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Sunday, January 11, 2009
GRIP Firms Helped Fund Richardson PACs
By Colleen Heild And Jeff Jones
Copyright © 2009 Albuquerque Journal
Journal Staff Writers
Gov. Bill Richardson and his entourage lived like VIPs in Boston back in 2004, when Democrats gathered for their national convention.
High-end hotels. A big tab for an event at a pub on Canal Street. An even bigger bill with Lifestyle Transportation, which bills itself as "Boston's premier limousine service."
Analysis of Professional Fees Incurred Related to GRIP/DOT Bond Projects (PDF)
The governor, who chaired the convention, has said his expenses were paid by the convention and the Democratic Governors Association.
For others in his group, it was large living financed in part by a political committee whose biggest contributor is at the center of a federal investigation that derailed Richardson's nomination for U.S. commerce secretary.
CDR Financial Products of Beverly Hills and others that gave to the committee, Si Se Puede! made big money as financial advisers for the project known as GRIP — Governor Richardson's Investment Partnership.
Si Se Puede was one of two political committees Richardson formed in his first 13 months in office. The other was Moving America Forward.
Together, the two funds collected at least $195,000 from companies or individuals working on financing for GRIP, an ambitious initiative that would fund transportation projects ranging from highway improvements to the Rail Runner commuter train.
The GRIP financing package was an economic bonanza for a lot of people.
Records obtained by the Journal show that more than 20 financial companies, advisers, lawyers and agents divvied up at least $12 million for work in 2004.
Five years later, an ongoing federal probe into the state's selection of CDR for a piece of the GRIP work has come to haunt Richardson, inflicting what could be the most political damage the two-term governor has endured in his decadeslong career.
In the course of a week, he's gone from being President-elect Barack Obama's high-profile Cabinet selection to being flashed on national TV news promos touting coverage of corruption and scandal.
The focal point is the questionable selection of CDR for two GRIP-related jobs, for which it was paid $1.4 million. But three of Richardson's closest and most trusted advisers are under scrutiny: former campaign manager and chief of staff Dave Contarino; former deputy chief of staff and later New Mexico Finance Authority executive director David Harris; and Denver political guru and Richardson confidant Mike Stratton.
Richardson, Harris, Contarino and others have retained legal counsel. All have denied any wrongdoing.
Regardless of whether any laws were broken, the transactions and relationships raise questions about influence, access and where lines should be drawn between politics and government.
"Ideally, the official functions of government and the people taxpayers pay to work for them would be completely separated from the fundraising activities of (politicians). In the reality, that's rarely the case," said Massie Ritsch, spokesman for the Center for Responsive Politics, a Washington, D.C.-based money watchdog group.
"It's not difficult to find connections between political contributions and actions governments take," Ritsch said. "We've seen this story over and over. What you worry about is the stories that don't get attention."
Harris selection
The seeds of last week's political blowup were planted on the campaign trail in 2002, when gubernatorial candidate Richardson talked about his ambitious transportation agenda: park and ride, improved roads, commuter rail.
Never mind that the state was already lumbering under $1 billion in highway construction debt — mostly from rebuilding the Big I in Albuquerque and widening U.S. 550. There was little money for anything other than road preservation.
Richardson, as early as October 2002, talked about refinancing that $1 billion debt, news articles show. But he offered no details.
"I knew we were going to have to come up with something because we had tremendous needs," said Rhonda Faught, whom Richardson appointed as Department of Transportation secretary.
During the first quarter of his first year in office in 2003, Richardson's longtime friend and political adviser, Stratton, was retained by commercial finance giant JP Morgan to focus on winning business from state and local governments in New Mexico.
Stratton, a Denver-based political power broker, would end up earning nearly $269,000 over the next year for his work.
JP Morgan would end up as a bond underwriter for GRIP and recommend CDR to the state, said a state official who recalled that Stratton also worked for CDR.
That spring there was also a changing of the guard at the New Mexico Finance Authority, a quasi-state agency that issues bonds for state and local government projects.
Meeting minutes show NMFA board chair Stephen R. Flance told board members in April 2003 that "Gov. Richardson wants, as he has in other agencies, his leadership reflected directly in the NMFA. Therefore, Gov. Richardson has requested the NMFA Board to consider the hiring of David Harris as its new executive director."
Harris, a top Richardson aide, would help put together the GRIP financing plan but stayed in the NMFA job just a year. He left to become a vice president at the University of New Mexico at a starting salary of $205,000.
His departure came after the GRIP financing details were approved and CDR was selected to advise the state on complex financing transactions called SWAPs.
Harris, who later received significant raises and bonuses at UNM, won't comment publicly and has retained a lawyer who has said his client did nothing wrong while at the NMFA.
Two other top staff members who recommended the selection of CDR are also no longer with the NMFA.
One of them was former NMFA chief financial officer Keith Mellor, who now works at the University Health Sciences Center.
"I've been interviewed by the FBI and the federal prosecutor and they asked me not to comment on anything," Mellor told the Journal last week.
Contarino, who has gone back and forth between running Richardson's campaigns and helping run his administrations, says he was involved in GRIP financing in his role as chief of staff.
Moving America Forward
The same month that Harris moved to the NMFA, Richardson launched a political organization to raise money to recruit Hispanics and American Indians to the Democratic Party.
It was called Moving America Forward and raised at least $2.4 million in contributions during its two years of existence.
Headed by executive director Amanda Cooper, a top Richardson political staffer, the political action committee's directors included former state Insurance Superintendent Eric Serna and Richardson political appointees Jamie Koch, Paul Blanchard and Carolyn Monroe.
