Arkansas State Treasurer Martha Shoffner spent most of Sunday alone in a cell meant for two at the Pulaski County jail.
Jailers watched her around the clock. She was allowed an hour of exercise. She was not allowed around other inmates.
Like all other inmates, Shoffner was required to wear a jail-issued jumpsuit, and unless otherwise ordered by a judge, she will appear in the jail clothes in federal court today.
The hearing will come two days after FBI agents arrested her without incident at her home in Newport on at least one charge under the Hobbs Act, a charge often used by federal prosecutors in cases involving public officials, particularly public corruption cases dealing with extortion “under color of official right.”
Pulaski County Sheriff Doc Holladay said he decided to keep Shoffner, 68, away from others for three reasons: her age, her position and concerns about her mental health “given the circumstances of her arrest.”
“She’s using one bunk. It’s a steel bunk with a mattress, one blanket, a toilet and wash basin,” he said. “And that’s it.”
During an interview Sunday afternoon, FBI spokesman Kim Brunell said she couldn’t provide any more details about the FBI’s investigation. Brunell also said she couldn’t say what prompted Shoffner’s arrest over the weekend or whether agents had notified the state treasurer she was under investigation before her arrest.
According to the U.S. Attorneys’ Criminal Resource Manual, in prosecuting a Hobbs Act extortion case, “the U.S. Supreme Court has held that the government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts.”
Shoffner has been scrutinized for over a year, in part because of an audit that questioned why her office purchased more than $500 million in bonds through a single firm, St. Bernard Financial Services Inc. of Russellville. Questions had also risen about her campaign’s finances.
Reports that the federal government was investigating Shoffner circulated in political circles for months, with some people saying privately they had spoken with the FBI.
Details of Shoffner’s case - including specifically what led to the charges - are expected to be made public during her arraignment at the federal courthouse in Little Rock. The hearing’s time hadn’t been determined Sunday, but Brunell said federal officials are expected to address reporters after Shoffner’s court appearance.
As of Sunday afternoon, jail visitor logs showed Shoffner had been visited by an attorney who listed his name as Charles Banks.
The only Arkansas attorney with that name is Charles Alfred “Chuck” Banks, a former U.S. attorney for the Eastern District of Arkansas and Little Rock lawyer with four decades’ experience. A message left for Banks on his cell phone wasn’t returned by Sunday evening. A second call rang through to voice mail. He also didn’t respond to a reporter’s e-mail.
Besides her attorney, Shoffner, a Presbyterian, would be allowed to visit with a pastor if she wished. No other visitors were permitted, said Lt. Carl Minden, spokesman for the Pulaski County sheriff’s office, because she hasn’t been locked up long enough to set up visitation.
On Sunday, no documents concerning Shoffner’s case had been posted electronically on the federal website where court records appear. And all was quiet at her home in Newport, neighbors said.
Randy Reynolds, 54, lives on Shoffner’s street. One house separates his from Shoffner’s.
On Saturday, he was outdoors grilling and spending time with his grandkids for most of the day. He said he never saw FBI agents on his street Saturday and wasn’t aware his longtime neighbor had been arrested until told by a reporter Sunday.
It was a normal Saturday in his neighborhood, he said. “People out mowing their yards and cooking out. That kind of stuff. They must have been subtle,” he said of the FBI agents.
On Sunday, the scene was much the same, he said. “I walked over to Martha Shoffner’s. There’s no vehicles. Everything seems to be locked up. There’s no lights,” he said. “No one there at all.”
Shoffner is not married and has no children.
The doors to Shoffner’s Capitol office were locked Sunday. Capitol Police said it is normal for the light to be left on over the weekend. No one answered repeated knocks on the door.
“The office will be open tomorrow and we will be conducting the business of the office as usual,” Chief Deputy Treasurer Debbie Rogers said by phone. She said she was not contacted by the FBI before the arrest.
The treasurer is the state’s banker and handles more than 400 accounts for about 200 state agencies and serves on the boards that manage investment of state retirement funds for public employees and school teachers.
Capitol Police Chief Darrell Hedden said he does not know if federal officials have searched Shoffner’s office.
“We have not been in contact with them whatsoever,” he said by phone Sunday. “Idon’t know if they’ve been up there or not.”
Attorney General Dustin McDaniel’s spokesman Aaron Sadler said the office was not involved in the FBI investigation and is not representing Shoffner in court.
Since legislators heard the results of an audit of her office last fall, Shoffner has drawn sharp criticism, particularly from Republican lawmakers, over her office’s decisions to sell 30 bonds early before they matured.
