Transcripts released in Krolicki case

Clark County grand jurors indicted Lt. Gov. Brian Krolicki after hearing key witnesses question the way he managed a multibillion-dollar college savings program while serving as Nevada treasurer.

The witnesses' statements are included in 424 pages of testimony amassed during grand jury proceedings prior to the Dec. 3 indictments of Krolicki and Kathryn Besser, his former chief of staff in the treasurer's office. They face arraignments Dec. 30 in Clark County District Court.

The first-term Republican lieutenant governor has denied the charges. He said the indictment was the result of "a secretive process" that was unfairly orchestrated by state Attorney General Catherine Cortez Masto, a Democrat.

The nine grand jury witnesses included Janice Wright, a former deputy treasurer in charge of the college savings program. Wright testified that she told Besser the Legislature had final say over the program's budget and was surprised when Besser said, "That's not true" and "he can do what he wants ... and he can exceed that authority."

Also testifying was Clark County Commissioner and former state Assemblywoman Chris Giunchigliani, who said Krolicki lacked legal authority to spend beyond his budget and utilize accounts that were separate from state accounts for the $3.7 billion Nevada College Savings Program.

"That would be off-line budgeting and in violation of the state (budget) act,"

Giunchigliani said at one point during her testimony before the grand jury.

Other witnesses included former state Budget Director Perry Comeaux, who served on a panel that oversaw the college savings program. Comeaux said he wasn't aware of any law that would have allowed Krolicki to handle various financial transactions outside normal state channels.

Kent Robison, one of three lawyers representing Krolicki, 47, said the attorney general's office was "dead wrong" in contending that Krolicki lacked legal authority for the way he ran the savings program.

"We disagree adamantly with that analysis," Robison said. "We fully believe that a completely different statute applies to the way the money for this program can be deposited and expended on behalf of the state."

"No money is missing or went into anybody's pocket," he added. "Reasonable minds may disagree on the statutes, but there was no criminal intent."

The indictment accuses Krolicki of two counts of misappropriation and falsification of accounts by a public officer, and two counts of misappropriation by a treasurer, but don't allege any funds were missing. The four counts all are felonies, and each carries a possible sentence of up to four years in prison.

Besser faces two counts, including being a principal to misappropriation and falsification of accounts and being a principal to misappropriation by a treasurer.

The indictments follow a 2007 audit that found budget controls were bypassed in the program. The indictment alleges Krolicki improperly accounted for money earned by the state through contracts with Upromise Inc., a company that creates college saving accounts. The company is not accused of wrongdoing.

When the audit was released, Krolicki said no laws were broken and money invested in the program was "balanced to the penny." The program helps parents to start saving early on for costs of sending children to college.

Kate Marshall, the Democrat who ran successfully for state treasurer when Krolicki

was elected lieutenant governor in 2006, had pressed for the audit, expressing concern about how the program had been managed.

Marshall also said she had heard reports of program records being destroyed and said when she took over as treasurer it was difficult to find the information that legislative auditors needed to complete their report.

Legislative auditors said more than $6 million in state funds was used to pay for program expenses, in excess of amounts authorized by lawmakers. Also, auditors said the funds were handled outside the state's accounting system and the treasurer's office hadn't set up accounting or internal control procedures.

The $6 million included more than $3.4 million paid by program managers to a plan adviser. Another $1.5 million was paid for marketing and advertising and nearly $1 million for legal services by a Sacramento law firm, at a rate of about $429 an hour.