Democrats call on Gov. Eric Greitens to renounce leader of Missouri’s fraud watchdog

Missouri Democrats continue to push for the resignation of Secretary of State Jay Ashcroft’s pick to lead the state’s consumer watchdog agency. And now they are hoping Republican Gov. Eric Greitens will join them.

On Thursday, House Democrats called on Greitens to renounce the appointment of Dave Minnick to lead the Missouri secretary of state’s securities division, which is responsible for protecting Missouri investors from fraud and ensuring that companies comply with state securities law.

From 2004 until taking the job as director of the securities division last week, Minnick was general counsel and senior vice president of St. Louis-based Stifel Financial Corp. The company is now under investigation by the securities division and has been investigated by the division several times in recent years.

Democrats also introduced legislation Thursday that would prohibit the secretary of state from appointing an individual to lead the securities division if that person had been previously employed by a company that has been under state or federal investigation within one year.

“Transparency is important when building trust, and Missourians deserve to know that the individuals appointed to these types of positions are not only qualified but clear of any conflict that may prevent them from doing their job properly,” said state Rep. Randy Dunn, a Kansas City Democrat.

In addition to hiring Minnick, most of the nonpartisan staff in the securities division lost their jobs when Ashcroft took over.

According to phone directories for the secretary of state’s office, there were 24 employees in the division in November. Fourteen of those employees are not listed on the January directory. Among those no longer employed in the division were three enforcement attorneys, the director of enforcement and the investigations manager, along with several lower-level administrative staff members. The division’s chief counsel and four investigators are among those who kept their jobs.

State Rep. Gina Mitten, a St. Louis Democrat, called the situation in the securities division “plainly unethical” and called on Greitens to denounce it.

“If Gov. Greitens is serious about promoting ethical behavior in public officials,” Mitten said, “he must call upon Secretary Ashcroft to withdraw Minnick’s appointment immediately.”

Greitens, a Republican, made cleaning up Jefferson City politics the centerpiece of his campaign. Since taking office last week, he’s made several moves on ethics reform, including signing an executive order on his first day banning executive branch employees from accepting lobbyist gifts and prohibiting his staff from becoming lobbyists while he is in office.

Ethics reform in state government was also featured prominently in Greitens’ State of the State address on Tuesday.

A spokesman for Greitens did not respond to a request for comment.

Democrats have been highly critical of Minnick’s hire. Last week the state Democratic Party chairman called for him to be removed from the job.

Maura Browning, Ashcroft’s director of communications, called the Democratic attacks “silly.”

“Secretary Ashcroft will hold all members of his staff accountable and the citizens of Missouri can be confident he will always hold his staff to a high standard,” she said.

Democrats remain skeptical.

“Investors in Missouri deserve to know that the secretary of state’s office is committed to protecting them from fraud,” said state Rep. Lauren Arthur, a Kansas City Democrat. “Minnick’s track record of running a company which was frequently under fraud investigations clearly indicates that protecting investors will not be his priority.”

Arthur also questioned whether Attorney General Josh Hawley supports Minnick’s role in the securities division.

Hawley also ran a campaign last year focused on cleaning up the culture in Missouri government. He implemented a strict ethics policy shortly after taking office and has vowed to create a public corruption union within his office to investigate and prosecute ethical violations in government.

The attorney general’s office also includes a consumer protection division. While the secretary of state’s securities division focuses solely on civil enforcement of securities laws, such as fraud by financial advisers, the attorney general’s office has the power to criminally prosecute those who violate state consumer protection law.

A spokesman for Hawley said the attorney general had no comment.

Stifel has faced several state and federal investigations in recent years.

In 2009, then-Missouri Secretary of State Robin Carnahan announced that her office had filed a civil action against Stifel for allegedly misleading customers who purchased a type of long-term bond called auction rate securities. Later that year the company agreed to accelerate a program to buy back the bonds as well as pay fines and costs associated with the investigation.

In 2010, Stifel was fined $130,000 by the securities division and had its state registration censured after one of its brokers admitted he was recommending transactions to investors that only benefited him.

In 2012, Stifel agreed to pay $530,000 to 10 investors across Missouri and three other states after a lengthy investigation by the securities division found one of its brokers sold shares in a fraudulent real estate investment to investors.

The federal Securities and Exchange Commission filed a lawsuit against Stifel in 2011 alleging the company defrauded five Wisconsin school districts. A settlement in the lawsuit was reached last year.

A spokeswoman for Ashcroft’s predecessor, Democrat Jason Kander, told The Star earlier this month that Stifel was currently being investigated by the securities division but details could not be released because the investigation is ongoing.

This story was originally published January 19, 2017 at 1:32 PM with the headline "Democrats call on Gov. Eric Greitens to renounce leader of Missouri’s fraud watchdog."