In December, the Legislative Joint Auditing Committee referred the audit of the treasurer’s office to state and federal law enforcement officials after auditors questioned why her office sold bonds from its investment portfolio before their maturity dates and purchased similar bonds from the same broker. The audit concluded that the state treasurer’s office’s decision to sell some bonds before they reached maturity had cost the state about $434,000.
In a written statement, St. Bernard Financial Services responded to the audit, saying that the auditors’ “economic loss projections contain assumptions that, although factual, are unrealistic.”
“They were not sold just to generate a commission. Treasurer Shoffner and her staff are smarter than that,” St. Bernard officials said.
Robert Keenan, chief executive officer for St. Bernard Financial Services, said by phone Saturday that he had not been contacted by the FBI.
In the December committee meeting, Shoffner acknowledged that she has received campaign contributions from several people who do business with her office. But she said she hadn’t received those contributions in the form of cash nor any compensation from the Russellville-based broker or other brokers.
Auditors found that the state treasurer’s office purchased $1.69 billion in bonds from broker Steele Stephens from May 2008-May 2009 - when he worked at Apple Tree Investments - and from June 2009 to present, while he has worked at St. Bernard Financial Services. The amount is almost double what the office has purchased from any other broker.
She didn’t have any previous personal relationship with any of the brokers or develop any such relationship after taking office, Shoffner told the committee in December.
Shoffner has said in the past that while Steele Stephens’ father Steve Stephens is a good friend, “there was no preferential treatment given because of that,” she said.
FBI QUESTIONS
Shoffner’s chief investment officer, Autumn Sanson, told lawmakers last fall that Shoffner instructed her to do more business with St. Bernard Financial Services. Sanson also asked to be protected under the state’s whistle-blower law because she feared for her job.
Sanson would not say Sunday whether she had been contacted by the federal officials. She referred further questions to her attorney, Reggie Koch of Little Rock. He also would not say whether Sanson had spoken with FBI agents but said she will cooperate with them fully.
Former treasurer’s office employee Cord Rapert said Sunday that he had a lengthy interview with the FBI in January about Shoffner’s 2010 campaign. But federal officials have asked Rapert not to disclose further details.
“They said that we could confirm … but not to go into any kind of detail. Mine was mostly campaign-related,” Rapert said.
Given the pace of the investigation, Rapert said he wasn’t expecting charges to be filed. “I kind of thought nothing was going anywhere, so we were as surprised as anyone.”
Cord Rapert and State Sen.Jason Rapert, a Bigelow Republican who has called for Shoffner to resign, are distant cousins. Saturday, Sen. Jason Rapert called Shoffner’s actions and subsequent arrest “an embarrassment not only to her but to every elected official in this state.”
Articles by the Arkansas Democrat-Gazette in late 2011 led to discovery of an apparent $50,000 discrepancy in campaign carry-over funds Shoffner reported in state campaign-finance reports. When questioned by the newspaper, Shoffner said errors had been made and filed five amendments to her campaign-finance report.
State law limits officeholders’ carry-over to an amount equal to the office’s annual salary, which in this case is $54,305.
Shoffner’s initial May 2010 report showed she had $97,349.67 left from her campaign. In her December report that amount was $47,356.29.
In 2009, Shoffner received a $10,000 campaign contribution from New York law firm Kaplan, Fox and Kilsheimer LLP. The firm had a securities monitoring contract with the Arkansas Teacher Retirement System. Shoffner is on the board of trustees for the system. In 2011, after the newspaper raised questions about the money, Shoffner returned the donation.
Retirement system board Chairman Richard Abernathy said by phone Sunday that he was never contacted by the FBI and learned of the arrest in Sunday’s newspaper. Board Director George Hopkins said the FBI never spoke to him and he hasn’t heard that others on the board were contacted by federal officials.
Also in 2011, Shoffner reimbursed $9,874 to her campaign carry-over account because campaign and carry-over funds were used to pay for a $900-a-month lease on a vehicle that was used for campaigning, for her office and for her personal use, her staff said.
Shoffner’s former longtime chief deputy Karla Shepard, who departed the office in 2011, confirmed Saturday that she was contacted by the FBI on a variety of topics related to Shoffner, but declined to provide additional details.
Martha Shoffner
Age: 68 Birthplace: Weldon Current town of residence: Newport Family: Single Current occupation: Treasurer Salary: $54,304.80 Political experience: Arkansas House of Representatives, 1997-2002; ran for state auditor in 2002 Business experience: Assistant to state auditor, 1991-93; 11 years as office manager at Little Rock advertising agency Cranford Johnson; licensed real estate agent Education: Newport High School; attended Arkansas State University and Memphis State University Political affiliation: Democrat
Front Section, Pages 1 on 05/20/2013