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 HARRISBURG, Pa., Feb. 3 /PRNewswire/ -- Pennsylvania Auditor General Barbara Hafer has called for a public meeting of the State Workman's Insurance Fund (SWIF) Board to evaluate the soundness of its $9 million investment in a private bank seized by the state for fiscal insolvency.
 "I am concerned about the security of depositors' funds, but at the same time I'm concerned about the state tax dollars being used to bail out failed banks," Hafer said. "The taxpayers deserve to know the current status of these types of investments. The taxpayers would have to foot the bill to reimburse the SWIF fund if the banks can't be sold, and that's wrong."
 The cause of concern came from a recent resolution by the state Board of Finance and Revenue authorizing the withdrawal of all inactive state deposits from Marian State Bank in Philadelphia. In a Jan. 28 letter to the state treasurer, Hafer wrote, "at the time the initial deposit of state funds was being considered, the Secretary of Banking represented that the Bank is a well capitalized FDIC-insured institution with strong management, in which the state funds may be deposited with assurance of their safety.'"
 "The fact that we are now acting to remove the deposited commonwealth funds causes me to have concerns about using SWIF monies to support the bank," Hafer said. "What changed, what happened to the strong management team? Has the bank's financial condition deteriorated under the state's management?"
 In April 1992, Hafer refused to sign an application for the deposit of state funds into Marian State Bank, which the state had seized days earlier claiming that it was insolvent. The Board of Finance and Revenue approved Marian's application without Hafer's signature. On Jan. 25, 1993, the state treasurer submitted a resolution to withdraw all inactive state funds in the bank.
 "Last April I refused to sign documents authorizing the deposit of $1 million in state funds without assurances of their safety," Hafer said. "Last week, however, I did not hesitate to sign the resolution to right a wrong.
 "It was a bad idea from the start," Hafer said in the Jan. 28 letter to the state treasurer. "As guardians of public monies, we must hold fast and carry out our duty, notwithstanding those who might wish us to do otherwise."
 On April 17, 1992, the state Department of Banking seized Marian Bank and branches of the Tobias Knoblauch Bank in Philadelphia and Reading. The state also seized the Pennsylvania Deposit Insurance Corporation, which insured the banks.
 Also in April 1992, the SWIF Board voted to invest $17 million in the Knoblauch Bank and $9 million in Marian Bank. According to the Department of Labor and Industry, SWIF wanted to recoup its $26 million by selling its interest within 24 months. The administration has guaranteed to cover any loss incurred by SWIF, including the average rate of return. Hafer stated that such financial transactions will be reviewed in a future audit.
 -0- 2/3/92
 /Editors: Related documents can be obtained from the contact. Sound bites on this topic are available to broadcast media 24 hours a day by calling 800-647-4883./
 /CONTACT: Steve Schell of the Department of the Auditor General, 717-787-1381, or 717-787-4486/

CO: Pennsylvania Department of the Auditor General; Marian State Bank;
 Tobias Knoblauch Bank ST: Pennsylvania IN: FIN SU:

MK-LJ -- PH032 -- 2497 02/03/93 14:33 EST
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Publication:PR Newswire
Date:Feb 3, 1993

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