Auditors start digging through college fund

Tuesday, March 20, 2007 | 7:11 a.m.

Legislative auditors began an audit Monday into possible irregularities in the state's $3 billion Nevada College Savings Plan amid allegations raised by state Treasurer Kate Marshall that some of the fund's records are missing.

Marshall asked for the audit last week after telling lawmakers that $3.4 million of nearly $5 million in investment fees received by the state last year may have been improperly diverted toward marketing and legal expenses during the watch of her Republican predecessor, now-Lt. Gov. Brian Krolicki.

Last Friday Marshall wrote a letter to Attorney General Catherine Cortez Masto, a fellow Democrat, asking for an investigation into "the potential destruction of records" in the treasurer's office, including those tied to the fund.

Krolicki has dismissed Marshall's claims as "reckless" and politically motivated, and has strongly denied that there was any attempt to destroy records as he left the treasurer's office after eight years.

Both Marshall and her chief of staff, Renee Parker, met for about an hour Monday with auditors from the Legislative Counsel Bureau, the Legislature's research arm, to discuss the parameters of the college savings fund audit.

"They told us that they hope to wrap it up as expeditiously as possible," Parker said.

Parker said that only about $1.5 million of the $5 million in investment fees earned from the fund was accounted for in the state budget. There was little or no accounting of the other $3.4 million, she said.

Her office had to go to the vendors who were paid to get information, Parker said.

Marshall said last week that about $2.2 million went to the Rose/Glenn Group, a Reno-based advertising firm that spent $1 million on a television and radio marketing campaign featuring Krolicki.

Although some of the college plan's ads aired during the 2006 election year, the state Ethics Commission found that Krolicki did not violate any laws as the face of the marketing campaign.

Another $1 million in fees went to lawyer William Donovan and his Sacramento law firm of Orrick, Herrington and Sutcliffe for legal work related to the fund.

In her letter to Cortez Masto, Marshall said her efforts to learn more about the fees were frustrated by a scarcity of documents in the office.

She also said there are no e-mails beyond October, when the office under Krolicki switched to a new Internet server used by other state agencies. The old file server, Marshall added, apparently was "purged and erased" and used for other programs.