AUGUSTA – State Treasurer David Lemoine blamed bad advice Wednesday for a $20 million investment gone bad and defended himself before the Legislature’s Appropriations Committee.

“Maine’s cash pool assets are invested wisely, cautiously and with as little risk as is consistent with sound money management and cash flow needs,” Lemoine told the Appropriations Committee in a lengthy prepared statement.

“And directly to the point, Maine, unlike some other states and even the largest investment banks, has had only minimal exposure to the market troubles brought on by the worldwide subprime crunch.”

Senate Republican leaders last month called for an investigation into the state treasurer’s $20 million investment of cash pool funds in Mainsail II commercial paper, whose rating slipped from high to low this summer.

Mainsail II assets were frozen, putting the state’s investment in question.

Lemoine has said nearly $20 million, representing about 3 percent of the cash pool, were invested in Mainsail II in August and that a financial adviser from Merrill Lynch advised the treasury that the investment met the state’s criteria.

In his statement Wednesday, Lemoine specified that “while it was indicated by the broker that the instrument was asset-backed commercial paper meeting the state’s rating requirements, it was not indicated that Mainsail was a structured investment vehicle [or SIV], which arbitrages between short-term and long-term debt.”

More than a dozen state-run cash pools that manage money for local governments have some exposure to mortgage-related and other high-risk holdings that roiled credit markets this past summer, according to rating agency Standard & Poor’s.

Mainsail II, which attracted Maine and others like Connecticut, Florida, Montana and King County in Washington, was an SIV that was operated by British hedge fund Solent Capital Partners.

Mainsail’s commercial paper offerings were downgraded to junk by rating agencies because of concerns about whether the SIVs could repay the money it owed.

In his statement Wednesday, Lemoine noted that “experts don’t always agree on what is the right advice.”

He added: “Treasury had some of the most qualified professional advisers in the nation working with us when the Mainsail II investment was made last August. Even here in Maine, very few experienced financial advisers have a perfect record.”

Part of Lemoine’s challenge Wednesday was to match up the timeline of when state officials learned about developments relating to the troubled investment and how they shared that information.

Addressing next steps, the treasurer also said, “This is an appropriate time to take apart our cash pool investment process and policies and to examine each assumption and practice.”