- Associated Press - Wednesday, January 15, 2014

DOVER, Del. (AP) - The state treasurer blasted the Markell administration on Wednesday for pushing legislation asserting that an unelected board dominated by political appointees, not Delaware’s elected treasurer, has authority over the state’s $2 billion cash investment portfolio.

Chip Flowers spoke shortly before a Senate committee took up a bill that gives the Cash Management Policy Board sole authority over investment decisions for the portfolio.

The committee later released the bill for a Senate vote on Thursday after a hearing at which Delaware’s secretary of state, who sits on the board, said Flowers wants to usurp the panel’s authority in allocating portfolio assets.

Secretary of State Jeffrey Bullock said Flowers has wanted to be more aggressive with fund allocations in an attempt to get higher yields for the portfolio, which holds money used to pay the state’s bills.

“The other members of the board did not agree with him,” Bullock said. “We said no, and the treasurer said ‘You can’t say no.’ “

Flowers acknowledged at the hearing that he has a “very contentious relationship” with other board members.

“I’m open to compromise…. Let’s put the personalities aside and let’s move forward,” he said.

Since taking office in 2010, Flowers has clashed repeatedly with other members of the board, a nine-member panel consisting of the treasurer, three other state officials and five gubernatorial appointees.

On Wednesday, Flowers suggested that the board’s political appointees may have conflicts of interest, based on campaign contributions and their ties to financial institutions that hold the state’s money.

“The truth is that I want to work with an honorable board operating with integrity, not a corrupt board seeking to use your money for their advantage,” Flowers said. “I want to do it the right way, not the corrupt way.”

On Tuesday, Gov. Jack Markell, who was elected treasurer three times before becoming governor, said the bill simply clarifies what has been common practice for some three decades.

Flowers said the bill should be amended to require board members to file financial disclosure statements, as other public officials do, and prohibit them from giving political contributions to the governor, treasurer, House speaker and Senate president.

Flowers also proposed term limits for board members and said the board must be subject to open government rules and public oversight.

House Speaker Pete Schwartzkopf said lawmakers already have discussed some of the proposals made by Flowers.

Lawmakers already have introduced an amendment striking a provision in the bill that would have exempted the board from Delaware’s Administrative Procedures Act. The APA specifies how state agencies can exercise their powers, including how they are subject to public comment and judicial review.

Schwartzkopf also noted that lawmakers have chosen to subject the board for scrutiny by a legislative committee that conducts periodic reviews of state agencies, commissions and boards to determine if they are performing effectively.

Lawmakers introduced the bill last year after several disputes between Flowers and other board members.

In November, the attorney general’s office, in response to a request from the board, ruled that it has sole legal authority to make investment decisions regarding the portfolio, and that the treasurer is subject to its directives. The attorney general’s opinion also said the board’s authority extends to decisions regarding asset allocation between short-term and intermediate-term investments, as well as allocations among different fund managers.

In 2012, Flowers released a report by Credit Suisse Securities that found that annual returns from the portfolio had not kept pace with inflation over the previous five years. Flowers quarreled with the Markell administration over his hiring of Credit Suisse. Markell’s office had language inserted into a budget bill that same year prohibiting the treasurer from retaining banking or investment services without the consent of the board. The bill also required that funds in the treasurer’s custody be invested consistent with board guidelines.

In addition to defending his efforts to oversee the investment portfolio, Flowers on Wednesday suggested he has been subjected to unfair treatment by the media over scrutiny of the use of state credit cards by himself and his former deputy treasurer. Both Flowers and Erika Benner have reimbursed the state for certain purchases.

“I’m not going to allow the media to impugn my character, good record and integrity or use the prejudices associated with my race to claim there was a problem with our state’s money under my watch,” said Flowers, who is Delaware’s only statewide, black elected official.

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