HEATH ABSHURE: Investigation of Shoffner case continues, but insufficient evidence for new charges so far.

HEATH ABSHURE: Investigation of Shoffner case continues, but insufficient evidence for new charges so far.

  • HEATH ABSHURE: Investigation of Shoffner case continues, but insufficient evidence for new charges so far.

Arkansas Republicans aren’t through milking the opportunity given by federal charges against former Treasurer Martha Shoffner, a Democrat, for taking cash payments from a securities dealer who did a huge amount of business with Shoffner’s office.


Earlier this month, Sen. Bryan King and Rep. Kim Hammer, co-chairs of the Legislative Joint Auditing Committee, sent letters to Securities Commissioner Heath Abshure, Attorney General Dustin McDaniel and Pulaski Prosecutor Larry Jegley. They essentially demanded more investigation of Shoffner and others for more potential charges, based on legislative audit review of the offices practices.

The audit review — though flawed in its understanding of the securities business (it, for example, compared investment yields on the treasurer’s highly liquid investments with those on the riskier, longer-term investment portfolio of Teacher Retirement) — noted the concentration of business Shoffner had done with Steele Stephens of St. Bernard Financial Services. It also noted that the state had realized far less in expected earnings on some bond purchases because of their liquidation for alternative investments. The broker has defended the trading for its profit on the sale of the bonds and for the fact that prevailing interest rates hadn’t performed as expected.


The Republicans and allies on the auditing staff have focused like a laser on trading losses. Please note: If a securities trade loss is a crime, the prisons would be filled with stockbrokers. I say this as a son and brother of securities dealers, who sometimes invested my own money in securities that declined in value.

Though the audits themselves alleged no law violations, they did recommend a number of needed changes in treasurer’s office investment practices. Shoffner’s arrest had nothing to do with the audit, however. It occurred because she apparently continued to take money from a salesman despite every indication that a whistleblower had complained to authorities about her favoritism in trading months before. When the salesman went wearing a wire to see Shoffner with a pie box stuffed with $100 bills, FBI agents recorded the visit. Arrest followed swiftly and she awaits trial.


Hammer and King wrote to Abshure July 5 (and also McDaniel and Jegley in similar vein) saying:

As you can see from the enclosures, there is some concern that improper trades or investments may have occurred in transactions involving the Office of the Treasurer, resulting in violations of applicable securities laws. Please review the enclosures and ascertain whether any of the individuals or firms licensed by your office, or any other parties, should be held to account for such violations. If you are not the appropriate authority to take action on such violations, please explain why and identify who you believe to be the appropriate authority.

One problem. None of the documents provided by Hammer and King present evidence of securities law violations. Suspicion — as when Shoffner started shoving huge amounts of business to a single broker (a fact this blog first reported almost two years ago) — can smell to high heaven but not constitute probable cause for investigation or charge. But Republicans are prone to order up investigations of people they’d like to find something to pin on. Remember Kenneth Starr?

In any case, Abshure has replied extensively to the request. He says that an investigation of the people over whom he has jurisdiction in this case — securities dealers and brokers — is underway. He noted he issued a letter of caution to involved securities dealers last August. Indeed, Abshure has worked closely with legislative audit and provided it a great deal of the information on which it based reports discussed at legislative hearings,.

Abshure’s letter to King and Hammer explains what it takes to prove that a sale was actually RECOMMENDED by a broker and whether it was SUITABLE for the client. These are important in determining a law violation. They are terms with legal meanings beyond opinion and suspicion.


Abshure said, for example, unsuitability cannot be proved by simply saying, in hindsight, that a better result could have been obtained with a different purchase. He indicated, also, that evidence so far has fallen short of proving that treasurer’s office purchases were made on “recommendation” of the dealer.

He said the ongoing criminal investigation has hampered his own continuing look into the matter, as well as a lack of a complaint from the customer (the state treasurer’s office). He wrote in the letter:

The information contained in the enclosures to your July 5 letter does not, standing alone, constitute sufficient evidence of securities law violations. The Department has been and will continue to actively investigate this matter. Once the Department is satisfied that it has sufficient evidence of securities law violations, the Department will bring all appropriate enforcement actions in a manner tht poses the least interruption of parallel actions such as the pending criminal case.

Hammer and King’s letters raised, in addition to securities law questions, the question of whether anyone had given perjured testimony before the auditing committee. And it noted, “Certain individuals were charged with federal…some were not charged with anything…and we feel that we need to do a good thorough job making sure that everybody that is responsible for any action in this situation is held accountable…”