Grand jury indicts Lt. Gov. Brian Krolicki

LAS VEGAS — A grand jury has indicted Lt. Gov. Brian Krolicki, a Republican hoping to unseat U.S. Senate Majority Leader Harry Reid, on charges stemming from his management of a multibillion-dollar college savings program in his previous job as Nevada’s state treasurer.

The Clark County grand jury indictment handed up Wednesday names Krolicki and Kathryn Besser, his former chief of staff in the treasurer’s office. They face arraignments Dec. 18 in Clark County District Court.

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. 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, which don’t allege any funds were missing, were sought by Attorney General Catherine Cortez Masto.

The first-term lieutenant governor quickly called a news conference Wednesday to deny the charges. He said the indictment was the result of “a secretive process” that was unfairly orchestrated by the attorney general.

“I can now begin defending myself in the fairness of an open courtroom and can clearly demonstrate that these accusations are false,” he said.

Krolicki, 47, was the first Republican to announce his plans to run against Reid, who is up for re-election in 2010. He has said he was targeted for political reasons by Masto — and that Reid was involved.

Representatives of Masto and Reid, both Democrats, deny any politics were involved.

“The attorney general has had no conversations with Sen. Reid on this issue,” Masto spokeswoman Edie Cartwright said Wednesday. “And she does not operate this office in a partisan manner.”

“This really goes to the heart of making sure our government officials have transparency, that they’re accountable in everything they do,” Chief Deputy District Attorney Conrad Hafen said. Hafen wouldn’t comment on what prosecutors believe was Krolicki’s motive.

The indictments follow a 2007 audit that found budget controls were bypassed in the $3.7 billion Nevada College Savings 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.

Krolicki has disputed the report’s findings, saying auditors were “simply wrong.”

When the audit was released, Krolicki, first elected state treasurer in 1998 and re-elected to that post in 2002, 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.

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Associated Press writer Scott Sonner in Reno contributed to this report.

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On the Internet:

Clark County Courts http://www.clarkcountycourts.us/