County Manager, County Attorney didn’t know Brock switched custody of county's $600 million against contract with BCC, without vote

Collier County Manager Leo Ochs and County Attorney Jeff Klatzkow didn’t know that Collier Clerk of Courts Dwight Brock switched the company that will act as custodian of the county’s estimated $600 million investment portfolio, both men said at the end of Tuesday’s County Commission meeting in response to questions by Commissioner Georgia Hiller.

Naples City Desk broke the story Tuesday that Brock switched the securities custodian from the firm approved by Collier Commissioners in a signed Nov. 1 contract, Infinex Financial Group, to another firm, Louisiana-based First National Bankers Bankshares, without a vote of commissioners. Naples City Desk had been seeking a copy of the executed custody agreement in a public records request since Oct. 22, and Brock’s Office provided the new agreement on Monday, Nov. 17.

Who acts as a third-party custodian for Collier County’s $600 million investments and how they are handled is important.  Custodial agreements are important because having a separate third party custodian for securities is a key mechanism to prevent fraud. For example, in the Bernie Madoff Ponzi scheme, Madoff did not have a separate independent custodian, and hence a separate set of eyes to verify that he had actually purchased the securities he said he did with customers’ money.

Hiller said Tuesday that Brock violated the county’s investment policy and violated the contract approved by Collier County Commissioners on Sept. 23 when he changed the custodian of the county’s securities without a vote of Collier County Commissioners, which is a party to the county’s master banking contract. A new custody agreement was signed by Brock and Sen. Garrett Richter, the founder of First Florida Integrity Bank, on Nov. 14, and Brock provided it in response to Naples City Desk’s public records request. 

Reached late Tuesday, Richter said the change from Infinex to First National Bankers Bankshares was needed to conform to Collier County’s investment policy, which is approved by the Board of County Commissioners. Richter acknowledged that his firm included Infinex as part of his company’s original bid for the banking services contract.

“The Infinex situation didn’t seem to meet the policy,” Richter said. He said the investment policy calls for a national bank or a Florida bank.

When asked if Collier County Commissioners needed to vote to approve the change of custodian, Richter said no. “That’s a very small part of the whole process,” Richter said. “The custodial services was just a small part of the [master banking services contract].”

When asked if the securities had been transferred to the new custodian, Richter said: “Probably not.”

Brock has not responded to questions from Naples City Desk about the new custody agreement with the Louisiana firm.

The county’s banking contract with Fifth Third Bank ended on Nov. 1, 2014.

“The contract provided for Infinex Financial Group and that was what was approved by the board and custodial contacts are to be approved by the board [under the county’s investment policy] and I’m not sure how this entity was selected without any competitive bid,” Hiller said. “I’d like the county attorney to look into the legality of what was done.”

In response to Hiller on Tuesday, Brock’s Finance Director, Crystal Kinzel, said: “The custodial agreement is still through First Florida Integrity Bank [Richter’s Bank] but it is a totally separate agreement with a separate custodian.”

Kinzel said Brock, in his elected role is the custodian of the county’s money. “Per the Constitution, the Clerk is the custodian of county funds and per state statute handles the investments of those funds,” Kinzel said.

Brock is required to comply with the investment policy that’s established by Collier County Commissioners.   

Continue Reading? 

To read this full story -- and the Naples City Desk archive of more than 100 stories, SUBCRIBE to Naples City Desk! Your grassroots subscription supports the production of this independent journalism. 

Reporting by: Gina Edwards

Dateline: Naples, Fla., Nov. 19, 2014

Contact Gina Edwards at 239-514-1336 or by email at ginavossedwards@gmail.com