DALLAS - An Oklahoma state, representative has filed a resolution calling for the impeachment of state Treasurer Claudette Henry, citing al legations that she neglected her duties when the treasury paid millions of dollars in excess brokers fees for securities trades.
"The loss of $6 million, the destruction of evidence, and the willful neglect of duty are serious. serious matters," said Rep. Russ Roach, D-Tulsa, who introduced the resolution in the state Capitol.
Roach's resolution is one of the latest developments in a controversy stemming from allegations that a former state Treasury official paid Planners Independent Management Co. of San Diego about $6 million in excessive fees for more than 60 trades from January 1991 to December 1992.
It also represents one of the few times that a state treasurer has faced impeachment. "It's highly unusual," said Milton Wells, director of federal relations for the National Association of State Treasurers. "It's only the second time I have heard about it in the last five years. [The first was] when the West Virginia state treasurer was subject to impeachment."
Under the Oklahoma resolution filed Monday, the House would be asked to establish a committee to investigate the activities of Henry, who was elected to a four-year term in 1990 and faces reelection next year. The committee would then submit a recommendation to the House for action.
"Veteran members have told me that the majority will vote for the resolution," said Roach. He has been told, he said, that he will receive both Republican and Democratic support when the Legislature convenes in early February.
But Henry's spokesman, Mack Spencer, called the impeachment move unnecessary and politically motivated. Henry is the highest-ranking Republican official in the state, Spencer said, and both the Oklahoma House and Senate are controlled by Democrats.
"We think it is redundant," Spencer said. "Other agencies have been investigating for a year, and no audit report has been released, and no criminal charges have been filed."
The controversy, which has been unfolding for more than a year, is being investigated by both federal and state agencies, according to Oklahoma media reports. The agencies include: the state Attorney General's Office; the Federal Bureau of Investigation; the Oklahoma Securities Commission; and the Internal Revenue Service.
The Treasurer's office also has been the target of a state audit - under the direction of Oklahoma Auditor and Inspector Clifton Scott - that outlines a number of possible state and federal violations.
While the auditor's report has never been released publicly, some information on the report's contents as well as the other investigations has surfaced.
The key issues include the trading practices of Henry's former chief trader, deputy, and longtime friend, Patricia Whitehead, who worked for Planners Independent Management before she joined the Oklahoma Treasurer's office in January 1991.
According to Henry's comments in July, Whitehead allegedly overpaid Planners millions of dollars in broker fees on trades for the state's portfolio, which normally amounts to about $1.5 billion in stocks, bonds, and other investments.
"An internal review of the Treasurer's office records has shown a pattern of deceptive practices involving Ms. Whitehead," Henry said in a July 23 statement. "As your state treasurer, I accept full responsibility for any actions taken by my former deputy. And I intend to seek every legal remedy available ... to recover any money due to the state of Oklahoma."
Henry said Whitehead, who resigned earlier this year, deliberately concealed the fact that she was trading with Planners Independent Management Co.
Under the program involving more than 60 transactions from January 1991 and December 1992, Planners collected fees for acting as the introducing broker-dealer to two other securities firms: Adler, Coleman & Co., and Mabon Securities Corp. However, Planners was never listed as doing business with the Treasurer's office.
State Auditor Scott said the profits earned by Planners amounted to more than 50 times the usual fees. "I don't think there is any question some major laws have been violated," Scott alleged. "I have been around here for 30 years, and I have never seen $6 million go out the window before."
He said his audit could be released soon after Oklahoma Attorney General Susan Loving, Oklahoma District Attorney Bob Macy, and U.S. Attorney Vickie Miles-LaGrange review the document. They are expected to decide what portions of the audit can be released without jeopardizing state and federal investigations and what role state and federal agencies will play in the investigation.
"There is room for all," Scott said. "The state of Oklahoma wouldn't have the resources or the authority to fully investigate it. The federal people need to handle certain aspects."
A spokesman for the attorney general said parts of the audit could be released as early as next week. "The attorney general would like to release as much of the auditor's report as soon as she can without affecting the criminal investigations," spokesman Gerald Adams said.
In addition to alleged overpayment of securities trading fees, the investigations also focus on several other issues.
A multi-county grand jury probe, for example, is expected to look at why the treasurer's office did not keep audiotapes on trading bids by Whitehead.
Roach and others are questioning why Henry fired two Treasury employees who said they told the state official of instances of possible embezzlement and fraud.
"She not only ignored them; she fired them," Roach said. "To my mind, that constitutes incompetence and willful neglect of duty."
Henry's spokesman Spencer responded: "The two employees were not fired because of whistle blowing."
Spencer declined to comment further because he said the agency's counsel had advised staff not to discuss the reasons for the dismissals until court hearings on lawsuits were held.
This fall, the two employees - Beth Rowton and Rebecca Bottoms - filed lawsuits claiming they were wrongfully fired for blowing the whistle on irregularities in the Treasury. In one lawsuit, Bottoms claims that Henry and Whitehead were "engaged in a fraudulent scheme in connection with securities transactions ... designed to ... defraud the citizens of Oklahoma."
The two employees' claims were featured on a recent report of the ABC television program "Nightline" and included a reenactment of their gathering and use of Whitehead's garbage to get evidence for an investigation.
Roach said the Nightline program heightened interest in the Treasurer's Office and the move toward impeachment.
Meantime, other political problems are focusing attention on the resolution for impeachment. Oklahoma Gov. David Walters also faces impeachment after being indicted on charges of violating the state's campaign finance laws - raising the prospect of two impeachments being considered in Oklahoma at the same time.
The Henry controversy also points to another coincidence. She won the treasurer's post in 1990 after she campaigned on a theme of restoring public confidence in the agency after similar problems emerged during the term of her predecessor Ellis Edwards. During Edward's controversial tenure several years ago, allegations were made that state Treasury traders made illegal investments and accepted kickbacks, but no indictments or criminal charges were made.
However, despite apparently deceptive prectices in the past, Henry said in July that the state's portfolio of about $1.5 billion is safe. The portfolio is largely made up of conservative investments, including U.S. Treasury bonds and certificates of deposit.
About $700 million in transactions were handled by nine securities firms in the quarter ended Sept. 30.
