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Wednesday, July 01, 2009
Correra Shared in $22M of Fees
By Mike Gallagher
Journal Staff Writer
The State Investment Council released new documents Tuesday showing the son of a political insider with close ties to Gov. Bill Richardson has shared in about $22 million in fees paid in connection with state investments since 2003.
The documents show Marc Correra, a Santa Fe broker, has been on the receiving end of about half of all third-party placement fees that state officials have been able to identify.
The placement or finder's fees were paid to Correra and others by companies and hedge funds for their help in landing deals with the State Investment Council and Educational Retirement Board.
Most of the newly disclosed fees paid to Correra, 46, came from Vanderbilt Capital, a firm already involved in a lawsuit over $90 million in lost state investments.
Correra's involvement in dozens of state deals apparently wasn't widely known.
"The staff was completely unaware of any relationship between Correra and Vanderbilt or that he had played a third-party marketer role," State Investment Council spokesman Charles Wollmann said Tuesday.
But State Investment Officer Gary Bland, Wollmann's boss, said he was aware of Correra's role and business relationship with Vanderbilt, although he did not know the specific arrangements.
"He (Correra) brought in Bear Sterns and Merrill Lynch," Bland told reporters after Tuesday's meeting. "Vanderbilt managed the products for them."
Bland said Correra's involvement didn't concern him because the state doesn't pay the fees. It has been asked on occasion to reimburse companies that did pay them, but Bland said those requests were rejected.
Bland has admitted not being enthusiastic about the current state ban on the fees, ordered by Richardson.
The Journal previously reported that Correra had shared in up to $16 million in third-party fees and that he was paid $2 million for the $90 million investment with Vanderbilt that went bad.
The new documents released Tuesday showed him sharing in another $6 million, including another $3.5 million from Vanderbilt for five additional deals involving the State Investment Council.
Bland said, "Vanderbilt came highly recommended. They did the research into the collateralized debt obligations (CDOs) and other instruments. This was not a fly-by-night outfit."
CDOs are complicated securities that often include subprime mortgages. They played a major role in the collapse of the financial markets last fall.
Wollmann said the staff members who make up the internal committee that reviewed the Vanderbilt investments were unaware there were placement agents involved.
SIC staff only became aware of the relationship when the ERB, which manages teacher pension money, issued a spreadsheet that showed Correra receiving a fee for the Vanderbilt investment and began asking the company for information.
Richardson, who is chairman of the SIC, was out of town on vacation Tuesday.
His deputy chief of staff, Gilbert Gallegos, said, "The governor has previously said that the practice of fund managers paying huge fees to third-party agents may be legal and commonplace, but the potential for a conflict of interest is troubling."
Richardson ordered a ban on deals involving their party placement agents after the SIC issued information on the identities and amount of fees the placement agents received.
He also ordered the firing of a consultant on private equity investments, an area where placement agents are common.
Correra is the son of Anthony Correra, a Richardson political supporter and close friend.
The elder Correra was also involved in Bland's hiring to the $300,000-a-year post as state investment officer. Anthony Correra at one point had office space in the State Investment Council and Bland has said he and Anthony Correra talked about markets almost daily.
Marc Correra's lawyers have said he did nothing illegal and worked hard for this money.
Ex-ERB chief's suit
The additional information in a new SIC spreadsheet is sure to add fire to the lawsuit filed by the ERB's former chief financial officer, Frank Foy.
Foy alleges that the $90 million invested in Vanderbilt Financial Trust was part of a pay-to-play deal that cost the state its entire investment.
He has sued Vanderbilt, Bland, ERB Chairman Bruce Malott and former Richardson aide David Contarino, among others. All the defendants have strongly denied Foy's allegations.
The ERB invested $40 million in Vanderbilt Financial Trust, and the SIC invested $50 million. Those investments are considered a total loss.
The third-party placement fees have attracted the attention of law enforcement, regulators and legislators. The FBI has questioned State Investment Council and ERB staffers and issued subpoenas for records to both agencies, and the Securities and Exchange Commission has inquired about investment advisers and third-party marketers.
Legislators and Richardson have agreed to an independent review of the State Investment Council, and that job should go out to bid in the next few months.