State treasurer Petersen to step down

State Treasurer David Petersen will resign as part of a plea deal offered Thursday to end a criminal investigation.

Under the terms of the pact, Petersen of Mesa will plead guilty next week in Maricopa County Superior Court to a single misdemeanor of failing to report income he made from Character First, an education program run by the nonprofit Character Training Institute based in Oklahoma.

Arizona law requires public officials to disclose all sources of revenue over $1,000 a year.

The deal requires that Petersen resign his $70,000-a-year job, but not immediately. Instead, he has to leave office before Judge James Keppel imposes a sentence, which could take weeks.

An aide to Gov. Janet Napol- itano said she is expected to quickly name a replacement. State law requires that the person, like Petersen, be a Republican.

Even without criminal charges, Petersen, 56, would have left office at the end of the year because he did not seek re-election. Sen. Dean Martin, R-Phoenix, and Democrat Rano Singh are competing for the job.

The Arizona Attorney General’s Office says it has evidence that the one-term treasurer stole from the public, engaged in fraudulent schemes and violated conflict-of-interest laws — all felonies. But none of that is mentioned in the plea deal.

“The public should be aware that neither the original allegations nor the charged offense relate to public funds,’’ said Craig Henley, Petersen’s attorney. He said Petersen’s failure to disclose his income “was in no way meant to deceive the public and involved a small amount of compensation unrelated to his duties as state treasurer.’’

Attorney General Terry Goddard would not comment on what the investigation found or why the only charge relates to a failure to comply with personal financial disclosure requirements. Nor would he say why his office wanted a deal to force Petersen to resign months shy of the end of his term.

“We are confident that this agreement is appropriate and in the best interest of justice,’’ Goddard said in a statement.

Under the agreement, Petersen will plead Wednesday to a crime related to the inquiry of whether he used his position — and state funds — to promote the character education program that he had financial ties to. The deal does not preclude Petersen from seeking office again.

In February, Petersen’s office was searched after a special agent from the Arizona Attorney General’s Office obtained statements from his top aides that he used his position to promote Character First. Documents obtained by Capitol Media Services show that Tony Malaj, who had been Petersen’s chief of staff, told the investigator that Petersen routinely traveled around the state and made presentations on character at taxpayer expense.

The records include a letter Petersen sent to Arizona Superintendent of Public Instruction Tom Horne, trying to convince him to let the state’s schools use the Character First program.

Horne told Capitol Media Services that Petersen was upset because the state was working with a competing program. Malaj told the investigator that Petersen acknowledged being paid by the Character Training Institute.

Also, Malaj said Petersen tried to involve him in the program, taking him in September to meet with Michael Milken, who had pleaded guilty in 1990 to violating securities and racketeering laws.

Milken e-mailed ideas about the program into the state computer system operated by the treasurer’s office. And Petersen later traveled to Los Angeles at state expense to meet with him. Blaine Vance, chief deputy treasurer, provided similar reports — and told the investigator that Petersen hired Raquel Wood, his future daughter-in-law.

He also hired Rhonda Bryce, who managed what was to be Petersen’s reelection campaign. Vance said he had yet to see any work from her.

Vance also said a stock trader in the treasurer’s office told him that within minutes of executing a trade with Citibank, he overhead Bryce call Citibank and ask for money for the Character First program. The incidents date back to 2003, after Petersen was first elected treasurer and when a speakers bureau offered him a $1,500 honorarium for a keynote speech.

After getting a written opinion saying Petersen couldn’t keep the money, Malaj gave it to the treasurer. Despite that, Petersen had the original check, which was made out to a school, reissued to him.

The investigator also said Malaj told her Petersen has required state employees to attend weekly character education programs in the office, with the state paying for materials from the character education program.