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Saturday, May 07, 2011
Lawsuits: Richardson Crony Anthony Correra Was 'Gatekeeper' in N.M. Pay-To-Play Scheme
By Mike Gallagher
Copyright © 2011 Albuquerque Journal
Journal Investigative Reporter
The State Investment Council filed two lawsuits Friday claiming the agency was the victim of a pay-to-play scheme involving former Investment Officer Gary Bland and associates of then-New Mexico Gov. Bill Richardson.
The suits seek compensation for millions of dollars they claim were paid to individuals who steered more than $1 billion in state investments based on their own selfish and political interests.
In particular, the lawsuits allege that Richardson's "confidante," political fund raiser and self-appointed consultant, Anthony Correra, played the role of "de facto gatekeeper" in recommending state investments.
Those investments, the lawsuits allege, benefited politically connected individuals, many of whom made and solicited contributions to Richardson's political campaigns.
Richardson, who left office at the end of 2010 and his second term, was on a plane Friday and not immediately available for comment. His former press secretary, Gilbert Gallegos, sent the Journal a statement saying, "After a thorough investigation of state investments, a federal grand jury has not found any wrongdoing by the Governor's Office.
"When Governor Richardson learned of the practice of investment institutions paying large fees to third-party marketers, he convinced the SIC to end the practice," Gallegos said. "Governor Richardson remains confident that all investments by SIC were first properly vetted by the competent staff of financial analysts the SIC, and made with the best interests of the state in mind."
Bland's attorney, Ira Robinson, said the allegations were "just absurd."
Correra's attorneys could not be reached for comment.
The lawsuits were filed by the New Mexico Attorney General's Office and the New York law firm Day Pitney LLP, on behalf of New Mexico's State Investment Council (SIC).
The lawsuit filed in state court Friday in Santa Fe names Bland and former political insider Guy Riordan and seeks an unspecified amount of compensatory and punitive damages.
"Everything we did was fully disclosed," Riordan told the Journal on Friday. "I have no idea what these allegations are about, except that somebody is running for office."
The lawsuit filed in federal court names former SIC investment adviser Saul Meyer; his company, Aldus Equity Partners; Anthony Correra, his son, Marc Correra; and 11 others who did business with the council.
Marc Correra worked as a third-party marketer for investment firms seeking state investments. He shared in more than $22 million in fees, according to SIC records.
His involvement in state investments became public after a number of firms doing business with the SIC and Educational Retirement Board were named in criminal and regulatory complaints in New York.
Several individuals named in Friday's filings have pleaded guilty to criminal charges related to similar schemes in New York.
The lawsuit alleges that the "New Mexico pay-to-play scheme that forms the basis for this action not only resembles the New York scheme in many respects, but also involves many of the same participants and investments."
Other claims in the lawsuits include:
• Anthony Correra gave Meyer a significant cash payment and other valuable gifts in or about 2004.
• As gatekeeper and often purporting to speak on behalf of Richardson, Correra "instructed, requested and/or suggested" that then-State Investment Officer Bland make investments that would benefit politically connected individuals, many of whom made and solicited others to make contributions that benefited Richardson's political campaigns.
• During Bland's tenure, Richardson's supporters and senior members of his staff requested Bland to secure political contributions from investment management firms that had received fees in connection with investments made by the Public Trust Funds.
The FBI and the Securities and Exchange Commission have been investigating New Mexico state investments since March 2009, and a federal grand jury subpoenaed extensive records from the SIC and state Educational Retirement Board.
That fact was not lost on the current chair of the State Investment Council, Gov. Susana Martinez.
"As we wait for justice in the criminal courts, we must aggressively pursue legal action of our own," Martinez said in a statement Friday. "These efforts must continue until all responsible parties are held accountable for the abuses that occurred here in New Mexico."
She warned that the numerous investment managers who entered payment arrangements with third-party placement agents to obtain SIC investment business should approach the Attorney General's Office voluntarily and fully disclose the details of those arrangements "before the attorney general knocks on their doors."
