NV Lt. Gov. May Be Indicted: College Savings Program Audit Key?

Another one bites the dust? B/B to the Gleaner who recounts the Nevada Appeal story that Nevada Attorney General Catherine Cortez Masto's office has informed Lt. Governor Brian “Empty File Cabinets” Krolicki of his impending indictment for “misappropriation or falsification of government accounts by a public officer.” According to Lt. Gov. Krolicki, this is all a partisan witch-hunt. According to auditors, during Krolicki's tenure as State Treasurer funds for the Nevada College Savings Program were paid in excess of legislative authorizations, and the treasurer's office “hadn't set up accounting or internal control procedures.” “The $6 million included more than $3.4 million paid by program managers to a plan adviser. Another $1.5 million was paid for marketing and advertising and nearly $1 million for legal services by a Sacramento law firm, at a rate of about $429 an hour, auditors said.” Steve Sebelius posted his version of a Krolicki Indictment in March 2007, (B/B Gleaner) including the Las Vegas Sun report that when prior attempts to gather information about Krolicki's operations in office were conducted the results were disappointing: “My (Treasurer Kate Marshall) attempts to gather all pertinent documents and materials to resolve irregularities in the revenues and expenditures of the Nevada College Savings Plan have been hampered by the lack of historical information and documents in the treasurer's office," Marshall wrote. Marshall said holdover staff members told her they were directed "by the previous administration to destroy documents as part of the transition and without any regard to the record retention laws. "While many of them either chose not to destroy the documents and/or to purchase their own 'flash' drives to save data in the event documents were erased, this information is clearly disturbing," Marshall wrote.” (Desert Beacon Krolicki Time Line) Additional articles: “Nevada official says attorney general trying to indict him” [RGJ] Link to the original audit from Inside Nevada Politics.

The May 14, 2007 audit from the Legislative Counsel Bureau staff found that while participant's funds were adequately handled in the Nevada College Savings Program, the state's funds were not. The audit report concluded: (1) “Of the $11.2 million in funding available to the State since the Program started, more than $6 million was not deposited in the State Treasury.” (2) “On April 2, 2003, Program officials in the State Treasurer's office notified the program manager via e-mail that they were not to transmit any future fees to the State.” (3) “We determined that more than $6 million was paid for Program expenses from funds held outside the State Treasury.” (4) “During the 5 ½ year period the Program has been in operation, the Legislature approved total expenditures of $1.6 million. However, more than $7 million of Program expenses have been incurred during that time.” (5) “At the Board of Trustees meeting on November 17, 2006, the Board approved a contract amendment with its Program Manager which ended the practice of paying Program expenses outside the state system.” (6) “The financial transactions of the Nevada College Savings Program have not been accounted for in the Trust Fund established by the Legislature when the Program was created.” (7) “The State Treasurer's Office has not prepared financial statements for the Trust Fund since the Program began.” (8) “A law firm has been paid nearly $985,000 for legal services since the inception of the Program. Since the contracts for these services were with the State Treasurer's Office, the Board of Trustees has not signed or approved any of these contracts.” (9) “The composite hourly rate paid for legal services during the term of the contract ended June 30, 2002 was $428.64. This is significantly higher than the $225 specified in the contract.” (10) “The billings provided by the law firm were not submitted to the State Treasurer's Office on a timely basis.” (11) “The State Treasurer's Office made payments to the Plan Advisor of about $500,000 which were not properly supported or did not adhere to the terms of the contract.” (12) “The State Treasurer's Office made payments to a marketing firm in excess of the $185,000 maximum allowed each year under the contract.” (13) “Program officials in the State Treasurer's Office did not provide adequate oversight of contractors to ensure key Program information was provided to the Board. This included audited financial statements for each of the four plans that make up the Trust.” (14) “The State Treasurer's Office has not established accounting or internal control procedures to help guide staff in carrying out their responsibilities for the Nevada College Savings Program.”

These 14 findings from the LCB audit of the Nevada College Savings Program alone seem sufficient to indict the former State Treasurer for “misappropriation” of state funds, and one might argue successfully that his consistent failure to provide the Board of Trustees with coherent, unified, financial statements regarding the status of Program funds constitutes a form of falsification. If, in fact, the LCB audit forms the core of the possible indictment, then Lt. Gov. Krolicki's claim that “all Democratic partisan roads lead to Harry Reid” [INP] would require that Reid control the LCB auditors. While Nevada's senior Senator's reach may be long – it's very doubtful it extends to LCB director Lorne J. Malkiewich's legislative auditors.

Lt. Governor Krolicki's attorney observed: “"If he is a ham sandwich, he's indicted," Robinson said, referring to the old saying that a good prosecutor could convince a grand jury to indict a ham sandwich.” [INP] Given the LCB Audit findings, it appears that a more likely culinary version of Lt. Governor Krolicki would be toast.