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Bill would allow Treasurer to hire own attorneys

Arizona Capitol Reports Staff//January 24, 2009//[read_meter]

Bill would allow Treasurer to hire own attorneys

Arizona Capitol Reports Staff//January 24, 2009//[read_meter]

State lawmakers on Jan. 27, will hear a proposal that could signal the beginning of the end of a lengthy legal quarrel between Attorney General Terry Goddard and State Treasurer Dean Martin.

The House Committee on Government will consider House Bill 2103, which would add the Office of the State Treasurer to a list of agencies permitted to hire their own attorneys to settle legal affairs and disputes.

In official capacity, Martin must be represented by the Attorney General's Office. But a bill filed by Rep. Sam Crump, a Republican from Anthem, would attach the Treasurer's Office to a list of nine state agencies allowed to hire and pay for their own legal representation.

Crump did not immediately return calls for comment on the legislation.

The issue of the treasurer's access to independent counsel stems from a years-long dispute between Goddard and Martin over a legal bill Martin's office was asked to pay in return for money recouped in a multi-state fraud settlement.

The fraud, committed in 2002 by National Century Financial Enterprises, cost Arizona governments approximately $131 million. Two hundred local Arizona governmental entities and many governments in other states invested in NCFE, which made loans to inner-city Medicare hospitals, before collapsing in 2002 in a fraud scandal involving $3 billion in lost investments.  

After the legal battle, then-Chief Deputy Treasurer Blaine Vance refused to transfer payment for the attorney general's legal services without written approval from the state solicitor general. But in June of 2006, the state Treasurer's Office agreed to pay the Attorney General's Office $1.9 million for legal expenses associated with recouping the lost investments.

The payment was not disclosed to the state Board of Investment, which oversees the state's investment portfolio.

The deal came months after agents with Goddard's office seized computers, 15,000 pages of documents and other materials from the Treasurer's Office as part of an investigation into allegations that Petersen had committed several felonies by using his office to promote character-building teaching materials sold by Character First.

Initially, Petersen faced charges of theft, fraud and conflict of interest. But weeks after resigning in October 2006, he pleaded guilty to a single misdemeanor count for failing to disclose a $4,200 commission he received for selling Character First products.

Martin, as a candidate running for treasurer in 2006, cast suspicions on the payment and criticized Petersen's sentence, which included three years of probation, as a "slap on the wrist."

Goddard has defended the payment repeatedly; pointing out that state law authorizes the Attorney General's Office to receive 35 percent of all state funds it recovers.

Upon taking office, Martin stopped issuing Goddard's office a portion of the fraud settlement, which was being distributed to the state periodically, and asked Maricopa County Attorney Andrew Thomas and Maricopa County Sheriff Joe Arpaio to investigate the payment.

Martin has asked for separate legal counsel to review the deal and to conclude how much the Attorney General's Office should be paid. The treasurer has stated on numerous occasions that a Texas law firm helped recover funds from the NCFE case, and has said he is not sure whether Goddard's office is entitled to the full 35 percent.

Two-hundred local Arizona governmental entities and many governments in other states invested in NCFE, which made loans to inner-city Medicare hospitals, before collapsing in 2002 in a fraud scandal involving $3 billion in losses to all investors, including the $131 million in Arizona.

Of that amount, the state treasury lost $14.3 million.

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