Name in mind for vacancy

Beebe is vetting treasurer choice

Gov. Mike Beebe decided Thursday whom he wants to appoint as state treasurer, but he won’t announce his decision until next week, his spokesman said.

Beebe wants to ensure that his office follows the procedures and completes the background check required of all appointments before naming a replacement for former state Treasurer Martha Shoffner, his spokesman Matt DeCample said.

“Given this is the first time the governor has appointed a constitutional officer, we are being particularly diligent, but we don’t anticipate any problems arising,” DeCample said.

He said Beebe expects to announce the appointment Wednesday. That day fits with the appointee’s schedule and gives the governor time to complete work on the appointment, DeCample said.

Shoffner resigned Tuesday - a day after a federal criminal complaint was filed alleging that since 2009 she had illegally accepted cash payments of at least $36,000 and $6,700 in campaign contributions. The money came from an unnamed bond broker in return for directing toward him the lion’s share of the state bond business, federal law enforcement officials said. The complaint also said that an FBI informant had secretly recorded her taking $6,000 in cash hidden in a pie box, shortly before her arrest Saturday.

On Tuesday, bond broker Steele Stephens resigned from his job with St. Bernard Financial Services without citing a reason, according to Robert Keenan, chief executive officer for St. Bernard. Shoffner intends to plead innocent to the charges, according to her attorney.

At the state Capitol, three men viewed by some as potential appointees for the treasurer’s job said Thursday afternoon that they hadn’t talked with either Beebe or his office.

They are former state bank commissioner Robert “Bunny” Adcock of Conway, former executive director of the Arkansas Association of Counties and Randolph County Treasurer Eddie Jones, and former state Court of Appeals Judge Raymond Abramson of Holly Grove.

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DeCample said the governor already has talked with his prospective appointee.

Abramson said the governor will find someone with the highest ethical integrity to appoint as state treasurer.

“When the governor calls, one must pay heed. It would be very difficult to turn down the job,” he said.

The state treasurer is paid $54,305 a year.

The job’s duties include managing more than $3 billion in state investments and serving on the board of trustees for the Arkansas Teacher Retirement System, the Arkansas Public Employees Retirement System and the State Highway Employees Retirement System. The three retirement systems have their own investments totaling more than $20 billion.

While Beebe seeks a new treasurer, the state is working to award a contract to investment consulting firm Hewitt Ennis Knupp of Chicago to analyze the state Treasury’s investments and make recommendations on new policies and practices.

Jane Benton, director of the Office of State Procurement, said her office posted notice on its website this week that the state anticipates awarding the investment consultant contract to Hewitt Ennis Knupp and that a five-member committee is negotiating the scope of the work and price of the contract.

Richard Weiss, chairman of the state Board of Finance and director of the state Department of Finance and Administration, said Thursday that the board will consider the proposed contract. The Legislative Council will also be consulted before the contract is approved.

He said he would like the investment consultant to get its work completed as expeditiously as possible and “make sure all the procedures and process are good.”

Callan Associates based in Atlanta and Hewitt Ennis Knupp were the only firms that submitted their qualifications to the state. Callan Associates is the investment consultant for the Arkansas Public Employees Retirement System, the Arkansas State Police Retirement System and the Arkansas Judicial Retirement System, while Hewitt Ennis Knupp is the investment consultant for the Arkansas Teacher Retirement System.

A three-member committee that evaluated the two firms recommended hiring Hewitt Ennis Knupp, said committee Chairman Gail Stone, who is director for the state employees, judicial and state police retirement systems. George Hopkins, director of the Arkansas Teacher Retirement Service, and Leigh Ann Biernat, vice president of finance and administration at the Arkansas Development Finance Authority, also served on the evaluation committee.

While Callan Associates and Hewitt Ennis Knupp both are qualified to provide the needed services, Hewitt Ennis Knupp “demonstrated a superior ability to get the project concluded efficiently and in a timely manner,” Stone wrote in a letter dated May 17 to Benton.

The Hewitt Ennis Knupp team assembled for this project has “a depth of experience, resources and maturity that we found compelling,” Stone said in her letter.

The Board of Finance decided in December to conduct a search for an investment consultant to analyze the state Treasury’s investments, after legislative auditors recommended hiring an outside expert to scrutinize the investment portfolio.

The auditors found that the state had lost out on about $434,000 in earnings because the state treasurer’s office sold 30 bonds before they had matured. Auditors faulted Shoffner for selling the bonds early on the advice of brokers and for failing to properly analyze those sales. In particular, the auditors concluded that eight of the bond transactions, involving St. Bernard Financial Services Inc. of Russellville, resulted in the state earning $783,835 less than it would have if it had held the bonds until maturity. Keenan has disputed the auditors’ figures.

In seeking proposals from investment consultants, the finance board said it wants to improve the state Treasury’s investment options and make sure that the Treasury is obtaining the maximum rate of return on its investments without significantly increasing its risks.

Changes in the overall investment environment have made it increasingly difficult to maintain adequate safety, liquidity and return on investment, and the rate of return on the Treasury’s investment portfolio has steadily decreased over the past five years from 5.3 percent for the year that ended June 30, 2007, to 0.78 percent for the year that ended June 30, 2011, according to the finance board.

The state Treasury totaled $3.33 billion as of Dec. 31, and its return on investments for the year was 1.922 percent, according to the finance board.

The state Treasury includes bond investments, certificates of deposit, money market funds and Arkansas Capital Corp. certificates of indebtedness, said Debbie Rogers, chief deputy for the treasurer’s office.

Act 1088 of 2013, which becomes effective in August, will expand the Board of Finance from five members to 10 and allow the board to select the chief investment officer from candidates nominated by the state treasurer.

Front Section, Pages 1 on 05/24/2013

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