From: Kurt Prenzler, Madison County Treasurer
Date: June 15, 2010
Subject: Press Release
Today, Kurt Prenzler, Madison County Treasurer, announced that he has liquidated the approx. $41 million of bonds which were illegally purchased during the administration of former treasurer Frank Miles. Miles was appointed County Treasurer by County Board Chairman Alan Dunstan.
Prenzler said, “One of the main duties of a county treasurer is to invest the county’s money, and Illinois law requires that a county treasurer establish investment guidelines. In 2001, former treasurer Fred Bathon established investment guidelines that prohibited investing in bonds with maturities greater than 10 years.”
Prenzler researched the investment policies of other Illinois counties and learned that Illinois counties rarely invest in instruments beyond a 2-year maturity.
Soon after taking office on December 1, 2010, Prenzler, a Certified Public Accountant, discovered bonds in the county’s portfolio with maturities of 12 to 15 years, which violated the investment guidelines.
“I was shocked,” said Prenzler, “because long-term bonds are risky, meaning that their values can greatly fluctuate with changes in interest rates.”
“Illinois law requires that the county’s money be invested to ensure a) safety, b) liquidity, and c) yield – in that order,” said Prenzler. “These bonds were neither safe nor liquid.”
“After discovering the illegal investments, we closely monitored their values,” Prenzler said. “At one point this Spring, the bonds had lost – on paper – over $3.5 million. We were fortunate that long-term interest rates declined this Spring. The market gave us an opportunity to exit these risky and illegal investments for a minimal loss, and we took it.”
Last week, Prenzler sold the bonds to limit the loss to approx. $360,000, which is approx. 1/10 of the maximum loss exposure earlier this year.
Prenzler continued, “Over 90% of the loss stemmed from bonds purchased after the 2010 election and before I took office on December 1, 2010. We have many questions about what went on between the election and my swearing-in. The bonds were all purchased from one bond dealer in Little Rock, Arkansas – without competitive pricing.”
In contrast, Jeremy Plank, Chief Deputy Treasurer, got competing bids from 6 different companies as he supervised the sale of the bonds. “Getting competing bids is simply good business,” said Plank, who is also a Certified Public Accountant.
After discovering the illegal investments, Prenzler notified State’s Attorney Tom Gibbons and urged Gibbons to take legal action to recoup the County’s losses. Gibbons has been working closely with Prenzler and Prenzler referred all questions of a legal nature to Gibbons.
County Board member Chris Slusser, R-Wood River, said he is glad to hear that proper due diligence is now taking place with the county’s portfolio.
“As a former registered investment advisor,” said Slusser, “suitability is the number one factor in investment decisions. The portfolio now seems to be suitable under the guidelines.”
County Board member Tom McRae, R-Bethalto, said, “It is refreshing to see what Mr. Prenzler and Mr. Plank have accomplished in their short tenure. This is proof that their qualifications matter.”