BOSTON - Massachusetts state Sen. Shannon O'Brien said yesterday she will try to unseat incumbent state Treasure Joseph D. Malone this fall.

O'Brien, a Democrat from Easthampton, becomes the first challenger for Malone, a first-term Republican.

During Malone's 1990 campaign, his main message was the need to improve the state's slumping economy. O'Brien so far is singing the same tune.

"We want the treasurer's office to be a proactive one," said Jackie Price, a spokesperson for the O'Brien campaign.

O'Brien served in the state House of Representatives from 1987 to 1992, and was elected to the state Senate in 1992. She has served as the vice chairperson of the Senate Insurance Committee and the chair of the Senate Steering and Policy Committee.

She is a graduate of Yale University and Boston University School of Law.

"The most important thing that I want to do is get the treasurer's office to play a more active role in the people's live," O'Brien said in an interview yesterday. "One of my first priorities would be to assemble a committee of some of the best and the brightest minds in the state and decide how the office could help stimulate the economy."

For the last few years, the treasurer's office has not been responsive to the needs of the people, she said.

Although the state's credit rating has jumped five notches since Malone has been in office, O'Brien said he has still not satisfied the state's economic needs.

"I want to restore integrity to the office," she said. "Three years ago, Joe Malone ran on the position of ending the old fiscal shell game. But all he has done is start a new game."

Although Malone has achieved a high level of popularity in the state, his administration was rocked when the Securities and Exchange Commission subpoenaed information dealing with former assistant treasury Steven Kaseta.

Kaseta was forced to resign last year when a report from the state inspector general's office maintained that Kaseta ordered certain documents dealing with the state pension funds to be backdated. The changes gave the appearance that certain firms were qualified to do state financial work at a time when, records show, they were not.

Inspector general Robert A. Cerasoli said that six of the 10 firms that received pension fund contracts in 1991 did not meet the state's minimum financial requirements.

Malone has continually defended his management of the pension funds. Recently, he requested that the state's top two funds merge, asserting that the merger would save beneficiaries millions of dollars a year.

Within the next couple of weeks, O'Brien said, she will propose legislation that would increase disclosure requirements for firms that do business with the pension funds.

Since taking office in 1991, Malone has required all pension fund managers to disclose any third party involvement by political consultants. This was not done under the previous treasurer's tenure, Malone said earlier this year.

O'Brien said she wants to set up several debates with Malone during the campaign.

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