$24 million settlement in pay-to-play cases

According to court documents filed late Thursday, District Judge Stephen Pfeffer of Santa Fe is being asked to approve the deal in which Vanderbilt Capital Advisors would pay $20 million to the SIC and $4.25 million go to the Educational Retirement Board.

BLAND: Sued by the State Investment Council

MARC CORRERA: Shared in $22M in fees

ANTHONY CORRERA: Denies any wrongdoing

Gov. Susana Martinez, who chairs the investment council, called it “a significant recovery of money for the taxpayers of New Mexico.”

She said the SIC has worked to “bring a measure of accountability following a deeply disappointing chapter in New Mexico history.”

The SIC filed a lawsuit against more than a dozen individuals in 2011, claiming the state lost hundreds of millions of dollars and through pay-to-play and politically motivated investments made during the administration of Gov. Bill Richardson.

That lawsuit alleged former State Investment Officer Gary Bland, Richardson insider Anthony Correra, his son Marc Correra, and others were part of the scheme. All have denied any wrongdoing.

Financial firms such as Vanderbilt allegedly paid Correra and other placement agents millions of dollars in “marketing fees” to help them get state investment business – when in fact they did very little work and were being paid for political connections.

The State Investment Council estimates that its investments in Vanderbilt alone lost $100 million while the ERB lost $40 million.

The U.S. Attorney’s Office apparently has concluded an investigation without filing criminal charges. That leaves the recourse in civil court, where the lawsuits will continue against other defendants.

While the settlements announced Thursday are far short of the state’s losses, State Investment Officer Steve Moise said the choice was obvious: “recover tens of millions of dollars today, or roll the dice in court, wait several more years, and face a very uncertain outcome.”

The SIC’s attorneys Day Pitney based in New York will receive $2.8 million in legal fees from the settlement based on a contingency contract. The law firm was hired after the Legislature allowed the SIC to hire lawyers based on a percentage of the recovery instead of by-the-hour.

The SIC didn’t sue Vanderbilt or other financial firms, but has sued Bland, the Correras and others. The settlement submitted to Pfeffer comes in a lawsuit filed by former ERB Chief Investment Officer Frank Foy.

Despite that, the SIC is seeking to bar Foy from receiving any of the settlement proceeds.

Foy brought his case against Vanderbilt and others to the state’s Fraud Against Taxpayer’s Act – in other words on behalf of the Investment Council and teacher pension fund.

But last year the state Court of Appeals ruled that claims could not be made for actions that occurred prior to July 1, 2007 when the law took effect. The ERB and SIC investments were made more than a year prior to that.

Foy’s attorney, Victor Marshall, has filed notice of an appeal to the state Supreme Court.

Marshall said he had not seen the filings and couldn’t comment on the specifics of the settlement.

“They piggybacked on our lawsuit but I’m concerned they haven’t gotten to the bottom of this and the public should be to,” Marshall said.

Mortgage-backed securities

The SIC invested hundreds of millions of dollars with Vanderbilt in mortgage-backed securities. After the collapse of the real estate market some of those investments lost 100 percent of their value while others lost 40-to-60 percent.

The SIC estimates it lost at least $100 million but argued in court filings that a full recovery of the state’s losses was doubtful and legally risky.

“After extensive risk analysis and deliberation, the Council worked earnestly to broker the best possible settlement for taxpayers,” Moise said. “This is an excellent result for the State of New Mexico.”

Documents filed with the settlement proposal say the Vanderbilt settlement is just one part of the SIC’s overall enforcement plan “to pursue individuals and entities that were involved in improper payments and other pay to play schemes in connection with State investments.”

Disclosure

Bland was appointed by Richardson, and Anthony Correra was a close but unofficial adviser to Richardson who recommended Richardson appoint Bland.

According to state documents Marc Correra shared in more than $22 million in marketing fees and Vanderbilt paid the younger Correra around $6 million in fees.

Richardson has said he was unaware that any marketing fees were paid to the younger Correra and Anthony Correra’s attorneys are seeking dismissal of lawsuits in which he is named.

The SIC and others claim Correra did little or no work to collect the fees.

In the motion filed Wednesday, attorneys say the SIC will continue to pursue claims against “fund managers like Vanderbilt that the NMSIC believes received investments in exchange for political favors, including payments to Marc Correra and other politically-connected individuals.”

SIC attorneys say Vanderbilt violated the state’s securities act by failing to disclose to the members of the council that it was paying substantial amounts of money to Marc Correra.

Vanderbilt said it fulfilled its duties by disclosing those payments to Bland.
— This article appeared on page A1 of the Albuquerque Journal