Good Morning. Thanks for giving me time to speak today.

I know you have a tight schedule so I

will be brief.

First off, I believe very strongly that service as a public official is a public trust. When I learned
about the substance of the Oregonian investigation into our travel practices shortly after being
appointed by Governor Kulongoski, I immediately understood both the public perception issues and
the need to bring our policies more in line with other state agencies. Starting nine months ago, I
took immediate action to address the most pressing issues.

I started by asking the State Treasury’s internal audit service to examine the concerns raised by the
Oregonian’s articles and I made some immediate changes to the travel policy. I then asked the
Secretary of State’s audit division to do a review of the investment division’s travel documents to
pinpoint any problems. Finally, I appointed a respected group of Oregonians to advise me on what
changes we should make to ensure Treasury’s policies meet the public’s expectations.

The Secretary of State’s report, as you have seen in your materials, “found no pattern of abuse of
OST travel policies” and agreed with me on the need to strengthen and clarify policies, procedures
and management oversight, which we have done.

I believe it is important to point out that the actual policies Treasury had been following for years
before my tenure were developed by Treasury staff in cooperation with Department of Justice staff
who are responsible for advising us on aligning our policies with state ethics laws.

I also believe our new policies are now some of the strongest in the nation. I have asked this ethics
commission to review the new policies to make sure everything we have put in place is in
accordance with state ethics laws. The fact that I made changes to our travel guidelines does not
mean that I believe staff was breaking existing policy at the time. I believed our policies needed to
be strengthened because even in a highly specialized branch of State government like Treasury we
need to uphold the perception of what is and is not acceptable for public employees.

As you deliberate on this matter today, please keep in mind the following:
 Travel is a job requirement for investment officers – not a perk. Full participation in all
business of the Limited Partnerships we invest in is essential if Oregon if to maintain our
standing as one of the top performing pension funds in the United States.
 Even if you accept all of the allegations of ethical lapses in this matter – which we do not
– there was no intentional misconduct by Treasury Staff or any effort to obfuscate
mistakes. Moreover, staff reimbursed the agency for all clerical errors. In fact, during our
review, we discovered instances that employees weren’t adequately reimbursed for their
travel.
 Recruiting and retaining highly qualified investment officers will be made much more
difficult if we need to tell future candidates that they could be exposed to ethics
enforcement actions that could damage their professional reputations despite staff’s
efforts to comply with existing policies.

Thank you for allowing me to speak. I am obligated on Treasury business and need to leave
shortly, but Deputy Treasurer Darren Bond will be here to answer any questions you may have.