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$100 million in losses, $24 million in settlement in alleged ‘pay-to-play’ scheme in NM

By   /   February 22, 2013  /   News  /   No Comments

GETTING A FRACTION BACK: New Mexico’s State Investment Council announces a $24 million settlement with a firm that lost $100 million in deals that critics say were politically motivated.

By Rob Nikolewski │ New Mexico Watchdog

SANTA FE – It’s less than a quarter of the $100 million in taxpayer money blown in alleged “pay-to-play” financial dealings, but at least it’s something.

The State Investment Council has announced more than $24 million in recoveries as part of a settlement with Vanderbilt Capital Advisors after a series of horrendous losses the SIC suffered with the Chicago-based firm between 2004 and 2006.

“This settlement represents a very good effort in a bad situation,” SIC spokesman Charles Wollmann told New Mexico Watchdog Friday morning, saying the deal “basically puts $24 million back into the state, where it belongs.”

On the positive side, the SIC hails the settlement as being second in magnitude only to the state of New York’s “massive efforts to recover placement fees amid similar allegations of pay-to-play, and far exceeds any reported pay-to-play recoveries made by California, which experienced similar problems.”

But on the other hand, when one considers a modest investment return of 2.5 percent per year on $100 million, that comes out to $2.5 million a year. Since the bad investments date back 7-9 years, the return of $24 million doesn’t seem that overwhelming.

“If we wanted to go to court there’s no guarantee we would have gotten this much,” Wollmann said. “And it would have taken up to seven more years through the court process and appeals, so this is a bird in the hand, and we can put this money to good use and good work.”

Wollmann also pointed out there are still other potential settlements with those who did business with the SIC during the administration of then-Gov. Bill Richardson.

The newly-constituted SIC has filed a lawsuit against more than a dozen individuals, including Gary Bland, the state investment officer at the SIC under Richardson, and Richardson political insider Anthony Correra and his son, Marc. The SIC suit claims the shady dealings with investment firms had more to do with political connections and kickbacks than with prudent business decisions.

The targets of the lawsuit all say they did nothing wrong, and Richardson — who rarely discusses the issue — has maintained he was unaware of any potential wrongdoing.

In a statement released Friday by the SIC, current Gov. Susana Martinez — who regularly attends the Investment Council’s monthly meetings — called the $24 million “significant,” saying it “demonstrates how diligently this Council has worked over the past two years to bring a measure of accountability following a deeply disappointing chapter in New Mexico history.”

The SIC does not possess any law enforcement power and cannot pursue criminal charges. The U.S. Attorney’s Office has reportedly investigated the affair but has not returned any charges, although there were reports Richardson insiders were called before a grand jury in Albuquerque. But that was well over a year ago.

New Mexico Attorney General Gary King has been criticized for not filing charges. King has said, “Our convictions should be based upon whether we have evidence of crimes that are committed in New Mexico.”

In response to a query from New Mexico Watchdog Friday morning, Attorney General spokesman Phil Sisneros wrote, “The entire SIC v. Bland case, filed in 2011, is a pay-to-play case, but beyond that, we really cannot talk about pending or ongoing cases that may involve pay-to-play allegations.”

“We’ve turned over all the records and documents to prosecutors,” Wollmann said. “It’s really up to them to follow the criminal path. So far they haven’t done that here in New Mexico, but the Council as fiduciaries has done what they can to get money back into the permanent funds, and we feel very confident that we continue to do that.”

Wollmann said he couldn’t reveal the status of those cases or provide any timeline on when they might be settled.

Last year, the SIC received $250,000 from a California investment firm that landed a $20 million deal during the Richardson administration.

Bland, meanwhile, says he’s bankrupt and is counter-suing the SIC. Bland told Watchdog investigative reporter Jim Scarantino last year that “there were a lot of investments that were connected to friends of (Richardson) that didn’t have merit or meet our standards, and they were not acted on.”

Anthony Correra is said to have recommended Bland to Richardson to run the SIC.

His son Marc, who reportedly received $22 million in placement fees for doing very little work, was last reported to be living in Paris, where SIC counsel told New Mexico Watchdog last year he was served with papers dealing with the SIC lawsuit.

Attorneys for the Correras are are looking to dismiss the SIC lawsuit.


Here’s our Watchdog interview with Wollmann on Friday:


Contact Rob Nikolewski at rob@nmwatchdog.org


Rob formerly served as staff reporter for Watchdog.org.