'Gatekeeper' and third-party agents
The federal lawsuit alleges that Bland, Meyer and Aldus Equity wrongfully caused the SIC to make investments of public trust funds "based on their own selfish interests and the personal, political and financial interests of politically connected individuals and their associates."
Bland resigned in October 2009 in the face of a no-confidence vote by the State Investment Council.
Both lawsuits say that "during Bland's tenure, Anthony Correra, Governor Richardson's personal friend, fund raiser and confidante – and a member of the search committee involved in hiring Bland – set himself up, with the knowledge, approval and/or acquiescence of Bland and other government officials, as Bland's unofficial investment consultant and a de facto gatekeeper of the SIC's alternative investment portfolio."
From 2003 until his resignation in October 2009, Bland directed SIC investments for the purpose of benefiting politically connected individuals, rather than solely on the basis of the underlying merits of the alternative investments, according to the lawsuits.
The scheme outlined in the lawsuit involved the SIC alternative investment portfolio that includes hedge funds, private equity companies and real estate deals.
These complex investments hold out the prospect of better financial returns than stocks and bonds but also carry the risk of substantial losses.
The lawsuit alleges Meyer's company, Aldus Equity, became the SIC's adviser with help from several unnamed politically connected individuals in 2004.
From January 2004 through April 2009, when the company was fired, Aldus received $4.3 million from the SIC for its recommendations.
The lawsuit claims that "Anthony Correra met with Meyer on numerous occasions and, purporting to speak on behalf of Governor Richardson, would often instruct, request or suggest Meyer" cause the SIC to make investments in certain private equity funds.
It also alleges that Meyer used Aldus' position as SIC adviser to curry favor with others to advance his "own agenda and for Aldus' business growth."
As part of the pay-to-play scheme, the suit claims, Bland helped Meyer and Aldus become an adviser to the Educational Retirement Board, which filed its own lawsuit against Meyer and Aldus last year.
The lawsuit claims that the third-party placement fees paid to Marc Correra and other agents were improper.
It also alleges that if companies failed to hire third-party placement agents, recommended by Bland or Meyer, the financial firms would not receive state investments.
It alleges that the third-party placement agents or marketers aided and abetted Bland and Meyer in failure to fulfill their fiduciary duties to the people of the state of New Mexico.
The lawsuit seeks an undetermined amount of damages and interest.
Riordan allegedly aided Bland
The state lawsuit makes many of the same claims as the federal lawsuit but only names Bland and Guy Riordan, a former New Mexico State Game Commission chairman, as defendants.
It alleges Bland violated his fiduciary duty to the SIC by making investments from the state's permanent fund and land grant fund pushed on him by politically connected individuals or their associates who stood to benefit from the investments.
The lawsuit in state court alleges Riordan aided and abetted Bland's breach of fiduciary duty to the state funds.
Riordan and Anthony Correra were part of the Richardson administration search committee that chose Bland to be state investment officer.
During his tenure overseeing the State Investment Council's investment program, Bland was paid about $2 million, making him one of New Mexico's highest-paid state employees.
The suit alleges that Riordan, "another politically connected individual, was paid substantial fees in connection with" SIC investments.
It claims Riordan aided and abetted Bland in breaching his fiduciary duty to the citizens of New Mexico by intentionally providing substantial assistance and encouragement to Bland in connection with one or more SIC investments.
The state case seeks an undetermined amount of compensatory and punitive damages and interest.
Previous lawsuit addressed
Also on Friday, the Attorney General's Office filed a motion in a Fraud Against Taxpayers Act lawsuit brought earlier by former New Mexico Educational Retirement Board investment officer Frank Foy.
The motion seeks to dismiss Foy's claims against third-party marketers named in Friday's SIC lawsuit filed in federal court.
Foy filed his lawsuit against more than 70 firms and individuals, alleging pay-to-play in state investments at the SIC and ERB.
His attorney, Victor Marshall, was traveling Friday and unavailable for comment.
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