Ex-securities chief defends NMFA probe

The former state securities director says he and his office did nothing wrong in handling the criminal investigation and prosecution into a forged audit at the New Mexico Finance Authority.

“I did what was appropriate under the circumstances,” Daniel Tanaka says. “I am going to stand by my investigative team.”

Tanaka came under criticism for the arrest of John Duff, then the Finance Authority’s chief operating officer. A grand jury later declined a request by Tanaka’s office to indict Duff.

Tanaka says he had nothing to do with a TV news crew being on hand when Duff, then 70, was arrested as he arrived for work on a morning last summer at the Finance Authority.

“I was and continue to be outraged by the perp walk,” Tanaka says. “We don’t do that. It’s not professional. It puts the subject at risk, and it puts the agents at risk.”

Tanaka declined to speculate on who might have alerted the TV crew to the arrest.

He says he resigned last month after the Democratic majority leadership in the Senate made it clear it would oppose his confirmation to head the Securities Division.

“I took one for the team,” he says. “The administration didn’t need another lightning rod.”

Tanaka says a Senate Rules Committee hearing on his confirmation would have made the committee’s handling of Education Secretary-designate Hanna Skandera look like a “hug-a-thon.”

The committee held three hearings totaling more than 10 hours on Skandera’s nomination by Republican Gov. Susana Martinez, but never voted on confirmation.

Saying he wasn’t permitted to talk to me about the Finance Authority case while securities director, Tanaka contacted me last week to arrange a meeting. We met Monday for nearly two hours.

Tanaka — a former investigator with the New York City Department of Investigation, Border Patrol agent and securities broker — was hired as a special agent with the Securities Division in 2008.

He was the original investigator into the Ponzi scheme of Albuquerque real estate agent Doug Vaughan, and the U.S. Attorney’s Office last month honored him for his work on the case.

Martinez appointed Tanaka in April 2011 to head the Securities Division, which has the authority to investigate and prosecute civil and criminal cases for securities law violations.

The Finance Authority and the State Auditor’s Office announced in July that they had discovered the authority’s audit for fiscal year 2011 had never been completed and that a fake audit had been created.

Greg Campbell, who had resigned as the Finance Authority’s controller just weeks before the discovery, admitted soon after that he forged the audit. He and Duff were arrested in August.

Duff wasn’t accused of taking part in the forgery or trying to cover it up. Instead, he was charged with conspiring with Campbell to try to keep potential investors from learning that millions of dollars had been transferred from the authority to the state general fund to help with a budget crunch.

The work of the Finance Authority includes selling bonds to investors to generate money to finance roads, sewers and other infrastructure projects by state and local governments and agencies.

While Duff, of Albuquerque, was arrested, handcuffed and led in front of the TV crew at the Finance Authority office in Santa Fe, Campbell was arrested after going to the Securities Division office in Santa Fe.

Tanaka notes that a state district judge signed off on the arrest warrants for Duff and Campbell, and he says it’s routine to arrest people charged with crimes.

He says Campbell was arrested after being told to go to the Securities Office for an interview. He says he wasn’t arrested at his Albuquerque home because his wife was operating a day care center there and because agents would have had to transport him in handcuffs to the Securities Division in Santa Fe.

Upon their arrests, Duff and Campbell were advised that the Securities Division would seek indictment by a grand jury.

Some have questioned whether there was a need to arrest Duff prior to the grand jury because there was no evidence that he was a danger to the community or a flight risk.

Six weeks after the arrests, a grand jury indicted Campbell but declined to bring charges against Duff, whose attorney called Tanaka a clown and an ignorant bully.

Duff testified before the grand jury, as did two accounting experts called on his behalf. He was later dismissed from his job at the Finance Authority.

Tanaka says he still believes Duff tried to intentionally misrepresent the financial health of the authority by agreeing to an accounting change proposed by Campbell.

He says his office “sold” the case against Duff to the grand jury and “sold it well.”

But, he adds, “The waters got muddied (by Duff and his expert witnesses), and we lost.”

Campbell eventually pleaded guilty to fraud and forgery charges and was given probation.

Tanaka also addressed allegations by Phyllis Bowman, who has said she was forced from her job as a lawyer at the Department of Regulation and Licensing, where she had worked as a prosecutor for the Securities Division.

Bowman says she resigned last fall after being retaliated against by department Superintendent J. Dee Dennis and Tanaka for her knowledge of their incompetence and wrongdoing.

The department has said the allegations “are not accurate,” and Tanaka says that shortly after he became securities director, the responsibility for supervising Bowman was transferred from him to the department’s general counsel.

“We had almost nothing to do with each other,” Tanaka says. “How is it possible for me to retaliate?”

He says he and Bowman had professional differences — “What professionals don’t?” — while they were colleagues in the Securities Division and that he authored two memos about her work. One of the memos included positive comments, he says.

Bowman has filed a lawsuit alleging the Regulation and Licensing Department has refused to provide copies of the memos in violation of the Inspection of Public Records Act.

Tanaka says he is now looking for a job in financial fraud investigations but likely will have to move out of state to obtain one.

UpFront is a daily front-page news and opinion column. Comment directly to Thom Cole at tcole@abqjournal.com or 505-992-6280 in Santa Fe. Go to ABQjournal.com/letters/new to submit a letter to the editor.