Apache County treasurer calls allegations 'slanderous'

By Cindy Yurth
Tséyi' Bureau

CHINLE, May 17, 2012

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Katherine Arviso

A pache County Treasurer Katherine D. Arviso stated in a press release this week that her failure to properly apportion $6.5 million in investment losses since 2009 was an honest mistake that could have been brought to her attention earlier, and is not grounds for her suspension.

On May 8, the county's board of supervisors voted 2-1 to suspend her for 120 days, but because the vote was not unanimous, she is entitled to a public hearing and another vote.

According to Arviso's chief deputy, Karen Glennon, the board scheduled the hearing for Tuesday, May 15, but Arviso did not show up because she had not yet requested the hearing be scheduled and has not has a chance to meet with her attorney.

"According to the law, she has 10 days to request a hearing, and she has not done that yet," Glennon said Tuesday.

The board postponed the hearing.

In her press release, Arviso asks the public to "reserve judgment because I have not had a chance to tell my side of this issue."

She called County Manager Delwin Wengert's charges against her "slanderous," particular his statement that her administration had created "a culture in which embezzlement, 'floating' and other improper use of county funds was rampant."

"I have never committed such an act in my life and never would," wrote Arviso. "Nothing I have done comes close to being embezzlement. The accusation is a slanderous effort to disenfranchise my constituents, specifically, those Apache County voters residing on the Navajo Nation."

Arviso is one of several Navajos who have run for county office in recent years and won. Prior to the turn of the millennium, most county offices had traditionally been held by members of the Anglo minority. Indeed, until a groundbreaking lawsuit in the 1970s, Natives living on reservations in Arizona could not run for county office or vote in county elections.

In her statement, Arviso suggested District 3 Supervisor John R. Lee, the lone Anglo on the board, had Wengert trump up the allegations in order to discredit her in the upcoming elections, paving the way for his brother-in-law, Arviso's Republican challenger Richard Brower, to defeat her.

Arviso also implicated John Smith, a finance department employee and another of Lee's brothers-in-law, in the conspiracy. Arviso said Smith had offered to help her office resolve some problems turned up by an investigation stemming from the June 30, 2009, audit.

Instead, Arviso alleges in her statement, Smith took his findings directly to Wengert in a deliberate effort to smear her administration just in time for the election campaign.

Smith responded that he's just crunching numbers.

"I haven't taken a side," he said. "The board asked me to present the numbers, and that's what I did."

Smith said he is indeed Lee's brother-in-law, but the two never talk politics.

"I'm a quiet person," he said. "I don't socialize much. John and I have spoken about county business maybe twice in the last three years. To say we're in collusion is the farthest thing from the truth."

As for the suspicious timing of the revelations just as the campaigns are commencing, Smith said that's Arviso's own doing.

"This has been a finding on the audit since '09," he said. "The treasurer was reluctant to have somebody come in. She considered the investments her domain."

Arviso's statement also targets County Attorney Michael Whiting. She accuses Whiting of failing to prosecute the one person in her office who was caught embezzling (by Arviso's staff) in 2010; of not determining that Lee has a conflict of interest in the matter and shouldn't have been allowed to vote; and of "sabotaging" her case by convincing her first attorney, former Apache County Attorney Criss Candelaria, that he had a conflict of interest in representing her.

She also says Joe Young, Whiting's deputy, should not be involved in the case because he was formerly assigned to the treasurer's office and is "privy to information about myself, my office and our operations to use against me."

In a telephone interview and subsequent email, Whiting said the board was following its own policy by setting Arviso's hearing for the first board meeting after the split vote on her suspension.

"The board was correct not to move forward, even though (Arviso) was not there and her chief deputy, Karen Glennon, could not explain why," Whiting wrote.

He also said he advised Candelaria to step down from the case because he may be called as a witness at the hearing, since he worked with Arviso during the time the investment losses occurred.

Regarding Lee's possible conflict of interest, Whiting said only Lee can recuse himself from voting - no one can make that decision for him. Whiting did bring Arviso's concern to Lee, he said.

Arviso's accusation that Whiting never prosecuted the accused embezzler is unfounded, Whiting said.

"That case is still under investigation, and it appears there may have been embezzlement by more than one person," he said. "I need to know who to charge before I charge somebody."

He added that there is a possible hidden agenda in Arviso's camp as well.

"Karen Glennon is a former Republican lobbyist whose husband ran for supervisor and lost," Whiting said. "She's still holding a grudge about that. Since she came on board just 10 days ago, there have been two or three statements and press releases a day coming out of the treasurer's office. I can't even keep up with them.

"The unfortunate thing," Whiting continued, "is that all these personal accusations are deflecting our attention from what we should be focusing on, which is, What are we going to say to all these entities that now have to reimburse the county for all this money? Teachers are calling me, administrators are calling me, coaches are calling me saying, 'How could the county have let this happen? What are we going to do now that we've already signed contracts with our employees?'"

As for the disputed interest reporting, Arviso said she had used the same method to distribute interest earnings (or, in this case, losses) among the 200 or so county entities as had been used by her predecessor.

"This was discovered by the Finance Department when they stared helping my office last October," she wrote. "I was told about it only three weeks ago."

Because the entities that receive the funds - including several school districts on the Navajo Nation - were not advised of the losses, they have been operating on inflated budgets since at least 2009 and they will now have to find ways to repay the county up to $1 million (in the case of the Chinle and Window Rock Unified School District, two of the larger affected entities).

In additon to the $4.5 million in undistributed losses, the other $2 million discrepancy had to do with a Lehman Brothers bond. Although the value of the bond dropped after Lehman Brothers declared bankruptcy in 2008, Arviso's office did not reduce the fund balance in the account.

Arviso said she was waiting for the bankruptcy to be settled, on the advice of both the county's investment fund manager and the Wells Fargo Bank account manager.

"These actions are not embezzlement," she wrote.

Arviso said the reporting errors were largely due to her office being understaffed.

"I believe the board of supervisors is making every effort to shift all of the blame to me, when they are equally culpable," Arviso wrote. "The greatest neglect of all has been by the board of supervisors and county manager who have failed to provide me with enough staff for performing all the duties of the office."

Arviso has three employees and said she needs at least five.

The treasurer said she is confident she will be cleared after the hearing, and is continuing to perform her duties to the best of her ability.

"I am innocent of the outrageous allegations made against me," she wrote.

Lee did not return a phone call by press time on Wednesday.

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