a campaign watch party sponsorship of $4,700,the affidavit says.

The broker also told authorities that a day before the interview with the FBI, an employee of the treasurer’s office instructed the broker to go to the back door of the office at about 11 a.m. The employee and Shoffner were both there at the scheduled time.

The employee left, and Shoffner told the broker, “You gave me no cash” and “You just sponsored a watch party,” making it clear that she keptthe cash provided during the watch party, according to the FBI affidavit.

The broker also had given Shoffner “smaller gifts” before the first campaign event, which was in the fall of 2009, leading the broker to believe that Shoffner felt more comfortable asking for larger amounts, the affidavit says.

The gifts also likely gave Shoffner incentive to ask the broker to buy property for her in Little Rock, something the broker refused to do because the paperwork would contain the broker’s name, according to the affidavit.

After that, the broker told agents, Shoffner asked for - and received - $1,000 a month to pay her rent.

The broker said Shoffner agreed to the suggestion that they meet every six months, instead of every month, to avoid suspicion about the cash transfers.

The broker recalled making about six payments of $6,000 each, usually in $100 bills, in addition to the campaign payments.

The broker told the FBI that in 2012 he began placing rolled-up wads of cash inside boxes with pies purchased from a Little Rock business,to conceal the payment.

“This method of concealing the payment was done the last two times Shoffner was paid and both of those payments were at Shoffner’s residence in Newport,” the affidavit said.

Although the broker wore a recording device at both meetings at Shoffner’s house in Newport, including the first one on Jan. 19, Shoffner wasn’t arrested until the second meeting this past weekend, Thyer said, because at this point, Thyer had given the informant immunity for his cooperation, and the money used during the second meeting - which Shoffner herself scheduled for Saturday - involved the use of $6,000 in FBI funds, rather than the broker’s money.

At the Saturday meeting, the broker gave Shoffner a pie box containing the rolled up cash while the FBI had the two under surveillance, the affidavit said. A short time after the broker left the house, the FBI executed a search warrant and found the money in a cigarette pack in Shoffner’s kitchen, the affidavit states.

She admitted then to having received multiple cash payments from the broker and even handed over some of the cash that she still had from a previous payment, the affidavit states.

At the Jan. 19 meeting, the affidavit said, agents listened in as Shoffner told the broker that she hadn’t told anyone about the payments, that she had told the Legislative Audit that she didn’t accept anything from him, and said that “nothing in her finances could show any different.”

The agent said Shoffner was referring to her Sept. 17, 2012, testimony before the Legislative Joint Auditing Comitteee. At the hearing, Shoffner told lawmakers that she couldn’t recall why her office sold bonds from its investment portfolio before their maturity dates and purchased similar bonds from the same brokers, transactions that auditors said have resulted in a net loss of morethan $800,000 to the state.

Shoffner’s chief investment officer, Autumn Sanson, said she advised Shoffner against selling the bonds before they matured.

Asked why the bonds were sold prior to their maturity date, Shoffner said “I don’t know that answer.”

“I’ll have to research that,” she explained.

During that recorded Jan. 19 meeting at Shoffner’s house, the broker asked the treasurer if anyone else was paying her in return for state business, and she replied that no one else was. The FBI said a check of records confirmed that there was no other broker handling business for the state whose share of the bond portfolio increased as much as this particular broker’s did.

In that same conversation, the broker reported, Shoffner agreed to do more to help him if she began to feel that she had “more leeway.” The broker also said that she told him, “We have two more years, and we’ll just see what it brings.”

In announcing the new statewide task force, the Arkansas Trust Public Corruption Task Force, Thyer told reporters, “I want to send a clear message that public corruption won’t be tolerated in Arkansas.” He urged anyone with any information about public corruption to contact the task force by phone at 501-221-8200 or online at tips.

fbi.gov. Thyer said that all correspondence will be kept confidential.

Front Section, Pages 1 on 05/21/2013

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