LITTLE ROCK — State Treasurer Martha Shoffner has been under federal investigation for more than a year for her handling of bond sales in her office, a state auditor confirmed Monday.
Jon Moore, deputy state legislative auditor, said an auditor working on an audit of Shoffner’s sale of state bonds was approached about a year ago by a federal investigator seeking information.
“They wanted to talk to one of our employees,” Moore said. “I think they were just wanting some information about the investments and wanted to see what we had already done in calculating returns and that sort of thing.”
Debbie Rogers, Shoffner’s chief deputy, said Monday that the treasurer “will not be making a statement … until this matter is resolved.”
In December, the Legislative Joint Audit Committee requested a criminal investigation into the way Shoffner’s office sold bonds, including her decision to sell bonds before they matured that cost the state more than $434,000 in potential earnings.
Moore said Monday that the results of the state audit have been turned over to the Pulaski County prosecutor.
The state audit of Shoffner’s office found that eight of the 30 transactions between Jan. 1, 2007, and May 17, 2012, were made to St. Bernard Financial Services. Each of those transactions was made before the bonds matured, resulting in an economic loss of $686,835.
Several of the 22 transactions were made by one broker, Steele Stephens. Shoffner told the legislative panel in December that she and Stephens’ father, Steve Stephens of Newport, also her home town, have been friends for years. She previously told the committee that she did not know Steele Stephens was his son until after she and Steele Stephens met at the state Capitol to discuss state investment opportunities.
In response to questions during the committee meeting, Shoffner said she never received any personal financial benefits from Russellville-based St. Bernard or any of the other firms. She did say Steve Stephens has donated to her campaign and helped organize a campaign fundraising event on her behalf.
Robert Keenan, CEO of St. Bernard, said in an e-mail Monday his firm and Steele Stephens “haven’t done anything wrong and we’re not the least bit concerned with anything any law enforcement office wants to look at.”
“Our records are open to any regulatory authority at any time,” he said. “Wevery trade we did for the state treasury was done at a profit to the people of Arkansas and I can back that up.”
Cherith Beck, spokeswoman for the U.S. attorney’s office in Little Rock, declined comment.
Arkansas Business reported Monday that federal investigators, including the FBI, are also investigating allegations that Shoffner converted political campaign funds to personal income.
Rep. Tim Summers, R-Bentonville, co-chairman of the audit committee, said Monday he heard rumors last year that federal authorities were investigating Shoffner, but said he has not talked with anyone specifically.
He said he and Sen. Bill Pritchard, R-Elkins, asked that Shoffner and her top deputies be sworn in before committee meetings last summer and in December because they knew the audit findings and Shoffner’s comments differed.
“We knew there was a difference between what she was reporting about some issues and what the (audit) staff was reporting,” he said. “We wanted that information on record.
“There is just smoke around this that I would think that Miss Shoffner would want the air cleared herself,” he said.
Sen. Jonathan Dismang, R-Searcy, said he expects the Legislature to consider a variety of proposals to change the way the treasurer’s office sells bonds and handles all state finances during the upcoming session, which begins Monday.
“I think there will be some recommendations,” Dismang said, adding qualifications of employees involved with statate finances will probably be debated.
Dismang said he had heard of a possible federal investigation last year but after sitting through the two audit hearings he felt “just lack of understanding and knowledge on the part of the treasurer was the bigger problem.”
“That may have violated law, I don’t know … we’ll just have to let the investigation work itself out,” he said.
Gov. Mike Beebe said he knew nothing about the investigation.
“It will be what it will be,” he said. “Whatever it shows, let the chips fall where they may.”