Call the cops, but ignore the newspapers: two state treasurers talk about scandal.

SANTA FE, N.M. -- Both are first-term state treasurers. Both were hit by headline-grabbing accusations of wrongdoing, and both went down to defeat in primaries this year.

And both told their stories to their fellow treasurers at a conference here this week. David King of New Mexico and Claudette Henry of Oklahoma said negative publicity played a part in their downfalls.

"I went down fighting," said Henry, who joined King -- and state and federal prosecutors -- on a panel discussion Tuesday at the annual meeting of the Western State Treasurers Association.

The panel was moderated by Arizona Treasurer Tony West, who described his experiences in thwarting an attempted $2 million embezzlement. The panel was titled "Investments: Scares and Frauds, Opportunities Too Good To Be True, Lessons To Be Learned."

"The smartest thing we did was to go to law enforcement authorities," New Mexico's King said, his voice cracking with emotion at the conclusion of a detailed and gripping talk about the alleged bribe attempts made to him.

But King became testy a moment later when John J. Kelly, the U.S. attorney for the New Mexico district, said treasurers who learn of potential scares must "go to law enforcement as early as possible."

"It's real fun to get up here to tell us all the good things to do, but I want to see the [law enforcement] agencies do their job," King said. "We got hit" by an alleged seam attempt in 1991, he said, but "the SEC notified us in November of 1993 to look out" for the same fraudulent investment opportunity.

"One thing you will find," King told treasurers, "is you are not going to get too much help from the agencies."

King did not mention his June primary loss to Democrat Michael Montoys, who defeated King by a margin of 54% to 46%. Because Republicans did not field a candidate for state treasurer, Montoya will face a Green Party candidate in the Nov. 8 general election to determine New Mexico's next treasurer.

In Oklahoma, meanwhile, Republican Bob Keisler beat Henry by a margin of 75% to 25% on Aug. 23 in that party's primary. The November general election challenger to Keisler will be decided in a Sept. 20 Democratic primary.

Henry said the allegations that have swirled around her are being investigated by a number of state and federal agencies -- "everybody who has an initial."

"The bottom line is that when people went to the polls last week to vote, it was totally ignored that, in spite of all this [negative publicity], I probably am the most progressive treasurer we've ever had in Oklahoma," Henry said. "Every program we've implemented has made money for the state. We've done extremely well in our investments."

West, the panel's moderator, praised King for the way he handled a disgruntled former state employee's alleged attempts to bribe and intimidate King in an investment scheme.

Noting that court actions are pending, West said, "We've only heard one side of it, but I happen to believe everything David [King] has told us."

King said he was offered a $50,000 campaign contribution in January 1993 in return for his willingness to participate in the investment proposal.

The New Mexico treasurer described a meeting with potential businessmen, recalling "one guy out of New York" who said: "We're real impressed with you. You got a really bright future here ... You're the kind of guy who is qualified to work with our program ... You could be a United States senator ... We think you're the kind of leader for New Mexico."

"I said, 'Well that's nice,'" King recalled. "They said, 'We would like to give you $50,000 as an initial contribution.' I said, 'Well, that's more than I spent in my whole primary.' ... I said I don't want any contributions from them."

Later, as part of a law enforcement investigation, King wore a secret recording device, and proponents of the alleged scheme tried to bribe him again.

"They [said they] didn't want to rough me up -- one of the guys might be a hit guy, but they don't want to hurt me," King said. "They didn't want me to have to look under my hood every morning ."

During the meeting, one person said, "'Look, we'll make it worth your while, we'll give you $10,000 a month,'" King said.

Neither King's office nor any other New Mexico state agency ever participated in the alleged scheme, which reportedly involved investing in standby letters of credit issued by top banks.

Oklahoma's Henry, meanwhile, described the pressure she was under when media coverage of events occurring in her office ultimately led to a nationally broadcast television news magazine show about the situation.

"What I have gone through in the last four years, I've related this to an extreme out-of-body experience," she said.

Henry said problems began mounting early in her administration when she fired an employee for running up a $3,000 bill on an office mobile phone, a bill "that she refused to pay back. She turned around and went to the state attorney general's office and said, 'I've been fired because I blew the whistle on the treasurer's office.'"

Scrutiny of the Oklahoma treasurer's office intensified when the fired employee charged the treasurer's investment officer with "receiving kick-backs from a firm that she [the investment officer] used to work for," Henry said. Henry described the investment officer as a best friend she has known for 20 years and someone who worked on her campaign. Based on later developments, Henry asked the investment officer to resign.

Henry said the state attorney general investigated her office, then turned its examination over to the U.S. attorney's office eight months ago. Moreover, the Federal Bureau of Investigation and the Internal Revenue Service have been involved "almost from the beginning," she said. Three weeks before losing her primary bid, Henry testified before a federal grand jury. The supposedly confidential testimony was leaked to the press, she said.

The Oklahoma treasurer said that one area under investigation is the assertion that "we paid too much for securities" and that the "excess money" went "into the pockets" of a firm that had given Henry a campaign contribution, which she later returned.

"I've been dissected, indicted, and convicted in the news media for almost four years now," Henry said. Yet "no charges have been filed, nothing has been substantiated."

In response to questions from West, other panel members provided their opinions about what lessons can be learned from King's and Henry's experiences.

"You will be presumed guilty by newspapers if anything comes up relating to your offices because you are guardians of public money," said Mike Cudahy, chief counsel for the criminal division of the Arizona attorney general's office. "There is a natural suspicion of anybody who is a public official," he said.

"In my opinion, don't accept political contributions from anybody that your office deals with in any way, whatsoever," Cudahy said. "Immediately, it is going to raise suspicions, if any problem comes up, that this is a kickback, a bribe, or whatever. If you have to run a shoestring campaign, well then, that's the way it is."

Cudahy described how a former employee of the Arizona treasurer's office, since jailed, attempted to embezzle $2 million, but all the money was recovered. He credited the successful resolution to Treasurer West's close ties to law enforcement. "The moral of the story is you have got to develop a relationship with law enforcement," he said.

Kelly, the U.S. attorney for New Mexico, said, "I know that as an elected official of an important state agency, you don't like to believe that the people you are dealing with are crooks. They are doing everything they can to persuade you they are good guys and their investments are legitimate."

But Kelly said, "Those calls [to authorities] need to be made as soon as it starts to smell bad."

"This is an education for me," Kelly said after listening to King's story. "I am really shocked at this kind of salesmanship ... These are door-to-door salesmen, at best. I find it incredible that they are able to get the access that they do get to elected public officials. The only thing I can suggest is, call early. Call your state attorney general, your district attorney, your United States attorney. Ideally, David would have been wired in earlier than he WAS."

"What David did, from my judgment, was an act of courage," West said. King "did the right thing ... He saved me, he saved Claudette [Henry]. He saved other state treasurers [because] had they made a foothold [in New Mexico], they would have been able to pyramid that."

West said if King had done business with the perpetrators of the alleged scheme, they would later have approached him and said, "We're doing all this for the great state of New Mexico, and we would like to empower and enrich Arizona even more."

West told the treasurers, "We have an obligation to report to proper law enforcement authorities [in order to] interdict these types of scares and frauds so they don't perpetuate themselves around the nation."

The Arizona treasurer said he told a New Mexico newspaper reporter that New Mexico "should be proud to have a treasurer like David King... because he did exactly the right thing and protected the taxpayers' money ... That was never printed."

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