BISMARCK -- Incumbent state Treasurer Kelly Schmidt is endangering the Veterans' Postwar Trust Fund by putting its funds in risky investments, her opponent said Monday.
"This fund is bleeding out, and it needs to be stopped right now," said Democrat Mitch Vance of Bismarck, who is seeking to unseat Schmidt, the Republican seeking her second term.
He said the losses amount to at least $200,000.
"This is not just paper losses. This will translate into loss of benefits," Vance said.
Schmidt countered that her investment choices are sound, pointing to the fact that the fund has lost less than most investments in this year's stock market downturn.
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The fund is used for hardship grants to North Dakota veterans for glasses, hearing aids, dentures and rides to the Veterans Administration hospital in Fargo.
Vance took his allegations to news conferences in Fargo and Bismarck on Monday and continues with another in Minot this morning.
He said that after Schmidt took office in January 2005, she took $2 million out of Treasury Inflation Protected Securities, commonly referred to as TIPS, which provide a hedge against inflation plus a modest return, and put them into marketable securities and bonds through a retail brokerage, Edward Jones.
Vance said the proper manager of the fund is not a retail broker but the state Retirement and Investment Office, which would not charge fees as high as Edward Jones and would not expose the fund to risk.
Vance said 72 percent of the fund's total assets are in the marketable securities.
He said that, had funds remained in TIPS, it still would be making money, He said the fund, which was worth nearly $4.6 million in December 2004, is now worth $4.3 million. TIPS worth nearly $4.6 million in December 2004 are now worth $5.2 million.
Schmidt said that bonds and marketable securities at Edward Jones are worth about $3.18 million; the money market account, also at Edward Jones, is $175,800; CDs at various North Dakota banks are worth $1.07 million, and a money market account at the Bank of North Dakota has $38,800, for a total of slightly less than $4.5 million.
Vance said state auditors scolded Schmidt this year for not complying with "the prudent investor rule" in state law, citing working papers state auditors generated during a regular audit of the treasurer's office for 2005-07 biennium. Schmidt said she was given no such warning. That is probably true, said the auditor in charge of the audit.
