MA - Auditor's report raps O'Brien on oversight

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State Treasurer Shannon O'Brien has failed to impose stricter oversight of a $180 million fund that contains abandoned stocks, bonds, and mutual fund holdings, despite an audit last year urging her to do so, a new report says.

The report released yesterday by state Auditor Joseph DeNucci, said O'Brien has failed to regularly review the account, which fell in value by $30 million between January 2000 and July 2001.

The fund is managed by two Boston banks and contains assets turned over by financial institutions to the state after being abandoned by their owners.

The state must hold them for at least one year, and seek to return the stocks to their owners.

Treasury officials could not detail how much of the $30 million decline was due to owners claiming their assets, and how much resulted from the drop in the stock market, the audit says.

DeNucci said he had previously warned O'Brien to implement tighter controls over the fund. Such safeguards would protect the account against the sort of theft that took place in the 1990s when aides to then Treasurer Joseph D. Malone stole $10 million from another fund in the abandoned property division.

O'Brien and her top aides sharply disputed much of DeNucci's findings, saying they are in the process of implementing the changes that the auditor had called for, but said the process is long and cumbersome.

''We are trying to combat a number of years of non-compliance with the statute and, while we agree there is some work to do, we want to remind everybody of the significant improvements that have already been implemented,'' said Deputy Treasurer Michael Travaglini. ''Even the auditor has likened our task to turning the Queen Mary around on the Charles River.''

DeNucci also took O'Brien to task for failing to regularly sell off unclaimed stocks, bonds, and dividends in the fund, as required by law. The last sale of stock was in 1990 and the last sale of mutual funds was in 1997.

He says the treasury is required to sell the securities after holding them for one year, and to turn the cash over to the state coffers. Not doing so has cost the state millions of dollars in custodial fees paid to the two banks - Investors Bank and Trust Company and Fleet Investment Services, the DeNucci audit report says.

But O'Brien says her focus has been on returning the securities to their owners rather than selling off the stocks. She said her office returned a record amount of stocks to their owners over the past nine months.

''I have consistently focused my efforts on locating the rightful owners, rather than simply padding the Commonwealth's General Fund,'' O'Brien said.

Boston Globe

-- Anonymous, March 27, 2002


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