Voter’s dilemma: 1 is dead, 2 have been bankrupt

Sunday, Aug. 6, 2006 | 7:37 a.m.

Meet some of the choices for Nevada state treasurer

Geoffrey VanderPal wants to oversee the state's money, although he's been terrible at overseeing his own. The Democrat running for state treasurer declared bankruptcy three years ago, unable to meet obligations on a leased Dodge Durango, a host of credit cards and a $10,000 student loan, among other debts.

He has a doctorate in business administration and is a financial planner, but when he sought bankruptcy relief, he had nearly $240,000 in debt and $340 in assets, according to his bankruptcy filing.

It would be easy and comforting to laugh this off as nothing more than supercharged irony, except that VanderPal could win. He's running TV ads and his signs are all over the valley; these down-ballot primary races are often decided by pure name recognition. If he defeats Democratic opponent Kate Marshall, a former Justice Department lawyer, in the Aug. 15 primary, he is likely to face Republican Mark DeStefano, who has his own personal bankruptcy.

Nor is the job meaningless. The office has $3.5 billion in its investment portfolio - tax revenue received before it's spent - while also managing bond issues for state and local governments. The treasurer also manages the Millennium Scholarship program and college savings plans. Corruption and incompetence in other states should serve as a caution about what can happen when public funds are left in the wrong hands.

VanderPal refers to himself as "Dr. VanderPal," by virtue of a doctoral degree from Nova Southeastern University in Florida. VanderPal also claimed he has passed government background checks for his "diplomatic involvements." By this he means he has applied to be an honorary consul for the Slovak Republic, a ceremonial role. His application has not yet been approved, said Marcel Klimo, the embassy's counselor.

In an interview, VanderPal, 33, provided names of a few of his financial planning clients, who later vouched for his competence. He blamed his bankruptcy on the recession that followed the terrorist attacks in 2001. He said he had business ventures that dried up, including his financial planning business and a business marketing his invention - an alarm clock that recorded the user's voice and used the recording as the waking device.

How exactly sales of this type of alarm clock would be affected by 9/11 or the recession is not exactly clear. Nor is it clear how a savvy financier would allow business failures to so deleteriously affect his personal finances.

VanderPal said he was personally liable for many of his business ventures: "As an entrepreneur, many times you sign off on debt personally, and I was personally on the hook."

Events were beyond his control, he said.

"You can't control what's going to happen in an external environment. No one predicted 9/11."

VanderPal also cited his risk-taking nature, to which he also attributes his success: "If you don't take risks in life, you don't go very far. When you take those risks, you can have a financial downside."

The potential downside of a risk gone wrong in the state treasurer's office, which controls billions in assets, is large.

"There are thousands of things that can go wrong," said Brian Krolicki, the current treasurer who's running for lieutenant governor.

In other states, and in Nevada's history, things have gone wrong. The intersection of politics, campaign cash and large pools of public money are a dangerous area for the unscrupulous and the incompetent.

Krolicki pointed to risk-taking in the management of public funds as particularly dangerous.

In 1994, the Orange County, Calif., treasurer made risky investments that led to a $1.64 billion loss, which forced the county to declare bankruptcy.

Large chests of public money have also been exploited by corrupt officials, trading favored investment business for kickbacks or campaign money.

In New Mexico, two former state treasurers were indicted last year in a kickback scheme. In Connecticut, the conviction of the state treasurer in another racketeering case eventually shook the entire state's political establishment, eventually ensnaring the governor. Last year, a Republican fundraiser and operative corrupted Ohio's workers compensation fund, which invested in his rare-coin business.

"When we brought together money, politics, good ol' boyism and public money, we had a real problem," said Catherine Turcer, legislative director for Ohio Citizen Action. She offered this warning to Nevada voters: "With the public's money at stake, why not head this off at the pass?"

Nevada historian Michael Green recounted corruption in this state's treasurer's office. During the 1920s, the treasurer and controller embezzled more than $500,000 - substantial money then - to invest in an oil company. They planned to return the money when they struck oil. Green's description sounds like a Johnny Cash song: "The well was dry, and the state was out the money."

Patty Cafferata, a Nevada historian and former state treasurer, recounted the story of Eben Rhoades, Nevada's first state treasurer, elected in 1864. He embezzled most of the money in the general fund as well as the state's school fund. He committed suicide by overdosing on either cocaine or morphine. No one is sure. The theft was so massive that it affects the state's finances today, she said.

The Democrats' alternative to VanderPal is Marshall, who was an anti-trust lawyer in the Justice Department before being tapped by Nevada's then-Attorney General Frankie Sue Del Papa to start up an antitrust division. Although she's never been a financier, Marshall said in an interview that as an antitrust lawyer she had to understand markets and how they work. She also led a team of lawyers and support staff.

Republican DeStefano is president of a consulting company and runs a charity. He declared bankruptcy in 1989. He also sued the government more than a decade ago after being retired as an air traffic controller, claiming he was discriminated against because of his manic-depression.

He said in an interview that he didn't actually suffer from manic-depression but was merely experiencing great stress because of the rigors of being an air traffic controller. He's not currently under psychiatric care, he said. He's put his prior troubles behind him, he added, and points to his current financial success and charitable work as evidence.

Nevertheless, Republicans are so uncomfortable with DeStefano that many of the faithful - and Republican women in particular - are telling voters to choose the other Republican on the ballot, Kathy Augustine, who died last month. If Augustine wins, the state party will be able to choose a candidate.

Krolicki, who recently endorsed DeStafano, said the possibility for disaster in the treasurer's office is so great that he would support a system in which voters elect a finance secretary, who would then appoint a controller and a treasurer.

"It may not be interesting, but if something were to happen, these assets are precious and there's zero tolerance for failure," he said.