State Treasurer’s Primary Bond Broker Defends His Firm

Anytime you get subpoenaed attend an audit committee hearing and have one of your staff ask for whistle blower immunity, you are in trouble.

This is the current condition in which our State Treasurer Martha Shoffner finds herself.  Much of the scrutiny is over her investment decisions in purchasing and selling bonds on behalf of the state.

But the principal of the brokerage firm that has gotten the majority of the state treasurer’ s business – Robert Keenan of St. Bernard Financial Services, Inc. – says he does not see anything wrong with his practice.

“I was amazed that we glossed over the difference between an economic loss and an actual loss. There was no actual loss. An economic loss is an opportunity that may or may not ever be realized,” said Keenan after the audit committee meeting.

Keenan also defended the amount of business he did with the treasurer insisting that his firm simply has the best prices on the bonds they sale.

“Somebody asked the question how come St. Bernard has such a large amount of the business. It’s because every time they put out bid for bonds we have better prices than anybody. It is very simple,” said Keenan. “Someone else would offer a bond that yielded 1.45% and we would offer a bond that yielded 1.50%. With kind of money, that adds a lot to the bottom line of the state.”

“We acquired that business by having better pricing. Not by favors. Not by being better looking. We acquired it by having better pricing which provided better yields for the state,” insisted Keenan.

Keenan also responded to a letter of caution issued to his firm by the Arkansas Securities Department regarding his lack of adequate records in his transactions with the treasurer.

“After this all came out last fall, that came up in a pretty extensive examination on the trades we have done with the state. And their letter of caution says we wish you had a better email system; we wish you had written notes about your verbal conversations. Well, neither one of those is required under the Arkansas Securities Act,” defended Keenan although he said his firm has taken steps to remedy this issued raised.

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This story involving the treasurer is far from over.  The Audit Committee approved a motion from Sen. Jonathan Dismang to examine the bond transactions for the state treasurer for the last four years.

“I was surprised at the lack of preparation by the treasurer and her staff to answer questions,” said Dismang. “I don’t know how many times she said ‘I am going to have to go back and research that.’… I am going to be curious to see what it looks like over a four year period when the audit goes back to look and see if there are similar transactions that result in losses, if not greater losses.”

Dismang said he does not feel that legislators have enough information yet to know if there was anything criminal going on, but certainly feels that there was mismanagement by the treasurer.

“When you are talking about the state losing as much as $32 million a year – yeah, that’s substantial – yeah, that’s mismanagement of taxpayer money,” said Dismang.

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