DALLAS – Arkansas Treasurer Martha Shoffner told a legislative panel Monday she did not know the reasons behind premature bond sales from the state’s investment portfolio that resulted in a net economic loss of almost $900,000 over the past two years.

The report from the Division of Legislative Audit said the state lost $58,173 in 12 bond transactions with a par value of $240 million with sales by the treasurer’s office between July 1, 2011 and May 17, 2012.

The treasurer’s office lost money by selling the bonds to brokers before the call date and then replacing them with similar bonds, the audit found, even though some of the bonds sold above par.

“I don’t know that answer. I’ll have to research that,” Shoffner replied when asked why the bonds were sold early by Sen. Linda Chesterfield, D-Little Rock.

In 11 of the sales, the auditors said the treasury replaced the sold bonds with new bonds paying a lower interest rate.

Similar practices resulted in economic losses of $835,931 in fiscal 2011, deputy legislative auditor Jon Moore said.

Shoffner came before the Legislative Joint Auditing Committee after subpoenas for contempt was issued Sept. 14 by co-chairs Sen. Bill Pritchard, R-Elkins, and Rep. Tim Summers, R-Bentonville, when she did not appear as expected at Friday’s audit review session.

Shoffner told the lawmakers she did not remember any warnings from the professional staff about the premature sales, but chief investment officer Autumn Sanson said she had written logs detailing her advice to not sell the bonds.

Shoffner denied receiving any warnings from Sanson.

Sanson asked lawmakers if she would be protected by the state’s whistle-blower law if she testified, and was advised to retain an attorney. A judge must determine if the coverage is available.

Shoffner agreed to take no action against Sanson, Chief Deputy Treasurer Debbie Rogers, or chief financial officer Melissa Corrigan until completion of a detailed audit mandated by the committee on Monday.

The committee asked for a review an additional 16 bonds sold before maturity during Shoffner’s tenure to determine if the transactions resulted in losses or gains.

Sen. Jonathan Dismang, R-Searcy, who requested the additional audit, said Shoffner is mismanaging the state’s investments.

“For you to sit there and not to be able to answer any of the questions on the transactions, I think it’s a problem,” he said.

The treasurer’s office has not sold any of the bonds it holds as investments since February, Shoffner said, and “will not sell again until there are better yields in money markets for the time between purchasing bonds and the actual settlement date.”

St. Bernard Financial Services Inc., Russellville, Ark., was involved in the transactions that created the $835,000 loss. The firm received a letter of caution in August from the Arkansas Securities Commission.

In a written statement, the firm said the auditor’s loss projections from the sale are factual but unrealistic.

“The bonds that were sold before being called were sold for sound economic reasons, either to capture a gain or in one case to reduce a loss,” St. Bernard said. “They were not sold just to generate a commission.”

The treasurer’s office sold 29 bonds before they were called or reached maturity between September 2009 and February 2012, the audit division said.

Shoffner, a former three-term Democratic state representative, was elected to her first four-year term as treasurer in 2006 and reelected in 2010.

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