GOP Treasurer Candidate Seeks Answers On Plan To Address Lost Interest Income From $50 Million Investment Loss
Submitted by on Wed, 06/23/2010 - 2:40pm
CARSON CITY – Nevada state Treasurer candidate Steve Martin is questioning the method Treasurer Kate Marshall is using to account for the loss of interest income from a failed $50 million investment with the now bankrupt Lehman Brothers.
Martin is also questioning whether Marshall has the authority to write off the interest loss to agencies and programs over a period of four and a half years.
Martin, the Republican candidate for state treasurer and a certified public accountant, is a former state controller and current member of the Nevada State Board of Finance, which oversees and approves the activities of the treasurer’s office. In a letter dated June 22, Martin asked Gov. Jim Gibbons, chairman of the Finance Board, to call a special meeting to discuss his concerns.
Martin said he discussed the issue with the Gibbons administration on Tuesday and expects that a special meeting will be called.
“I want to get to the bottom of it and give them a chance to explain what exactly they are doing,� he said. “There is a lot of confusion.�
Marshall’s decision to write off the investment loss, “would make an arbitrary adjustment to the budget approved by the governor and the Legislature for each of the years in question,� Martin said.
“It would also seem that this procedure would allocate a revenue source to the various agencies where funds do not actually exist,� he said.
Marshall took issue with Martin’s letter, saying her office budget, including the amortization plan, was approved by the Legislature. The Board of Finance, including Martin, has also approved the plan each time the quarterly investment reports, which include the interest distribution and amortization data, are reviewed and accepted, she said.
The state controller’s office also signed off, Marshall said. Controller Kim Wallin is a member of the Finance Board.
“We cannot do this in a vacuum,� Marshall said. “For a board member to want to rehash, revisit and reanalyze previous board actions to try to manufacture a crisis I think suggests a very poor temperament for someone who is involved in the financial management of the state.�
Marshall, a Democrat, is running for a second term.
Steve George, chief of staff for the treasurer’s office, said Nevada was not alone in the Lehman Brothers collapse. More than $3 billion was lost to states and municipalities as a result of the bankruptcy. These other government entities were surveyed to determine the best way to address the situation, which was the amortization process now being used by Nevada, he said.
Martin said Marshall’s decision to compensate for the loss over a period of years was made prior to his appointment to the Board of Finance in November of 2009.
Martin said it is not clear to him which agencies and programs are being affected by the investment loss.
Martin said from the minutes of a Finance Board meeting in July 2009, it appears as if Marshall decided to go forward with her response to the Lehman Brothers loss on her own. There is no evidence the board ever took action to approve her plan, he said.
The minutes of the July 2009 meeting include a comment from Marshall that spreading out the loss to the agencies over a period of years was proposed so all of the lost income did not have to come out of their budgets at one time.
At the meeting Gibbons asked for an explanation of the 4.5-year time frame.
Mark Winebarger, chief deputy state treasurer, said the office did not want to drag out the process but also didn’t want to unduly impact the fiscal year 2010 and 2011 budgets that were already approved. He said the proposal was discussed with the Legislature’s fiscal staff and that it was deemed acceptable.
The state lost the money in its securities lending portfolio when Lehman Brothers collapsed in September 2008. The treasurer’s office is attempting to recoup some of the loss through bankruptcy court proceedings.
George said there is the potential to recover a portion of the loss which would then lessen the impact on the affected programs and agencies.
audio clips:
Martin questions Marshall’s action on Lehman failure:
062310Martin1 :28 education trust fund.”
Martin says Marshall does not have authority to take action:
062310Martin2 :22 we’re talking about.”
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