Arkansas State Treasurer Martha Shoffner was arrested Friday in Little Rock by the FBI on a charge of public corruption dealing with extortion “under color of official right.”

Shoffner was to be arraigned Monday in federal court under the Hobbs Act.

A FBI spokeswoman would not specify what led to the arrest, or whether Shoffner had been told she was under investigation before the arrest. She is being held in the Pulaski County jail.

The treasurer has been under scrutiny for her handling of bonds in the state’s investment portfolio.

The Legislative Joint Auditing Committee turned over a report in December 2012 to state and federal authorities that found the state lost $434,000 when Shoffner’s office sold 30 bonds before their maturities.

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

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

Shoffner denied she had received campaign contribution or compensation from St. Bernard Financial Service in Russellville, which handled the transactions.

State auditors said the treasurer’s office purchased $1.7 billion in bonds from a broker at St. Bernard Financial, almost twice as much as from any other broker in the state. Most of the bonds were purchased when the broker worked at another firm, but the Russellville firm received orders totaling $500 million.

St. Bernard Financial Services issued a statement that the auditors’ findings of “economic loss projections contain assumptions that, although factual, are unrealistic.”

Shoffner, a Democrat and former state legislator, was elected to her first four-year term as state treasurer in 2006. She was re-elected in 2010.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.