Former employees of Martha Shoffner described her Thursday to a federal jury as volatile and ill-tempered, with a penchant for slamming her fist on tables and declaring, “I’m the g * * * * * * state treasurer, and I can do what I want!”
The portrait that emerged from the testimony of several people who worked for and alongside Shoffner during the six years she served as state treasurer was that of a controlling boss who insisted that her commands be blindly followed, even if she was wrong. Workers described Shoffner as particularly adamant about the handling of hundreds of millions of state tax dollars to suit a particular bond broker.
Prosecutors say that broker, Steele Stephens, paid Shoffner thousands of dollars in cash under the table for her official efforts helping him earn big commissions on a large chunk of the money the treasurer’s office invests. Shoffner has acknowledged receiving cash from Stephens but denies that it was in exchange for any official actions that benefited him.
Autumn Sanson, who is in her 14th year as chief investment officer for the state treasury, testified that Shoffner regularly disregarded her concerns about Stephens being given a disproportionate share of the state’s bond business and letting him sell bonds before their maturity dates. She said Shoffner consistently admonished her that she trusted Stephens, whose father is a longtime friend of Shoffner’s and, like her, is from Newport.
“She would use the phrase, ‘They’ve been good to me. They just get it,’” said Sanson, who has a degree in finance.
Defense attorney Charles “Chuck” Banks challenged the motivation of government witnesses, including Sanson, suggesting that they were retaliating against Shoffner for firing or berating them, or were egged on by office gossip aimed at unseating her.
Now 69, Shoffner resigned May 21, during her second four-year term, after being accused in federal court of accepting at least $36,000 in bribes from Steele Stephens, who resigned from Russellville-based St. Bernard Financial Services on the same day. Stephens isn’t connected with the Stephens Inc. investment house.
Another former employee of Shoffner’s, former Chief Deputy Treasurer Karla Shepard, testified later Thursday that she counted and turned over to Shoffner more than $10,000 in cash donations collected at a Sept. 24, 2009, re-election reception at Cotham’s restaurant, only to realize later that the cash was never documented on a campaign-finance report. Included among the donations, Shepard said, was an envelope containing $4,000 cash that Steele Stephens, who was helping sponsor the campaign kickoff event, had handed Shepard to give to Shoffner.
Shepard also testified that at a Nov. 2, 2010, election-watch party at the Wyndham Hotel, she went to Shoffner’s hotel room and gave her $4,000 in cash that Stephens had asked her to give to Shoffner. Shepard said the cash wasn’t used to pay the hotel bill, noting that Shoffner ended up paying the bill with a check from the campaign account. Jurors saw a copy of the $4,007.98 check, bearing Shoffner’s signature, that was made out to the hotel.
On cross-examination, Banks asked Shepard, “At the time of your dismissal, which was submitted as a resignation, didn’t you threaten Ms. Shoffner with ‘I’ll get you?’”
“I did not,” Shepard replied. She also denied that two weeks after Shoffner fired her in early 2013, she reported Shoffner to the FBI. She said the FBI approached her.
Backing up Shepard’s account of the 2009 reception at Cotham’s was Cord Rapert, a pharmaceutical representative who worked as an assistant for Shoffner in the treasurer’s office on two separate occasions.
Rapert, who said he had once been an avid supporter of the Newport Democrat, testified that he organized the 2009 event and helped Shepard count the cash donations at the end of the night. He said donations totaled between $9,000 and $10,000. He said the cash and several checks that were left in a donation basket were given to Shoffner.
“I saw the checks again, but I never saw the cash,” he said.
Rapert, 27, testified that he asked Shoffner about the cash when he was preparing a quarterly campaign-contribution report, and she responded, “What cash?”
When he resigned in December 2009, giving Shoffner three to four weeks’ notice, he said, “She crumpled the resignation letter and threw it at me. I was fired. She told me to leave then.”
Rapert, who said he is a distant cousin of Republican state Sen. Jason Rapert, testified that when he first started working for Shoffner, “I would’ve jumped in front of a bullet for her.”
He said he became disillusioned with her as time went on, describing her as difficult to work for, adding, “I was talked to horribly. Nights and weekends were not my own. I was expected to spend personal money on food and pickup her dry cleaning.”
Like Sanson, Rapert testified that Shoffner often hit a table with her fist when angry and “would just blow up” if her directions weren’t explicitly followed, such as “if a letter wasn’t correctly written to the Girl Scouts.”
“She didn’t understand the workings of the office,” he said, adding that she nevertheless insisted on running things.
Banks suggested that Rapert’s comments were used to fuel an overzealous FBI investigation. He asked Rapert, “You surely told somebody about your concerns that she was out of control?” Then, before Rapert could answer, Banks walked away.
Earlier, Debbie Rogers, the current chief deputy at the treasurer’s office who has worked in the office for 29 years, explained to jurors that the treasurer’s office is “the state’s bank” and explained its various divisions. She said the treasurer decides which bond brokers to add to a list of 10-15 certified brokers that the investment division uses to purchase bonds.
Rogers said that traditionally the experienced staff, including Sanson and herself, helped Shoffner - who lacked their financial expertise - evaluate bond-trading proposals from different brokers before deciding who to invest through. She described Shoffner as insistent at being personally involved in all bond-trade decisions.
Rogers, and later the state’s supervising special auditor, Joseph Buddenberg, testified that they became alarmed as Stephens’ share of the state bond business grew beyond the $300 million unofficial cap that the office had set. They noted that other brokers were generally limited to $100 million to $150 million of the state’s bond-trading inventory.
Buddenberg testified that Sanson raised the irregularities to his attention. “When we asked, we didn’t really get satisfactory answers on why it was occurring, other than it was what the treasurer wanted to do.” He said those inconsistencies, as well as an increasing tendency to sell bonds before their maturity dates, led him to prepare a special report for legislators in September 2012.
“In our review,” he said, the early selling “did not appear to be advantageous to us.”
He said a review of the period between July 1, 2011, and May 31, 2012, showed that Stephens - who had begun selling the bonds before their maturation dates - had about twice the number of bond purchases as any other broker the state used.
Banks suggested that Buddenberg was simply responding to allegations made by a retaliatory Shepard after her firing. Buddenberg acknowledged that Shepard approached him about two weeks after being fired with several allegations about Shoffner, many of which he didn’t remember, but he said it didn’t affect his review of recent trades, which he determined caused the state a loss of anticipated profits.
More prosecution witnesses are expected to testify when the trial resumes at 9 a.m. today in the Little Rock courtroom of U.S. District Judge Leon Holmes.
Front Section, Pages 1 on 03/07/2014