LISBON - State Rep. Nick Barborak said he was unaware the firm hired to invest county funds while he was Columbiana County treasurer had made investments that violated state law.
"Obviously, if that was something I was aware of I would have pointed it out to them. We relied on their professional advice," Barborak said.
His comments were in response to Wednesday's meeting of the county investment advisory board, where current Treasurer Linda Bolon reported at least two investments in corporate bonds were for longer periods than allowed by law.
Bolon discovered this following a review of the investment account she initiated upon taking office in January and after being advised by Barborak of a discrepancy in investment records that he was unable to resolve before leaving office in 2013 to begin serving as the county's state representative.
The discrepancy was due to the way interest income was being reported to Barborak by WesBanco. The investment firm was hired in March 2010 after the investment board authorized Barborak to negotiate a contract with First National Community Bank to invest $5 million in county funds through WesBanco.
Although no money is missing, Bolon concluded the problem resulted in interest income being overstated by $118,779, and at some point county commissioners will have to reduce the 2013 county general fund budget by that amount.
It was during the course of this review Bolon discovered that at least two of the investments violated state law, and there may be more because those were the only ones she was able to identify, due to lack of documentation that would provide tracking numbers for investments and other helpful details. She said the county investment policy and state law required the tracking information and other investment documentation be filed with the treasurer's office, which was not done.
Barborak said he provided WesBanco with copies of the county investment policy, and "they assured me they had other Ohio clients and were well aware of the regulations and requirements."
Barborak said neither FNCB or WesBanco provided him with details about specific investments during their periodic meetings, other than he knew the investments were "nothing risky that would result in losses or put the county in jeopardy, but a little more aggressive."
"The fact is we consulted on general strategies, on directions, but not on specific instruments. I relied on their professional judgment ... and we trusted they were compliant with policy and law because they were obviously aware of it and they assured us they were familiar with the policy and the law," Barborak said.
FNCB was interested in handling some of the county's investments, believing it could generate more interest income for the county through WesBanco, which is why Barborak said he arranged for them to make a presentation to the investment board.
As for the problem with the discrepancy in the interest income figures being provided, Bolon found the problem: The monthly income statements provided Barborak failed to point out that the figures included various investment fees being deducted.
Barborak said he became aware of the problem after the first several months and advised the state auditor's office when they were performing routine audits of county books. After speaking with them and meeting with investment officials and telling them what was needed to provide clearer records, Barborak believed the problem was corrected, but that was not the case.
"All through the process we believed we were booking the correct interest because we were told that by the bank and told that by the state auditors, and yet we couldn't get them to reconcile," he said.
On Thursday, Barborak sent an explanatory letter to the investment board, which is chaired by the treasurer and also consists of the county commissioners and county clerk of courts. Some of the commissioners were critical of Barborak for failing to alert them of the problem, but he said it was brought to their attention at a meeting.
"This isn't something we were hiding or concealing. The implication is we were somehow trying to hide this. That was not the case. We made the (state) auditors aware. I'm sure this came up at an investment advisory meeting," he said, adding board members were also provided reports showing the discrepancy.
When asked why Bolon was able to figure out the problem, Barborak attributed it to her experience (she was a state auditor before serving as treasurer from 2000-2006) and the fact she was able to obtain some records that he was not. He also served as treasurer for six years.
Barborak said the bottom line is no money was lost as a result of the discrepancy. The investment has earned $66,000 in interest income since mid 2010.
"I think it is important for people to realize that the investments, the money, is safe. It's there. This isn't a situation- I know some people alluded to the Strabala incident - this isn't that. It's nowhere near that. This is simply we were given the wrong numbers and we relied on them, and that's where we're at," he said.
The "Strabala incident" Barborak referred to is the 1993 investment scandal involving former treasurer Ardel Strabala, who illegally invested millions of dollars in county dollars through his son. The scandal resulted in the loss of $6 million in public funds and prison terms for both Strabalas.
Meanwhile, county Republican Party Chairman David Johnson has filed a public records request with Bolon seeking all documentation about the investment accounts, including emails between her and Barborak, both of whom are Democrats.
He is also seeking copies of other related information, including correspondence between Barborak and United American Capital Corp., which is the other investment firm used by the treasurer's office.
When contacted at home last night, Bolon said she has yet to receive the records request.
Johnson sent copies of his records request and an accompanying statement to the Journal, saying Barborak is to blame for the illegal investments and not WesBanco. "He was the responsible officer," he wrote.
Johnson also said a more thorough probe needs conducted, "and if I do not get immediate and full disclosure from county Treasurer Bolon, I will be calling for a full state investigation of this matter. In fact, even with disclosure I believe there needs to be a full, thorough and impartial investigation of what has occurred at the treasurer's office."