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Police Lieutenant Suspended, Bank President Resigns in Pension Fund Probe

October 18, 1985

WINONA, Minn. (AP) _ A police lieutenant has been suspended and a bank president has resigned in a probe of alleged police pension fund abuses, attorneys said Friday.

Lt. Dale Schafer, secretary-treasurer of the Winona Police Relief Association, was suspended with pay Thursday for allegedly receiving $263,000 of pension fund money through fictitious loans from the First State Bank of Rollingstone, according to Kent Gernander, an attorney for the bank, and a statement by City Manager David Sollenberger issued Thursday night.

Bank President Kenneth Harstad, who allegedly prepared the fictitious loans, resigned on Wednesday, Gernander said.

Harstad’s attorney, James Ryan, said Friday his client ″believed it was in the best interest of the bank to resign″ while the investigation was being conducted.

″He denies any intentional wrongdoing and stresses that there was no misapplication of bank funds,″ Ryan said.

Police officials refused to confirm Schafer’s suspension Friday, referring all calls to Sollenberger. Sollenberger did not return telephone calls and there was no answer at Schafer’s home Friday.

But Lt. David Knight, an association board member, said, ″At an emergency meeting of the association at 3 p.m. Thursday, we accepted Lt. Schafer’s resignation as member of the association’s board.″

Knight said missing funds would not jeopardize pension payments to police officers. He also said the association will do whatever is necessary to recover the funds allegedly taken by Schafer.

Gernander told city officials Thursday that ″serious improprieties in handling of funds at the bank had been uncovered,″ the Winona Daily News reported Friday.

Sollenger’s statement said, ″According to Mr. Gernander, indications are that Schafer received the full amount of funds withdrawn from the relief association assets.″

Winona officials began investigating the investments of the relief association after it was revealed the penison fund was late in filing annual financial reports to the state for a second year, Gernander said.

The Minnesota Legislative Commission of Pensions and Retirement is currently withholding $97,823 of insurance reimbursement funds and $49,263 in amortization state aids due the city because of the late filings.

County Attorney Julius Gernes said he would determine whether to file criminal charges after contacting the state attorney general’s office and the Bureau of Criminal Apprehension for assistance in an investigation.

The Winona Police Relief Association has invested $960,774, or approximately 42 percent of the association’s total assets, in the First Bank of Rollingstone, according to a financial statement dated Dec. 31, 1983.

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