Charged with overseeing around $10 billion in investments made by the state, the Board of Investment on Aug. 30 voted to consult with a law firm about its constitutional and statutory authority and whether it might have a role in operations at the Treasurer’s Office.
With Treasurer David Petersen dissenting, the board voted in a special meeting to meet with the law firm of Gutilla & Murphy to define the scope of such an opinion and fees. Hiring outside counsel was suggested by the Attorney General’s Office, which not only might be the subject of another outside legal opinion desired by the board but also is nearing its eighth month of investigating Mr. Petersen for alleged felonies.
With all that has taken place at the Treasurer’s Office since the AG investigation began, the board has become concerned about what authority it might or might not have had in matters such as the controversial $1.9 million payment Mr. Petersen authorized to the AG for its work in the National Century Financial Enterprises (NCFE) fraud case.
“I’m assuming that once the decision [legal opinion] is rendered, that we’re all going to live by it,” said board member Bill Bell, “and it will also set the stage for the treasury to live by.”
Mr. Petersen countered, “We do have one attorney’s opinion already, and that opinion said pay the bill.” The solicitor general formally advised Mr. Petersen earlier this month that he was obligated by statute to pay the AG for recovering money in the NCFE case, a payment he made at the end of June.
“Then the question is what do we do with the decision already made?” he asked.
Mr. Bell said the payment is water under the bridge, but the board would like to know if it has responsibility in such cases in the future.
“You can hire attorneys — we don’t have to tell you to do it or not,” board member Felecia Rotellini told Mr. Petersen. “You have the obligation, frankly, about whether you want an outside opinion on that…If the Board of Investment doesn’t have the authority to look into this issue, then it’s on your shoulders; you need to make that decision.”
A motion to have the firm also issue an opinion on whether the solicitor general was correct in interpreting state law that the Treasurer’s Office was obligated to make the payment was not allowed because that item was not on the agenda, and a vote would have violated the Open Meetings law. That motion is expected to be voted upon at the board’s Sept. 20 meeting.
No executive session
Mr. Bell resisted a move by Mr. Petersen to go into executive session to discuss a recent report in the Arizona Capitol Times that a former portfolio manager had a potential conflict of interest regarding his relationship with a Banc of America securities agent, from whom he purchased $19 million in floating rate securities.
The issue involved state trader Minh Trang and trader Renee Kuo Burnside, who exchanged 1,000 pages of e-mails over a six-month period. Some of the e-mails suggested a dating relationship and potential conflicts of interest regarding state laws pertaining to state employees accepting gifts from people with whom they do business.
In addition, the day Mr. Trang and Ken Fisher quit their posts at the Treasurer’s Office, they danced shirtless around the trading room. Mr. Fisher had previously been warned about falsifying a mid-month financial report to the board.
“I’m not interested in whether or not the gentleman danced around the office his shirt off,” Mr. Bell said. “I’m concerned about the liaison.”
He said he only wanted to know if Mr. Trang’s relationship with Ms. Burnside had any negative effect on the investments.
Speaking by speaker phone from home, Chief Deputy Blaine Vance said the investments were appropriate and have performed well, as reported earlier by Arizona Capitol Times.
Mr. Bell, nevertheless, said he wanted to hear Mr. Vance’s assessment in person.