If Lt. Gov. Brian Krolicki hadn’t launched his first-strike offensive, his indictment Wednesday would have been a huge surprise. But because he went public beforehand, insisting he was the victim of political shenanigans, the seed was planted that his indictment was nothing more than a political assault by Democratic Attorney General Catherine Cortez Masto serving as the tool of U.S. Senate Majority Leader Harry Reid.
Unfortunately for Republican Krolicki, the factual timeline doesn’t support his assertion, no matter how forcefully he makes it.
Krolicki launched his offensive Nov. 24, saying Reid was behind the indictment and noting that only a few days earlier he said he might challenge Reid in 2010. But an audit by the Legislature, which first raised questions about Krolicki’s handling of the Nevada College Savings Program when he was state treasurer, is dated Dec. 31, 2006.
While recognizing Reid’s prodigious skill for political gamesmanship, it’s unbelievable that two years ago he was working non-partisan legislative auditors to issue a hard-hitting audit against a potential political rival so that an indictment would pop up in 2008.
Cortez Masto hasn’t shown any evidence of partisan game-playing as attorney general. Some of her legal efforts have hurt Democratic interests, such as term-limiting Regent Thalia Dondero and investigating ACORN, the Democratic-leaning voter registration group. If she conducted her job wearing partisan blue glasses, we ought to have seen evidence before now.
Krolicki has done an excellent job of sowing doubts with any potential jury pool with his accusations. Instead of a headline “Krolicki to be indicted soon,” the Las Vegas Review-Journal went with the banner “Krolicki blames Reid for inquiry.” Score one for Krolicki.
The only real surprise in Wednesday’s indictment was that his chief of staff, Kathy Besser, was indicted alongside him. She also was his chief of staff when he was treasurer.
The indictment charges Krolicki with misappropriation and falsification of accounts when he was in charge of the college savings program from its start in July 2001 until he left office Dec. 31, 2006. Besser is charged with being a principal to the crimes of misappropriation and falsification.
Basically, the indictment alleges the duo didn’t turn over program earnings of “$250 or more” that should have gone to the state and kept false and fraudulent accounts of the program earnings and the marketing and administration funds. Half of the six charges deal with not turning the money over to the state, and half deal with the marketing and administration accounts. The indictment focuses on contracts with Upromise Inc., Upromise Investments Inc., Strong Capital Management Inc. and Strong Investment Inc.
The college savings program established in 2001 is a way for Nevadans to save money for higher education expenses through tax-free investment methods, commonly called 529 plans. At the end of 2006, the program had assets of $3.3 billion. It had earned $11.2 million. Krolicki gave $5.2 million to the state’s general fund and held back $6 million to administer the program.
Don’t worry that your child or grandchild’s college fund is in danger. It’s not. The audit was clear. “Although participant money in the Nevada College Savings Program was properly handled and accounted for, money earned by the state was not.”
The audit, which Krolicki disputes, made it sound as if the treasurer were running the program as his own fiefdom, separate and apart from the state.
Some of the audit’s concerns suggested the treasurer wasn’t following the most basic accounting rules. He didn’t provide annual financial statements. He didn’t require much verification of expenses from contractors. He didn’t follow Nevada law when contracting services. A law firm received almost $1 million, an overpayment of nearly $96,000, because it was paid $429 an hour rather than the $225 provided in the contract. And while the Legislature approved $1.6 million in expenses to run the program for five years, Krolicki spent more than $7 million — overspending by more than $5 million.
Because he isn’t accused of embezzlement, the question now is: What would his motive be for overspending?
When the grand jury transcripts become public, we’ll see if any mention is made about all those televised promotional ads for the college savings program featuring Krolicki in 2006 — when he was running for lieutenant governor.
Jane Ann Morrison’s column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison/