LITTLE ROCK — State Treasurer Martha Shoffner and one of her top investment advisers gave conflicting testimony before a legislative committee Monday over key findings in a state audit critical of how the office sold bonds.
Autumn Sanson, the treasurer’s chief investment officer, asked lawmakers whether she would be protected as a whistleblower after she was questioned why the treasurer’s office sold bonds before they matured, resulting in a lower yields. A lawyer for the Legislative Joint Auditing Committee said a judge would have to make that determination.
Sanson later testified that she advised Shoffner not to sell bonds before they matured. Shoffner told lawmakers that no one on her staff had spoken against the practice.
"I’m shocked," Shoffner said after the meeting about Sanson’s comments. "I couldn’t even think for the rest of the meeting."
An audit found that Shoffner’s office sold bonds from its investment portfolio to selected brokers before the bonds reached maturity and later purchased bonds from the same investment brokers. The audit concluded that if the bonds had been allowed to mature the state would have made an additional $58,172.
Shoffner, who was repeatedly asked during the three-hour meeting why the decision was made to sell the bonds early, did not give an explanation.
"I’ll have to research that," she said.
Lawmakers appeared frustrated with Shoffner’s inability to answer specific questions.
"I think that’s a problem," said Sen. Jonathan Dismang, R-Searcy. "We’re talking about a significant amount of money."
The committee directed state auditors to review all bond sale and investment transactions made by the treasurer’s office since 2010. Sen. Bill Pritchard, R-Elkins, said he hopes the panel can meet again to discuss that audit in late October.
The committee was originally scheduled to discuss the audit Friday, but had to reschedule because Shoffner was a no-show, even after the panel issued a subpoena to compel her to attend.
State police served a subpoena on the state treasurer Friday afternoon in Newport.
Shoffner apologized to the committee Monday, saying she had planned to attend the meeting but opted to go to a meeting in Newport on an economic development project because she thought her chief deputy and other top staff could answer the committee’s questions. Top members of the treasurer’s staff attended the meeting but were not asked to testify.
The audit also found that the treasurer’s office did not record the loss separately from interest income, in accordance with generally accepted accounting principles. A 2011 audit found that the treasurer’s office sold bonds to brokers before they were called or reached their maturity dates, purchased similar bonds from the same brokers, and then reported the sell/purchase activity.