Associated Press

Wed, Dec 3, 2008 (12:13 p.m.)

Lt. Gov. Brian Krolicki

A grand jury has indicted Lt. Gov. Brian Krolicki on charges stemming from his management of a multibillion-dollar college savings program in his previous position as Nevada's state treasurer.

The Clark County grand jury indictment handed up Tuesday names Krolicki and his former chief of staff in the treasurer's office, Kathryn Besser.

The indictment accuses Krolicki of two counts of misappropriation and falsification of accounts by a public officer, and two counts of misappropriation by a treasurer. The four counts all are felonies, and each carries a possible sentence of up to four years in prison.

Besser faces two counts, including being a principal to misappropriation and falsification of accounts and being a principal to misappropriation by a treasurer. The indictments were sought by Attorney General Catherine Cortez Masto.

Krolicki, 47, was the first Republican to announce his plans to run against Senate Majority Leader Harry Reid.

The first-term lieutenant governor said Tuesday there's no basis for the indictment. He says he was targeted for political reasons by Masto—and that Reid was involved. Both Masto and Reid are Democrats. A spokesman for Reid has denied any role in Masto's move against Krolicki.

The indictments were based in part on a 2007 audit that found budget controls were bypassed in the $3.7 billion Nevada College Savings Program. Krolicki has disputed the report's findings, saying auditors were "simply wrong."

Krolicki disclosed late last month that he was told by Masto's office that an indictment would be sought. Masto said at that point that she couldn't comment. Her notice to Krolicki cited a law making it a felony for any misappropriation or falsification of government accounts by a public officer.

When the audit was released, Krolicki, first elected state treasurer in 1998 and re-elected to that post in 2002, said no laws were broken and money invested in the program was "balanced to the penny." The program helps parents to start saving early on for costs of sending children to college.

Kate Marshall, the Democrat who ran successfully for state treasurer when Krolicki was elected lieutenant governor in 2006, had pressed for the audit, expressing concern about how the program had been managed.

Marshall also said she had heard reports of program records being destroyed and said when she took over as treasurer it was difficult to find the information that legislative auditors needed to complete their report.

Legislative auditors said more than $6 million in state funds was used to pay for program expenses, in excess of amounts authorized by lawmakers. Also, auditors said the funds were handled outside the state's accounting system 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.