Yellow notes could help fraud charges stick to Krolicki

By David McGrath Schwartz (contact), Cy Ryan (contact)

Monday, Dec. 22, 2008 | 2 a.m.

No smoking gun emerges in the transcript of the grand jury hearing that led to the indictment of Lt. Gov. Brian Krolicki. But there are yellow sticky notes.

The most damaging testimony for Krolicki and his chief of staff, Kathy Besser, in the 470-page transcript came from former Deputy Treasurer Janice Wright, who oversaw the College Savings Plan.

Yellow Post-it notes had instructions for Wright to use unauthorized, “off-line” money to pay for advertising featuring Krolicki, according to Wright’s testimony.

Authorities say the alleged violation of laws against the misappropriation of funds by a public official worked like this:

The state had an investment account for parents to save money for their children’s college tuition. That account generated fees. Instead of those fees returning to the state, Besser ordered the company overseeing the account, Upromise, to hold back the fees. When the state got bills from a marketing company, Rose/Glenn, for print, television and radio ads, Besser ordered Wright to have Upromise wire the money to Rose/Glenn.

It’s a process known as “off-line budgeting,” which means there is no legislative oversight as required by law, according to the testimony.

Wright said she began to feel uncomfortable about the process and started attaching Post-it notes to the invoices for Besser to sign.

Asked by a grand juror if she kept a diary or written record of whom she spoke to, Wright said no.

“It wasn’t until we started doing this off-line that I became increasingly nervous about it to the point of starting to do yellow stickies on the bills to say ‘Is this what you want me to pay from this off-line account?’ ” she testified.

“Well, that is something,” the juror responded. “At least you had that.”

When Wright told Treasurer Kate Marshall of the process soon after Marshall took office in January 2007, they immediately went to the attorney general’s office with the allegations.

Marshall had Wright pull all the original invoices.

“I noticed on all your invoices there are stickies,” a juror said.

•••

A $1 million check from Metro Police to cover a disputed state insurance debt is apparently still “in the mail.”

The payment, resolving a five-year battle between the state and the police department, had not arrived Friday afternoon, according to Leslie Johnstone, executive officer of the benefits program.

The 2003 Legislature passed a law requiring local governments provide a subsidy for their employees if they join the state insurance system when they retire. Since then, the department and state have been at odds over whether Metro is required to pay.

The Nevada Supreme Court ruled Metro should pay.

The department has since sent $400,000 and told state officials that a check for an additional $1 million had been dispatched.

But Johnstone expressed skepticism about the delay in the arrival of the $1 million payment last week, calling it “the check is in the mail” syndrome.

A spokesman for Metro said Friday the check for the Public Employees Benefits Program was cut Dec. 11 and probably made it into the mail Monday or Tuesday.

Officer Bill Cassell said the department isn’t trying to withhold the payment.

“It’s en route,” he said.

•••

The state continued the drumbeat of troubling economic news last week, as the jobless rate in Las Vegas reached a record 7.9 percent in November and the statewide figure eclipsed a previous high of 7.5 percent.

There was one bit of good news for those who are out of work: The state still has money to pay unemployment benefits.

Cynthia Jones, administrator of the state Employment Security Division, said the unemployment fund remains solvent.

Some states have exhausted unemployment funds, but Nevada should not, she said. “We collect taxes from employers in a way that allows us to remain solvent during difficult times.”