Shoffner’s guilt solid, judge says

Evidence in case ample, he finds

Martha Shoffner’s extortion and bribery convictions will stand, U.S. District Judge Leon Holmes declared Tuesday.
Martha Shoffner’s extortion and bribery convictions will stand, U.S. District Judge Leon Holmes declared Tuesday.

Martha Shoffner’s extortion and bribery convictions will stand, U.S. District Judge Leon Holmes declared Tuesday.

Although a federal jury found the former Arkansas treasurer guilty March 11, Holmes had reserved a ruling on whether the evidence presented by federal prosecutors during Shoffner’s one-week trial was sufficient to support the charges.

Meanwhile, he asked attorneys on both sides to submit written briefs on the issue of whether the extortion charges were properly filed under the Hobbs Act and the bribery charges were properly pursued under the federal program bribery statute. Both are federal laws found in Chapter 18 of the U.S. Code.

Shoffner’s defense team argued that the evidence didn’t demonstrate the necessary links between Shoffner’s actions and either interstate commerce or federal program funds. The attorneys suggested that the accusations would have been more properly pursued in state court. Prosecutors argued that Shoffner’s attorneys were misconstruing the law and that there were plenty of evidentiary links shown between the former state treasurer’s activities and the laws in question.

While agreeing with prosecutors that the evidence presented was ample proof of federal violations, Holmes’ written order noted that, “Her crimes represent a breach of trust against the state of Arkansas much more than an injury to interstate commerce or a wrong against the federal government.”

But the U.S. attorney’s office invoked its prosecutorial discretion to submit the facts to a federal grand jury, which indicted Shoffner for violations of legitimate federal laws, Holmes said, noting, “This court has no authority to overturn Shoffner’s convictions simply because her crimes might be more appropriately prosecuted by the state of Arkansas.”

Neither Shoffner’s lead defense attorney, Charles A. “Chuck” Banks of Little Rock, nor Grant Ballard, the attorney who took the lead on the jurisdictional questions, could be reached immediately after Holmes’ late-afternoon ruling to say what Shoffner’s next step will be.

Meanwhile, Shoffner, 69, of Newport is still scheduled to be tried beginning Dec. 1 on additional public-corruption allegations - specifically, that she used campaign funds to pay $9,800 in personal expenses. Because those mail fraud charges were added about a month before her scheduled extortion and bribery trial, Holmes scheduled a separate trial on them to give her defense time to prepare.

No sentencing date has been set on the extortion and bribery convictions, for which she faces up to 20 years in prison.

In the extortion and bribery case, a former bond broker - Steele Stephens - testified that he secretly gave Shoffner $36,000 in cash over a 2½-year period during which his share of the state’s bond business increased exponentially.

By mid-October of 2011, Stephens’ state-investments portfolio totaled more than $533 million. The broker with the next-highest portfolio had a total of $170 million in state investments. The third-highest portfolio totaled $135 million, the fourth totaled $131 million and the fifth totaled $100 million.

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Historically, the state had spread its bond business as equally as possible among the different bond brokers who were on the treasurer’s list of approved brokers, according to testimony.

Holmes said the dramatic shift in the way the treasurer’s office conducted business after Stephens began paying Shoffner was also demonstrated by the fact that Stephens was given exclusive access to reports kept by the treasurer’s office that showed the office’s entire portfolio of investments. Other brokers had periodically asked to see the information, but the office had never let them see it, Holmes noted.

The reports would allow one broker to know when bonds invested through another broker would mature and go back into the state treasury for reinvestment. While testimony indicated that the bonds were typically reinvested with the original brokers, a broker who had the inside information about other brokers’ investments “could attempt to persuade the treasurer to invest those funds with him,” Holmes wrote, saying the information Shoffner gave Stephens “gave him a competitive advantage over the other brokers.”

He noted, “Again, this change in practice was instituted by Shoffner over her staff’s objections.”

Stephens testified that Shoffner approached him in the first half of 2010 and asked if he could help her purchase a house where she had been living that was going through foreclosure. Holmes cited Stephens’ testimony that one reason he decided instead to pay her $1,000 a month to rent an apartment in Little Rock was his concern about having “his name on a mortgage encumbering the state treasurer’s residence.”

Holmes noted the clandestine way in which Stephens gave Shoffner the money - in meetings limited to just once every six months, in wads of $100 bills totaling $6,000 in cash tucked into a pie box.

He also cited evidence that once Stephens’ share of state bond business began to attract attention, the broker purchased a cellphone for Shoffner that couldn’t be traced to either of them or monitored, and her admission after an FBI investigation began that she had thrown the phone into a river between Little Rock and Newport.

Although Ballard argued that prosecutors had to prove that Shoffner took money in exchange for a specific exercise of her official power, and that no such precise “quid pro quo” was shown, Holmes said a payment must be shown to be made “in return for official acts,” not in exchange for “specific official acts.” He said case law also doesn’t require “an explicit promise or undertaking.”

“Here, the course of dealing between the parties provides ample evidence from which the jury could reasonably conclude that Shoffner received $6,000 payments from Stephens in exchange for directing the state’s investments to him,” Holmes wrote. He said the government proved that Shoffner “used her office to obtain funds to which she was not entitled.”

Ballard argued that the government had to prove that depriving Stephens personally of $6,000 affected interstate commerce, but Holmes said that argument applied only to robberies charged under the Hobbs Act, not to extortion.

He said prosecutors showed that Shoffner used her “official right” to direct bond transactions that occur in interstate commerce to obtain payments from Stephens. “Therefore, the means by which Shoffner obtained payments - her official right to direct bond transactions - affected interstate commerce.”

He also said, “It was the exercise of her leverage over interstate commerce, not the effect of depriving Stephens of $6,000, that established the necessary effect on interstate commerce.”

Addressing arguments that the government failed, in the bribery counts, to trace specific federal funds to the treasurer’s office, Holmes cited the testimony of Joseph C. Buddenberg, an auditor with the Legislative Audit Division, that monetary assets of the treasurer come from federal and state sources, and that grant money is invested by the state treasurer.

Richard Weiss, director of the state Department of Finance and Administration, had testified that the federal funds go directly to state agencies rather than into the state treasury, but Holmes said a jury “could reasonably conclude that Buddenberg’s testimony on this point was more reliable than that of Weiss,” because Buddenberg was responsible for tracing funds that were deposited into, and dispersed from, the state treasury.

“Buddenberg’s testimony shows that federal funds were directly affected by Shoffner’s act of taking bribes in exchange for directing bond transactions to Stephens,” he said, adding that the government wasn’t required to show that the bribery affected federal funds.

Front Section, Pages 1 on 04/16/2014

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