|
 State Treasurer John Chiang and Senate President Pro Tempore Kevin
de León said they would conduct legislative oversight hearings to
ensure that government bonds were safe from fraud, abuse, and
mismanagement.
The hearings follow the disappearance of nearly $1.3 million of bond
funds held by the Association of Bay Area Government (ABAG), an
organization that issues bonds for local governments, nonprofits and
private entities, the Treasurer's office said.
The missing money was earmarked for infrastructure improvements in
downtown San Francisco and was controlled by ABAG's Finance
Authority for Nonprofits (FAN), a separate entity from ABAG but
whose workers are ABAG employees.
 Clarke Howatt, who resigned as FAN's financial services director,
appeared to have "executed a sophisticated scheme to defraud the
agency by creating illegitimate documents, creating false
identities, and deceiving the FAN board and bank trustees to wire
these funds," ABAG said in a Jan. 30 statement.
State Controller Betty Yee said on Thursday that her office would
conduct an audit of ABAG following the theft allegations, which her
office described as "a sophisticated scheme involving illegitimate
documents, false identities and deception of the finance authority’s
board and bank trustees."
ABAG's Deputy Executive Director Brad Paul said the association
would work with investigators.
"We want to learn as much as we can from a forensic audit," Paul
told Reuters on Thursday. "FAN is financially siloed from every
other ABAG program. Mr. Howatt did not have access to any other
money at this agency."
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Howatt's attorney did not immediately reply to an email seeking
comment.
California and its local governments issued more than $700 billion
in public debt over the last decade, the state treasurer's office
reported.
"The ease in which one of ABAG’s leaders allegedly fleeced more than
a million dollars in bond funds raises concerns regarding whether
there are sufficient safeguards at the thousands of State and local
agencies which are responsible for nearly three-quarters of a
trillion bond dollars," said Chiang in a statement.
Senator Bob Hertzberg (D-Van Nuys), chairman of the Senate Committee
on Governance and Finance, will lead the legislative hearings,
focused on finding problems and solutions to avoid abuse and waste.
"These abuses of the public's trust are shocking and should serve as
a wake-up call to local and state governments," said Hertzberg.
(Reporting By Robin Respaut; Editing by Andrew Hay and Ken Wills)
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