In October 2003, CDR president David Rubin dropped $25,000 into the PAC.
Three other firms that ended up with GRIP business would follow suit: the law firm of Sutin, Thayer & Browne; financial advisers First Southwest Co.; and the Denver-based law and lobbying firm then known as Brownstein, Hyatt & Farber each gave $10,000 in a short period between mid-April and early May of 2004.
Stratton has long-standing lobbying and business ties with the Brownstein firm, which as of 2006 had four lucrative contracts with the Richardson administration. Stratton has not returned telephone messages seeking comment.
Romer's pitch
At an NMFA board meeting in early 2003, JP Morgan banker Chris Romer — the son of former Colorado Gov. Roy Romer, for whom Stratton once did work — pitched the merits of a fairly new type of financing vehicle called a SWAP.
Such SWAPs, "are now the largest denominations of currency anywhere in the world," board minutes quote Romer as saying.
With such contracts, the NMFA could enter into an arrangement with investment bankers to pay a fixed rate, he explained. Investment bankers take the interest rate risk over a period of time "and hopefully break even or make a little money," said Romer, who in 2006 was elected a state senator for Colorado.
SWAPs offered lower interest rates, he said. But they were also tied to variable rates, so the risk was slightly higher.
The NMFA had never entered into a SWAP before, though UNM and the city of Albuquerque had.
A year later, the NMFA would hire CDR, which specialized in SWAPs. Of the $1.6 billion GRIP financing plan, about $420 million was financed through SWAPs.
(Last week, the University of New Mexico told the Journal it was subpoenaed late last year by Justice Department investigators seeking details on several university bond projects in 2002 and 2003 — at least some of which UNM believes involved CDR and J.P. Morgan.
That investigation, largely unrelated to the GRIP probe, is part of a nationwide investigation into allegations of price fixing.)
Bill Sisneros, NMFA's current executive director, said SWAPs saved the state millions, but his agency hasn't used them since GRIP.
"I haven't really seen a need for them," Sisneros said. "Most of our products historically are fixed-rate. I'm an old bond guy ... I'm just more comfortable with fixed-rate products."
GRIP is born
The same month Rubin contributed to Moving America Forward, Richardson convened a special legislative session proposing GRIP among other initiatives.
GRIP legislation was sponsored by Speaker of the House Ben Luján and then-Senate Pro Tem Manny Aragon, both key Richardson allies.
Until GRIP, most transportation bond issues had been handled by the state DOT.
But the initiative supported by the administration designated NMFA to handle the financing plan. It also contained specific wording to allow SWAPs.
Faught, who retired as state transportation secretary Dec. 31, recalled last week that the Governor's Office and the finance authority found a way to pay for more than the $1 billion in GRIP projects by extending existing 12-year bonds to 20 years and adding an extra $40 million to the pot.
As to why NMFA was selected to oversee the financing, Faught said, "It was just part of the deal. ...
"From my own perspective, we didn't have the expertise to do it. We had lost a lot of the expertise that was in the department. And the finance authority always felt like they should be doing the bonds."
CDR is hired
At the end of 2003, the NMFA issued what seemed to be a routine request for proposals for "investment advisory services pertaining to its current investment portfolio of about $150 million." Six firms, including CDR, responded.
The RFP never mentioned GRIP or SWAPs, and CDR didn't come in first in the ranking.
But, based on that RFP, NMFA staff recommended and the NMFA board — comprised mostly of Richardson appointees — approved using CDR in the event the state decided to do SWAPs.
A different company was hired as investment adviser.
Bill Fulginiti, a longtime NMFA board member, said he was asked by the FBI last August how the NMFA's procurement process typically worked.
He said he told the FBI agent that NMFA staff sets the criteria, the vendors bid, "and the staff rates the vendors according to the criteria that we published."
A copy of an NMFA scoring sheet provided to the Journal shows that firms were graded on the various criteria published in the RFP.
But there was an extra category added on the scoring sheet for SWAP services.
In that SWAP category, CDR got 100 percent. So did the vendor ultimately selected to provide investment adviser services.
Officials from CDR have said that their company was selected in a competitive process.
Sisneros has said that the procurement process wasn't up to current day standards.
Si Se Puede!
In February 2004, another Richardson-affiliated political committee was born — Si Se Puede! Boston 2004 Inc. — to pick up some of the expenses related to the Democratic convention.
Richardson's tab was covered by the convention itself and the Democratic Governors Association, a staffer said at the time.
But the fund paid costs for some of Richardson's "politically related staff," the staffer told The Associated Press.
Si Se Puede took in about $330,000 in contributions during its one-year life, with $140,000 of that coming from GRIP firms, records show.
CDR was the single largest contributor, kicking in $75,000 on June 18, 2004. By the end of the month, the company won a no-bid, sole-source contract from the NMFA related to GRIP escrow services.
Overall, CDR was paid $1.4 million for GRIP-related work.
Si Se Puede listed the same Santa Fe address as Moving America Forward; Amanda Cooper also served as its executive director.
Some of Si Se Puede's initial directors included:
Ted Trimpa, a Colorado lobbyist and lawyer who in 2003 and 2004 was working for Brownstein.
Guy Riordan, a former Richardson political insider and political appointee accused in administrative court of paying kickback money to convicted former state Treasurer Michael Montoya in exchange for state securities business. Riordan denied the allegations.
Si Se Puede had some cash left over after Boston, but donors can be assured that it went to other political purposes. The PAC gave more than $87,000 to the Democratic Governors Association, which Richardson chaired in 2005 and 2006 — another position that gave him significant national political exposure and allowed him to travel around the nation and build support as he prepared to launch his unsuccessful run for president.
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