Shoffner, aide tell panel different stories

State Treasurer Martha Shoffner, right, listens to Autumn Sanson, her chief investment officer, tell her side of the story at a meeting of the Legislative Joint Auditing Committee on September 17, 2012.
State Treasurer Martha Shoffner, right, listens to Autumn Sanson, her chief investment officer, tell her side of the story at a meeting of the Legislative Joint Auditing Committee on September 17, 2012.

— State Treasurer Martha Shoffner told lawmakers on Monday 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 economic loss of more than $800,000 to the state.

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

Then, Shoffner disputed Sanson’s assertion.

At one point, Sanson asked lawmakers on the Legislative Joint Auditing Committee whether she would be protected under the state’s whistle-blower law. She said she feared for her job. She said she has a written log of what she said about these bond investments and when.

An attorney for the Division of Legislative Audit, Frank Arey, said a judge, not lawmakers, would have to decide whether to grant Sanson protection under the state’s whistle-blower law, which was enacted to bar a public employer from taking adverse action against a public employee because the employee communicates in good faith to state authorities about waste of public funds, property or manpower, or a violation or suspected violation of a state law, rule or regulation.

When pressed by state Rep. John Burris, R-Harrison, Shoffner agreed not to make any personnel changes with Sanson and two other employees who testified Monday before the auditors complete more work on an audit requested by a legislative committee on Monday. The two other employees are Shoffner’s chief deputy, Debbie Rogers, and chief financial officer, Melissa Corrigan.

Burris advised Sanson to retain an attorney.

Shoffner told lawmakers that she’s “very disappointed” with Sanson’s remarks and doesn’t know why Sanson would say that.

The treasurer’s office sold a dozen bonds valued at more than $240 million between July 1, 2011, and May 17, and replaced them with similar bonds that resulted in anet economic loss of about $58,000 to the state, and another similar transaction the previous year resulted in a net economic loss of about $835,000, said deputy legislative auditor Jon Moore.

“We won’t be selling again,” Shoffner told lawmakers.

St. Bernard Financial Services Inc. of Russellville, Bank of Oklahoma Investments and Morgan Keegan & Company Inc. were involved in the dozen bond sales with a net loss of $58,000, and St. Bernard Financial Services was involved in the bond sale with the $835,000 net loss, Moore said.

The Arkansas Securities Commission issued a letter of caution to St. Bernard Financial Services on Aug. 28, for activities associated with the transactions, he said.

St. Bernard Financial Services said in a written statement that the auditors’ “economic loss projections contain assumptions that, although factual, are unrealistic.”

“The bonds that were sold before being called were sold for sound economic reasons, either to capture a gain or in one case to reduce a loss,” St. Bernard said. “They were not sold just to generate a commission. Treasurer Shoffner and her staff are smarter than that.”

The Legislative Joint Auditing Committee later ordered auditors to review 16 other transactions in which Moore said the treasurer’s office sold bonds before they matured in previous years under Shoffner, who has been the state’s treasurer since 2007. State Sen. Jonathan Dismang, R-Searcy, said he wants to know the net economic loss or gain on these other transactions.

Shoffer testified before the committee two days after the committee’s co-chairmen, Republican Rep. Tim Summers of Bentonville and Republican Sen. Bill Pritchard of Elkins, authorized a subpoena to compel Shoffner, a Democrat, to attend its meeting last Friday and then issued a second subpoena to compel her to attend its meeting on Monday.

Moore told lawmakers that Shoffner indicated a few weeks ago that she could attend last Friday’s meeting.

Shoffner apologized to lawmakers “for the chain of events that happened” on Friday.

“I just want to apologize, but I want you to know that the treasurer of state is working for the people of Arkansas and to get the best investment that we can,” she said.

She said she originally planned to attend Friday’s meeting, but “something came up with economic development” in Jackson County on Wednesday so she went to Newport on Friday at 10 a.m. By 11 a.m., she received a call from a state police trooper about a subpoena being authorized by the audit committee, “so I waited for four hours” until she received the subpoena, she said.

Shoffner said she could have made it back to Little Rock from Newport for the committee’s meeting Friday at 1 p.m., but she hadn’t been served the subpoena. She said she originally had thought it was her prerogative to decide whether to attend Friday’s meeting but “now I know different.”

“I wish I could have ... Friday back,” she said later.

Rogers said she, Shoffner and Sanson made the decisions together to sell bonds before they reached their maturity dates after she became the chief deputy last fall.

But Sanson said: “It’s the state treasurer’s final decision to sell bonds.”

Shoffner said she signed off on selling the bonds, but “we do collaborate.”

Rogers said she has worked for the office for about 24 years, and the office doesn’t have a certified public accountant.

Sanson said she has worked for the treasurer’s office for a dozen years, including the past six as chief investment officer.

When state Sen. Linda Chesterfield, D-Little Rock, pressed Sanson about why the treasurer’s office sold a dozen bonds prior to their maturity date at a net economic loss of about $58,000, Sanson replied: “I am going to have to ask if I am going to be protected under the whistle-blower act at this time.”

Pritchard said he couldn’t make that determination.

Chesterfield asked why the bonds were sold prior to their maturity date.

“I don’t know that answer,” Shoffner said.

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

Dismang criticized Shoffner over her remarks last October that she didn’t realize that the treasurer’s office purchased more than $500 million in bonds through St. Bernard Financial Services of Russellville out of its total bonds investments of $1.6 billion at the time.

At that time, she said she thought her office had about $300 million in investments through the firm.

“You doubled down on St. Bernard’s,” Dismang said.

He said Shoffner “has the final signing authority on all transactions, and so for you to sit there .. and not to be able to answer any of the questions on the transactions, I think it’s a problem.”

Dismang said this matter could be called mismanagement.

Shoffner insisted to lawmakers that she didn’t show favoritism to St. Bernard Financial Services.

St. Bernard said it sold a large share of the treasurer’s office portfolio because its prices were better.

“Because of St. Bernard’s aggressive stance on pricing, every other broker has had to sharpen their pencil, and the treasury is the beneficiary of this. The state of Arkansas is making untold millions in better yields because of St. Bernard’s efforts,” the firm said.

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Front Section, Pages 1 on 09/18/2012

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