BILL MINOR: Madison lawyer claims Reeves bungled investments

By Bill Minor

JACKSON – In the Republican race for lieutenant governor, Billy Hewes is on the right track to unmask his opponent, Treasurer Tate Reeves, for claiming to be the “taxpayers’ watchdog.”
Previously, published reports have shown Reeves fattened his campaign war chest with contributions from people who handle state bond business that the treasurer oversees.
But Hewes should rattle another money management tree in Treasurer Reeves’ official domain where documentation indicates Mississippi taxpayers were short-changed at least $2.5 million from investment commissions in a 2006-2007 period and the self-proclaimed “watchdog” failed to bark. Trouble is no one seems to know who’s pocketing the money.
We’re talking about investments by the Health Care Trust Fund established in 2000 to invest in perpetuity funds from the state’s $4.2 billion settlement with the tobacco industry (paid over a 25-year period) for damage its product caused to Mississippians’ health. Reeves by law chairs the board charged with oversight of the HCTF.
A citizen, having used Freedom of Information requests to pry out of Reeves’ office records and minutes of the HCTF board meetings, uncovered and informed the board in a Dec. 16, 2008, letter instances of costly mismanagement of the multi-million dollar fund.
Essentially, the citizen’s letter made several allegations that the state (HCTF) had received only 10 percent of rebates from commissions paid to investment consultants or brokers. A standing contract on such investments dating back to Treasurer Marshall Bennett’s administration (prior to Reeves) calls for the state to recapture 50 percent of the commissions.
This writer has obtained much of the material uncovered by the citizen, attorney David C. Dunbar of Ridgeland. He asked to remain anonymous. However, since he is named in HCTF board minutes, I felt it necessary to identify him for full disclosure.
Dunbar’s findings (done with coaching from someone knowledgeable in the highly specialized field of investments) revealed that the state was shorted over $2.5 million from commissions on investments handled by vendors in the 2006-2008 period. It should be noted also that investments for HCTF were co-mingled with those of MPACT, the Mississippi Prepaid Affordable college Tuition Program which Reeves also oversees.
In effect, the investment commissions wound up in somebody else’s pocket other than the state. It’s troubling to learn that Dunbar (who has no pecuniary interest in HCTF’s affairs) had brought the discrepancies to the attention of the HCTF two and a half years ago. He then called on the board to have an auditor independent of the treasurer’s office make a complete forensic audit of his findings, and pursue collection of the missing commissions.
As revealed from the documents turned up by Dunbar’s whistle-blowing, an analysis of the allegations was ordered by Reeves, but rather than an independent audit it was made by an auditor previously employed by Reeves.
The responses given by the treasurer’s office and the auditor are mind-boggling. “Any efforts to ‘recover’ (commissions) would be legally futile as it is the manager’s (Reeves) discretion to direct trades,” said the auditor’s response. Dunbar, in a subsequent letter to HCTF board members had called the accountant’s analysis “glaringly superficial.”
Among the documents obtained by this writer was a March 17, 2009, letter from Attorney General Jim Hood to both Max Arinder, director of the PEER committee and State Auditor Stacey Pickering. Hood enclosed a copy of Dunbar’s allegations as well as the accountant hired by Reeves and asked both Arinder and Pickering to make their recommendations. Only Arinder responded, stating his committee had approved a preliminary inquiry. Hood got no response from Pickering.
I want to emphasize I have no dog in the Hewes-Reeves election fight because I don’t intend to vote in the Republican primary. However, as an inquiring reporter, and as I have previously written, I believe Reeves grossly exaggerates how much of a “taxpayer watchdog” he has been.
Columnist Bill Minor has covered Mississippi politics since 1947. Contact him through Ed Inman at edinman@earthlink.net.