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Letter to the editor

Repay fund, Hillsborough official demands

The Hillsborough clerk says borrowing among accounts violated state law.

By TOM ZUCCO, Times Staff Writer
Published December 14, 2007

As city and county governments rushed to pull their money out of a troubled state investment fund last month, the State Board of Administration borrowed money out of other government accounts in the fund.

That, says Hillsborough County Clerk of the Circuit Court Pat Frank, is illegal. And she is demanding those who withdrew money be forced to repay at least part of it.

In a strongly worded letter to Gov. Charlie Crist, Florida Attorney General Bill McCollum and Florida Chief Financial Officer Alex Sink - the trustees of the SBA - Frank cites state law that the SBA must keep separate accounts, and that if overdrafts occur, they must be repaid.

Frank said several Hillsborough entities, including the School Board and Sheriff's Office, kept their money in the fund while other fund investors were pulling out and taking part of Hillsborough's money with them.

"The SBA should be compelled to obtain the return of the funds ..." the letters states.

Dated Dec. 10, the letter came to light Thursday when Hillsborough County Commissioner Jim Norman told colleagues at an Environmental Protection Commission that he had a "very important letter from Pat Frank."

Norman waved the letter in the air, saying the county needed to act "immediately."

"This is very serious," Norman said, adding that the county had to protect about $110-million of county money in the fund. Norman said his reason for bringing the matter up was to get the county attorney involved.

SBA spokesman Mike McCauley said Thursday he had not seen Frank's letter, but had heard concerns from other investorswho had kept their money in the fund.

"There are folks who did stay in (the fund) and feel the losses should be borne by everyone," McCauley said. "There's been a lot of legal evaluation of this that's ongoing."

The SBA, which manages about $180-billion, came under fire last month for management of the Local Government Investment Pool, a short-term investment vehicle for cities, counties, school boards, universities and other government entities.

Those investors learned last month that some of the pool's assets were riskier than expected. Assets bought for about $2-billion have been downgraded and in some cases defaulted.

That led to a run on the fund and forced the SBA to halt withdrawals for a week. The fund reopened on a restricted basis last week and now holds about $10-billion in assets, about a third of its original size.

Times staff writer Michael VanSickler contributed to this report.

[Last modified December 13, 2007, 23:06:50]