Taking another run at Krolicki

By Michael Mishak

Wednesday, May 23, 2007 | 7:04 a.m.

CARSON CITY - Another shoe may be dropping on Lt. Gov. Brian Krolicki's previous performance as state treasurer.

A day after state auditors released a scathing report alleging that Krolicki, as the former treasurer, broke state law in his handling of Nevada's College Savings Program, Treasurer Kate Marshall said she has asked for another investigation, this one into the handling of certain state investments when the office was under her predecessor's watch.

There are additional areas in the office where benefits earned by state investments dont appear to have been run through the state accounting or budgeting system, Marshall said Tuesday.

Marshall said she submitted documents to the legislative auditor this month, in hopes that officials would include them as part of the College Savings Program investigation. The documents failed to make the cut, she said, but piqued investigators' interest. Marshall said legislative auditors have since requested more information.

Although declining to offer specific details, Marshall said the matter, like the College Savings Program issue, involves problems with a lack of transparency in how the investments were handled.

Told of another potential audit, Krolicki rattled off a list of accomplishments and said he was confident that any such inquiry would vindicate his performance as state treasurer.

"Auditors will do what they need to do," Krolicki said. "I'm proud of how I left that office and of the people who did business there."

He added: "I sleep very well at night."

On Monday a team of legislative auditors, in testimony before a legislative subcommittee, said the treasurer's office had withheld more than $6 million in state-earned fees from the state treasury and used the money to pay for legal services, marketing and consultants - without legislative oversight.

One of those contracts went to Rose/Glenn Group, a Reno-based advertising firm that spent $1 million on a television and radio marketing campaign for the program 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.

By spending money on its own, the treasurer's office - under Krolicki's direction - violated the state budget act and several Nevada statutes, the report said. The practices also cost the state at least $38,000 in interest that would have otherwise accrued .

In addition, the treasurer's office signed contracts with legal and marketing firms without the approval of the college program's board of trustees, and ultimately paid those firms more than $1.4 million above contracted amounts.

The Legislature established mechanisms to track and record financial activity of the program . But, according to legislative auditors, they were largely ignored, and Krolicki instead essentially farmed out the bookkeeping operations to the vendors, which had a financial stake in the accounting.

The report said the office's "fragmented approach" made administering and overseeing the program difficult, if not impossible, especially for the board of trustees and the Legislature. In essence, the treasurer's office was operating outside the standard government and regulatory framework defined by Nevada law.

For his part, Krolicki, in a brief interview in his office Tuesday, cast the situation as a constitutional struggle between the legislative and executive branches .

Krolicki said state law gave him the right as a constitutional officer to take certain actions outside the state budgeting process, including the right to enter into contracts with firms to administer and promote the College Savings Program. His moves, he said, were approved by officials in the executive branch, including lawyers in the attorney general's office.

He said he followed the advice of public and private legal counsel, in addition to financial advisers. The college program's contracts, he said, were cleared at the time by the attorney general's office.

"This program is the product of well-intentioned people giving their best advice," he said. "The muck is in some of the details , and that needs to be addressed."

That could happen soon.

This week's legislative audit will be turned over to the attorney general's office.

In a related investigation, the attorney general's office and the Nevada Public Safety Department are looking into the possible destruction of public documents in the state treasurer's office to determine whether any criminal wrongdoing occurred. On Tuesday Marshall said all of her office's employees had been interviewed in the investigation.