‘Uninteresting’ job draws interesting candidates

Michael J. Mishak

Wednesday, Oct. 25, 2006 | 9:16 a.m.

The race for state treasurer is one of those down-ballot contests that traditionally receive little attention from the press, let alone voters.

But this year, voters have two major reasons to reflect on the low-profile but consequential constitutional office that's responsible for overseeing the state's money: the candidates themselves.

Mark DeStefano, the Republican, is a Las Vegas business consultant who has declared bankruptcy, sued the U.S. government for discrimination, was kicked off the ballot on a residency issue in a run for university system regent and booted from a Nevada charity after he hired away a key employee.

Kate Marshall, the Democrat, is a Reno lawyer who has spent much of her career working in the antitrust division of the Justice Department, but has virtually no experience in finance or investment.

"What a choice Nevadans have this year: someone with no experience or someone whose experience is questionable at best," said Chuck Muth, a Carson City conservative activist.

As the two candidates mine each other's political baggage, voters face the task of trying to weigh each candidate's resume against the importance of the state treasurer's office - and the potential for things to go wrong there.

The office has $3.5 billion in its investment portfolio - tax revenue received before it's spent - and also manages bond issues for state and local governments. The treasurer also manages the Millennium Scholarship program and college savings plans.

"When it functions well, it's largely uninteresting," said Brian Krolicki, the current treasurer who's running for lieutenant governor. "But there's a real potential for bad things to happen. If something goes wrong, it could debilitate the entire system."

And in Nevada, things have gone wrong, almost from the start.

The state's first elected treasurer, Eben Rhoades, embezzled most of the money in the general fund as well as the state's school fund. During the 1920s, one of his successors and the state controller embezzled more than $500,000 - substantial money at the time - to invest in an oil company with dry wells.

The abilities and integrity of state treasurers have been called into doubt around the country in recent years. The nexus of campaign money, politics and large reserves of public money have created opportunities for the incompetent and the unseemly.

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 ensnared the governor. And a Republican fundraiser last year corrupted Ohio's workers' compensation fund, which invested in his rare-coin business.

Patty Cafferata, a Nevada historian and former state treasurer, said financial expertise has not been a prerequisite for past officeholders here. Krolicki, she said, was the first treasurer in the state's history with a background in financial investment.

Elected treasurer in 1982, Cafferata said her own financial experience was limited to keeping books for a travel agency owned by her mother, Barbara Vucanovich, who was elected to Congress the same year.

The responsibilities of the office have grown dramatically since her tenure, she said. Or, as Krolicki puts it: "It's a Wall Street job in Carson City and Las Vegas."

DeStefano said he has been running for treasurer since December 2004, putting himself through what he calls a "rigorous training process" to understand the intricate workings of the office. DeStefano, 45, who graduated from State University College of Buffalo in 1983 with a bachelor's degree in business and restaurant management, claims 20 years of financial experience.

In an interview, DeStefano said he earned a stockbroker's license in 1984 and worked the next four years at a small brokerage firm in New York that specialized in initial public offerings.

But regulatory records, filed in the Central Registration Depository and obtained from the New York attorney general's office, show that he did not pass his license exam until 1986.

Asked about the discrepancy, DeStefano insisted that he passed the license test to be a broker in 1985, but that his firm, Thomas James Associates, may have taken a year to register his results with the state.

Such a delay is unusual, said Michael Sullivan, a UNLV finance professor. Brokerage houses generally file test results with the state much sooner, he said, because an employee's ability to represent a firm depends on it.

In 1988 still reeling from the previous year's stock market crash, DeStefano said, he moved to California, where he took a job as an air-traffic controller.

A year later, DeStefano filed and received Chapter 7 bankruptcy protection. He said his daughter had health problems, which caused financial distress that led to the bankruptcy. At the same time, he said he took real estate appraisal classes and started his own business, Personal Value Appraisal, which did financial planning and debt restructuring for homeowners.

In 1992 he was fired from his air-traffic controller job by the Federal Aviation Administration for what the agency termed a "psychotic disorder." Although he filed a discrimination lawsuit in federal court and sought damages, DeStefano now says he never suffered from any such disorder, and that he was pressured into the suit by the air-traffic controllers union. He later dropped the suit.

DeStefano continued a career in finance, starting another company called Asset Based Consulting, which he said used debt instruments to help grow small businesses, before moving his family to Nevada in 1996.

Nevada, he said, reversed his bad fortune. In 1999 he founded MQ Holdings, a consulting firm that DeStefano says has helped "hundreds of corporations" in mergers and acquisitions, often taking them public by using complex financial instruments.

As the Sun reported this month, that practice - known as "reverse mergers" - allows privately held companies to go public without the heavy scrutiny of government regulators. For that reason, financial experts take a dim view of such deals, which they say are open to manipulation.

Dismissing the criticism, DeStefano points to his "overwhelming" experience in complex finance as his key qualification for treasurer.

"I would never do anything in the treasurer's office that would put the money at risk," he said.

After graduating from law school at the University of California, Berkeley, Marshall, 46, spent seven years as an antitrust lawyer in the Justice Department, where, as part of a team, she evaluated a number of big mergers and investigated monopoly complaints.

The work involved analyzing financial documents and negotiating deals with executives of Fortune 100 companies, two skills that Marshall said would serve her well in the state treasurer's office.

In 1997 Nevada's then-Attorney General Frankie Sue Del Papa tapped Marshall to start an antitrust division here. As director of the unit, she led a group of attorneys, financial experts and administrators in revising the state's antitrust statutes and headed a multistate investigation of MCI's failed bid to acquire Sprint, among other probes.

Three years later, Marshall left the public sector to work as in-house counsel for a Nevada telecommunications company, before going into private practice in 2002.

Although she has never been a financier, Marshall said, her work has required her to understand markets and how they work. "I don't think the fact that I haven't done that will harm me at all," she said. "My government experience puts me head and shoulders above my opponent."

DeStefano said he would do little to change the current operations in the office, calling it "the best-run constitutional office in the state."

"This race really boils down to one individual who's lived a real life in the financial industry - with ups and downs - and who has extensive financial experience, and another individual who really doesn't want to be state treasurer," DeStefano said.

Marshall has developed a seven-point plan to improve the treasurer's office.

If elected, she would push to lower fees now charged to the state by credit card companies for transactions involving government services. Such fees cost Nevada about $3 million a year, she said.

Marshall also would restructure the unclaimed property division's Web site, which in its current form, she says, has prevented residents from claiming assets.

With an eye on diversifying the state's economy, she said, she would shepherd the Research Alliance Plan through the Legislature. The plan, funded with $100 million in economic development bonds, is aimed at retaining the state's scholars and attracting new industries. Last session, the bill, which was championed by Krolicki, passed in the Senate but failed in the Assembly.

Seeking to contrast her background with that of DeStefano, Marshall often cites her FBI background checks and national security clearance as proof of her own trustworthiness.

"It comes down to, 'Can I trust you with my money?' " Marshall said. "It's a choice between prudence and risk. I'm the former. My opponent is the latter."

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