State treasurer excludes 2 Hobbs appointees from investment meeting, citing 'murky' status

Arizona Treasurer Kimberly Yee speaks during her ceremonial inauguration at the Arizona state Capitol in Phoenix on Jan. 5, 2023.
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Republican Treasurer Kimberly Yee jumped into the fray over how state agency directors should be appointed by refusing to acknowledge the authority of two top employees given new titles by Democratic Gov. Katie Hobbs.

Lawyers for the Treasurer's Office and outside counsel advised her that the legal status of the employees as agency bosses was now "murky," which led her to "not recognize" two of Hobbs' appointees as at a State Board of Investment meeting, Yee told The Arizona Republic Wednesday.

As a result, she said, the two appointees — Barbara Richardson of the Arizona Department of Insurance and Financial Institutions and Elizabeth Thorson of the Arizona Department of Administration — could not participate in the meeting.

"This absence of a lawfully appointed director to serve from these two agencies create legal uncertainty," Yee said. "It really does jeopardize the proceedings of the State Board of Investment and will continue to do so until the governor reinstalls legitimate directors into these positions."

On Monday, Hobbs ditched the process used for decades in the Legislature to appoint the heads of state agencies subject to Senate confirmation, writing in a letter to state Senate President Warren Petersen that she was tired of the "political circus" that has led to stalled appointments.

She withdrew her remaining nominations from the Senate's Committee on Director Nominations and bestowed the new title of "executive deputy director" on 13 of her nominees, allowing them to skip Senate confirmations and continue their work as official agency directors.

Democratic state Attorney General Kris Mayes backed up Hobbs' legal ability to make the decision. But Petersen said the maneuver was unlawful and warned that decisions made by what he called the "fake directors" would be "dubious" and subject to lawsuits.

Yee said she didn't coordinate her action with Petersen or anyone else. She believes strongly in the nomination process as a former state Senate majority leader, she said, noting that she held up several nominations by former Republican Gov. Doug Ducey when questions were raised about the nominees' qualifications.

She consulted with lawyers after learning that Hobbs' was "blatantly circumventing the law" by rejecting the confirmation process, and they told her "we could not legally recognize these individuals in the open meeting" of the Board of Investment.

Under state law, the directors of the departments of Administration and Insurance and Financial Institutions or their "designees" are members of the Board of Investment, along with the state treasurer and two other members assigned by the treasurer. They're supposed to meet monthly to review the state's investments.

The nominees can legally serve up to a year without confirmation. But Hobbs' withdrawal of the nominees from any Senate confirmation process means "there was no longer a record of a process" for which these directors could sit for a year without Senate confirmation" that would allow them serve even as unconfirmed interim directors, she said.

The absence of two key members from the meetings "jeopardizes the proceedings of the State Board of Investment," Yee said in a news release Tuesday. On Wednesday, she said that having them participate without clear authority also creates a risk that decisions made with them as board members could be on shaky legal ground.

A designee for Thorson remained at the meeting on a video conference call, Yee said, but that's unlikely to continue to future meetings. Interpreting the "executive deputy directors" as "designees" won't solve the problem, Yee said, because "a designee can only be granted that authority by a director."

"We are the trustees," Yee said. "Without these members being involved with the Board of Investment, the public loses out on their input."

Yee temporarily became the acting governor on Wednesday because Hobbs, Mayes and Secretary of State Adrian Fontes were out of state. Yee said in a statement she would "refrain" from naming the 13 nominees as directors and calling the Senate to convene and confirm them. Hobbs was in Washington, D.C., Wednesday after a weeklong trip to meet with political and business leaders in Taiwan.

Yee said she hoped Hobbs' names "qualified directors" to be nominated as agency directors and ends the "legal uncertainty" her order created.

Hobbs' spokesman Christian Slater, in a statement to The Republic, said Yee did exclude a director's designee at the investment board meeting Tuesday, which was "illegal."

"We expect Treasurer Yee to stop playing political games, seat the duly authorized Board members, and ensure government keeps working on behalf of Arizonans," Slater said, adding that it wasn't clear if Yee really had the power as acting governor to appoint new directors.

Hobbs and the Republican-led state Senate have battled over her nominees for much of the year after Petersen changed the standard confirmation process and put state Sen. Jake Hoffman, R-Queen Creek, a political ally and the leader of the hard-right Arizona Freedom Caucus, as chair of the nomination committee. Hoffman, who is apparently the target of Mayes' probe into a multi-state scheme to present alternate electors for Trump in the 2020 election, has used the position as a bully pulpit to denounce perceived left-wing policies of Hobbs' nominees and led the GOP-run committee to reject several of them.

Hoffman stopped the committee hearings in June in retaliation for Hobbs' executive order taking the power to prosecute abortion laws away from county attorneys, then led the rejection of Hobbs' Director of Housing nominee this month after discovering documents she had plagiarized. The battle has meant that only six of Hobbs' roughly two dozen nominees have so far been confirmed.

Petersen said to "stay tuned" for more actions against Hobbs' latest decision, hinting that the fight would end up in court.

"This was ill-conceived and not well thought out," he said. "It won't work, practically or legally."

Reach the reporter at or 480-276-3237. Follow him on X @raystern.

This article originally appeared on Arizona Republic: Arizona treasurer Yee bars 2 Hobbs appointees from investment meeting