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Early inquiry cleared Downs racino deal

An auditing firm reviewed the 25-year lease for the new racino at the Downs at Albuquerque and told the state in a letter in January that the bid process “was in accordance with state law and procurement regulations.”
An auditing firm reviewed the 25-year lease for the new racino at the Downs at Albuquerque and told the state in a letter in January that the bid process “was in accordance with state law and procurement regulations.”
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FOR THE RECORD: This story about an audit of the Expo New Mexico lease with the Downs at Albuquerque incorrectly identified the competing bidder as Laguna Industries Inc. The competing bidder was Laguna Development Corp.

Audit firm said it appeared to comply with state law.

A Santa Fe firm asked to do a follow-up inquiry on the controversial lease for the Downs at Albuquerque racino concluded in a letter to the state auditor in January that the bid process “was in accordance with state law and procurement regulations.”

The four-page letter by Griego Professional Services answered nine additional questions posed by the office of State Auditor Hector Balderas regarding the Downs 25-year lease after Griego had prepared a 2012 draft audit for Expo New Mexico.

The Griego firm was hired by Expo to prepare its annual audit and was approved for the job by Balderas’ office.

Griego submitted its proposed audit in December 2012 and sent the follow-up letter, with answers to the additional questions, a month later, but the state auditor has yet to release the full Expo audit for last year.

The $25 million racino opened last week on the Expo grounds. Under the contract, Expo New Mexico gets $2 million a

year.

Balderas spokesman Evan Blackstone said this week that because of Expo New Mexico’s “past financial problems and the complaints we received, the state auditor has a duty to ensure Expo’s handling of public funds is thoroughly and independently audited.”

Some prominent Democrats have continued to criticize the 25-year-lease, often referring to it as “the Dirty Downs deal.” State Fair Commissioner Charlotte Rode, who opposed casino gambling at the site, was among those who complained to Balderas’ office about the contract.

Complaints were also lodged with Attorney General Gary King and the FBI.

Enrique Knell, a spokesman for Gov. Susana Martinez, said it’s unclear whether the state auditor “is playing politics by delaying the final release, but the independent auditor already concluded months ago that the process was sound and therefore the complaints are entirely baseless.”

Blackstone said, “Our audit review team is currently in the final stages of verifying key information and documents with the independent auditor and Expo’s management.”

He said the office is working to complete the audit “in a measured manner so that the public and other government agencies can confidently rely on the independent auditor’s ultimate conclusions.”

The Downs racino contract was approved by the State Fair Commission, which oversees Expo New Mexico, in November 2011, and the subject has come up during an FBI investigation into the theft of Martinez campaign emails.

At least two witnesses in the FBI’s email investigation said they have also been separately interviewed about what they know about the Expo-Downs contract. The Downs owners contributed more than $70,000 to the Martinez campaign.

The FBI investigation hasn’t reached the grand jury stage, nor have any subpoenas been issued.

The Attorney General’s Office hasn’t done any interviews concerning the Downs contract in months.

Neither agency would comment about ongoing investigations.

Knell dismissed the notion that there was any impropriety in the racino contract.

“The lease was competitively bid (unlike the failed, no-bid approach of the previous administration), and it resulted in a deal that is financially and logistically much stronger for the state – one that will ensure the viability of the state fair and provide financial stability to Expo New Mexico.”

Audit process

The Griego firm has done the audits on Expo New Mexico for the past several years – under both Richardson and Martinez administrations – and in prior audits has raised questions about the operation ranging from poor procurement procedures to extreme financial problems.

Expo New Mexico selects an independent auditor from an approved list provided by the State Auditor’s Office. The auditing firm, in this case Griego Professional Services, then makes its report to the state auditor.

The audit becomes public after it is reviewed and approved by the state auditor.

In this case, after submission of a draft audit, Balderas’ office requested the Griego firm to examine nine additional areas about the Downs racino contract.

The questions included whether the Downs was a “responsible bidder as defined by state law, whether the Downs participated in drawing up the specifications of the bid, and whether the Downs had inside information.

Among the findings in the Griego firm’s January letter:

• The Downs at Albuquerque appeared to meet the definition of responsible bidder as outlined in state law.

• There was no evidence suggesting the Downs participated in determining the specifications of the request for proposals issued by EXPO New Mexico.

• The Downs does not appear to have received information from EXPO New Mexico that wasn’t provided to other bidders.

• The Downs as an “incumbent” bidder had some advantage over other bidders; however, this is typical of the bid process and not a violation of state procurement regulations.

• The length of time for bidders to respond to the request for proposals – 30 days – exceeded the requirements of state law, “although 30 days may be subjectively construed as not enough time.”

There was only one other bidder, Laguna Industries. It appealed the initial decision administratively and lost, but did not take then next step of going to court.

The 30-day period for submitting proposals was criticized by opponents as being too short to attract serious competition for the Downs, which was the existing contract holder.

Release requirements

The State Auditor’s Office said this week it had been reviewing Griego’s audit and the underlying work papers.

In May, the Griego firm received an “OK to print” confirmation from the State Auditor’s Office – meaning the firm was authorized to print two paper copies and one electronic copy and send the copies to the State Auditor’s Office.

Under audit rules, that means the report “is not considered unfinished or excessively deficient” but that any changes needed in the audit would mean a delay in releasing the audit.

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