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Originally published May 20, 2013 at 9:16 AM | Page modified May 20, 2013 at 8:52 PM

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Ark. treasurer accused of taking cash from broker

Arkansas' state treasurer was accused Monday of taking at least $36,000 in cash - sometimes stashed in a pie box - from a broker who later came to manage a large share of the state's $3.3 billion investment portfolio.

Associated Press

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LITTLE ROCK, Ark. —

Arkansas' state treasurer was accused Monday of taking at least $36,000 in cash - sometimes stashed in a pie box - from a broker who later came to manage a large share of the state's $3.3 billion investment portfolio.

Democrat Martha Shoffner, who made her initial court appearance Monday, said she had no plans to resign despite members of her own party joining Republican calls for her to step down. She was released on her own recognizance but ordered to surrender her passport.

Federal prosecutors allege Shoffner accepted $12,000 a year from a broker who would sometimes deliver cash in a pie box, with the pie included. They said the broker is cooperating with investigators.

"The allegations against Ms. Shoffner are serious and they completely erode the public trust that we put in our elected officials, if they prove to be true," U.S. Attorney Chris Thyer said at a news conference.

Outside the courthouse, Shoffner, 68, said she does not intend to resign. She was re-elected in 2010, and has faced inquiries over the past year about the way her office has handled state investments.

She didn't enter a plea Monday, but her attorney, Chuck Banks, said she'd plead not guilty at the appropriate time. A federal grand jury will decide whether to indict Shoffner, who is charged with attempt and conspiracy to commit extortion under color of official right.

The charges carry maximum penalties of 20 years in prison and up to a $250,000 fine. A next court date was not set.

Shoffner was arrested during a sting operation Saturday and spent the weekend in Pulaski County Jail.

"This has been a very, very tough proceeding for her and a tough weekend," Banks said.

An FBI affidavit filed in federal court alleges that a broker - unidentified in court documents - would roll up cash in $6,000 increments and have it delivered to Shoffner's office every six months. At least two of the payments were delivered in a pie box with a pie. The broker "recognized his/her bond business with the state grew because of the payments," the affidavit said.

The payments were made after Shoffner asked the broker for $1,000 a month to pay her rent in Little Rock, according to the affidavit. The document said the broker was granted immunity in exchange for his or her cooperation.

Legislative auditors last year questioned Shoffner's selling of bonds before they matured, a practice that they said cost the state more than $434,000 worth of earnings.

The state's top elected officials, including Gov. Mike Beebe, Attorney General Dustin McDaniel and U.S. Sen. Mark Pryor, called for Shoffner to resign.

"I think she should resign immediately," said Beebe, adding that the details provided by prosecutors are so specific that Shoffner has been rendered unable to lead.

"It would be very hard, in my opinion, for that office to properly function under her continued leadership," the Democrat added.

The heads of the Democratic and Republican parties also said Shoffner should step down.

"The incompetence that has been uncovered, the criminal charges that are pending, and the distraction from her office that due process will involve make her unfit to continue in her service as State Treasurer," Arkansas Republican Party Chairman Doyle Webb said.

Banks, Shoffner's attorney, said he "probably" would advise Shoffner to resign, but that the call is ultimately up to her.

"If she cannot properly perform her duties and responsibilities and still protect herself in a crime accusation, then to me it would be something for strong consideration," he told reporters.

Lawmakers could hold impeachment proceedings to remove Shoffner from office if she doesn't resign, but legislative leaders stopped short of saying whether they'd consider it.

Shoffner was arrested at her home in Newport after the broker agreed to record the meeting and bring $6,000 in a pie box, according to the affidavit. FBI agents executed a search warrant and found the cash inside a cigarette package in Shoffner's kitchen.

"Shoffner admitted she knew it was wrong to accept the payments," the affidavit said.

Thyer said he did not know how much the state had invested with the broker, or how much commission the broker made from the bond transactions. Thyer said it wasn't an easy decision for prosecutors to grant immunity to the broker, who he wouldn't name.

"It was a decision made out of necessity more than anything else," the U.S. attorney said. "At the core of this particular conspiracy as alleged in the affidavit there were two people, and if both of those two people remained silent we would not be here today."

The State Securities Department, which regulates brokers, said it would look into who made the payments to Shoffner and whether they were acting alone or on behalf of a firm.

"We're probably going to have to hunt this person down and we're going to do that," Securities Commissioner Heath Abshure said.

The CEO of St. Bernard Financial Services, the firm that legislative auditors said handled the bulk of bond investments by Shoffner's office, said he had not been contacted by the FBI.

Auditors said the office purchased $1.69 billion in bonds from St. Bernard and a related firm between July 2008 and March 2012, almost double the amount purchased from any other broker.

"If my broker is the one involved, I am not aware of it," Robert Keenan wrote in an email to The Associated Press. "At this time I don't believe he was, but anything is possible."

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Associated Press Writer Chuck Bartels contributed to this report from Little Rock.

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Follow Andrew DeMillo on Twitter at www.twitter.com/ademillo

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