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Wednesday, May 06, 2009
ERB Records: Millions More to Richardson Insider
By Mike Gallagher
Journal Staff Writer
At least a third of the private equity investments made by the state Educational Retirement Board during the past three years involved the son of a close friend of Gov. Bill Richardson's.
Records released by the ERB late Tuesday in response to a Journal public records request show Marc Correra shared in up to $4.2 million in fees paid to so-called placement agents by companies that received investment money from the New Mexico teachers pension fund.
That's on top of more than $11 million he shared in similar fees from State Investment Council business. The exact amounts he received are difficult to determine because placement agents in some cases split their fees with others.
Marc Correra is the son of Anthony Correra, a close friend and political supporter of Richardson's.
Anthony Correra was on the governor's transition team and a member of the search committee that led to the hiring of State Investment Officer Gary Bland. Anthony is described in campaign finance records as retired, but he and Marc share a Santa Fe business address.
The ERB records released Tuesday also show Marc Correra received $2 million from Vanderbilt Capital Group, which organized a trust that received a combined $90 million in investment money from the ERB and the State Investment Council.
Those investments soured, and the two New Mexico agencies have written them off as complete losses. They are the subject of a controversial civil lawsuit.
Marc Correra was listed as the third-party placement agent on more than 20 private equity investments made by the State Investment Council from 2004-08 and listed as a "marketer" on eight of 23 private equity investments made by the ERB.
In addition to the successful deals, Marc Correra also is listed as a marketer on several investments that have not closed or were rejected by ERB staff.
Dallas-based Aldus Equity Partners was the private equity adviser to both the Investment Council and ERB. Aldus has been swept up in a New York State Pension Fund pay-to-play scandal with tentacles reaching into New Mexico.
Richardson fired Aldus last week from its $1.5 million-a-year advisory role to the two New Mexico investment funds.
Marc Correra has been awarded a racing license to open a racino in Raton, but a separate gaming license application has been put on hold by the Gaming Control Board.
Not enough info
The spreadsheet released Tuesday shows ERB staff was not satisfied with disclosures made by Aldus regarding third-party placement fees, and the board staff had to contact the funds in which the state invested to get more detailed information.
In some cases, Marc Correra's involvement as a placement agent wasn't disclosed initially by Aldus, according to the spreadsheet.
In March, the Journal reported Aldus Equity's involvement in the New York case and its role in New Mexico advising the State Investment Council and Educational Retirement Board.
A day after Richardson ordered the ERB and Investment Council to terminate their agreements with Aldus, the company's founding partner, Saul Meyer, was charged in the New York pension fund scandal.
The federal Securities and Exchange Commission accuses Henry "Hank" Morris, a prominent New York political figure, with running a kickback operation in which investments from the New York pension fund were made in exchange for the payment of placement "finder's fees" to Morris or companies or individuals he controlled.
The SEC and New York Attorney General Andrew Cuomo allege the fees paid by companies like Aldus were "thinly disguised kickbacks," and some of the same players in the New York scandal, including Morris, were involved in SIC investments in New Mexico.
Aldus has denied wrongdoing, and Meyer has pleaded not guilty. In earlier statements, Aldus said the company ended its relationship with Morris in 2006.
The ERB spreadsheet is sure to pour gasoline on the controversial lawsuit filed by the board's former chief financial officer, Frank Foy.
Foy alleges 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.
The ERB spreadsheet shows Marc Correra was paid $2 million in connection with the investments in Vanderbilt. The ERB invested $40 million in Vanderbilt Financial Trust and the SIC invested $50 million. Those investments are considered a total loss.
Correra's attorney, Sam Bregman, said last week that Correra was not involved in those investments, but said Tuesday night he had not had a chance to review the new documents and had no comment.
All the defendants in the lawsuit have strongly denied Foy's allegations.
The records release Tuesday was the latest development in a painful saga for the Richardson administration.
In addition to ordering that Aldus be fired, the governor last week ordered both the ERB and the SIC to stop allowing third-party placement agents a term used interchangeably with third-party marketer to play any role in state investments for at least six months.
Richardson said in a news release that "serious questions have been raised."
While the practice is common in the investment industry, Richardson said, "the added potential for conflict of interest concerns me."
The issue has attracted the attention of law enforcement, regulators and legislators. In recent weeks the FBI has questioned State Investment Council staffers, and the SEC has inquired about investment advisers and third-party marketers.
And next week the Legislative Finance Committee will hold a hearing on the issue.