Bank Fraud? Lawmakers Call for Treasury Investigation

Arkansas' top banker was back in the hot set Friday, answering to an in-depth audit of state treasury's investment practices.

Treasure Martha Shoffner started by reading a prepared statement before the Joint Audit Committee, but didn't seem prepared for the barrage of questions leveled by lawmakers.

Committee members seemed intent on discovering how Shoffner and her senior staff invested billions of dollars in taxpayer money. The treasurer said they talked through big investments, but that statement was refuted by Shoffner's Chief Investment Officer, Autumn Sanson, who said she was often directed by Shoffner which bonds to buy or sell. Samson also testified that Shoffner directed her to invest through St. Bernard, a brokerage in Russellville; often at a loss.

"We didn't consciously show preference to them, even though it appears that way," Shoffner said when lawmakers asked why she directed nearly two billion dollars to the small brokerage.

The treasurer also adamantly denied receiving kickbacks.

"Absolutely not. Absolutely not," Shoffner said. "All the brokers are friends, and we have a good relationship with them, but absolutely not."

Shoffner's deputies told lawmakers they made investment decision based on the advice of brokers, but didn't seek outside counsel, or professional money managers. Shoffner said they're working to change the policy, and will also start evaluating the results of deals suggested by brokers.

There were also several occasions when treasury employees gave testimony that contradicted what Shoffner, most notably by Sanson.

For example, Sanson told lawmakers Shoffner directed her to make sales that would result in a loss, and identified St. Bernard as the brokerage the sales went through.

In the face of contradictory testimony, Committee Co-Chair Tim Summers moved to send the results of the audit to state and federal authorities for further investigation.

"The one thing I'm certain of, there's a lot of smoke," Summers said, "and we need to get to the bottom of it and just find who did what. It's the public's money, and they have a right to know."