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Thursday, February 11, 2010
Firm With Scandal Ties Pushed N.M. Deals
By Mike Gallagher
Copyright © 2010 Albuquerque Journal
Journal Investigative Reporter
A financial firm that helped private companies get New York and New Mexico state investment money has agreed to get out of the placement business and will pay $1 million to the New York State Pension Fund.
California-based Wetherly Capital Group was active in New Mexico from 2003 until 2008, helping arrange five investments worth $145 million from the State Investment Council in three different funds.
The company also was involved in two investments worth $90 million made by the New Mexico Educational Retirement Board.
Wetherly was a so-called third-party placement agent retained by companies trying to get the state to invest in them. Placement agents were paid something akin to finder's fees when deals went through, without the state necessarily knowing about the payment.
According to state records, Wetherly split its placement fees for the seven New Mexico investments with former Santa Fe broker Marc Correra, who was paid $1.95 million in connection with the deals.
Correra is the son of Anthony Correra, a debarred stock broker and a close friend and political supporter of Gov. Bill Richardson. Anthony Correra also was instrumental in Richardson's appointment of former state Investment Officer Gary Bland, who resigned recently in the face of a no-confidence vote. Bland has denied any wrongdoing.
According to federal grand jury and Securities and Exchange Commission subpoenas, a number of New Mexico investments are the target of criminal and regulatory investigations.
The New York AG has been investigating corrupt investment practices by that state's pension fund for more than two years and investigators have found many connections to New Mexico and other states.
Wetherly agreed to the $1 million payment to the New York state pension fund and promised to stop doing business as a placement agent as part of a civil agreement reached with the attorney general there.
The company was involved with three investments with the New York State Pension fund in which it split its placement fees with Hank Morris, a local political figure who is criminally charged with acting as a secret gatekeeper to the pension fund in that state.
A statement issued by Wetherly this week said the firm has cooperated with investigators in New York "fully and voluntarily."
Last week, the State Investment Council in New Mexico began sending demand letters to companies that failed to thoroughly disclose who acted as placement agents and received fees for helping get state investments. The SIC letters called the dealings "suspect."
Wetherly initially explained that the company's problems in New York were due to former employee Julio Ramirez, a California broker and political fundraiser.
Ramirez, who has pleaded guilty to securities fraud in the New York investigation, was a go-between in recruiting financial firms and placement agents to pay fees to Morris.
In New Mexico, Ramirez and Correra, who was recently living in Paris, France, were the placement agents for a $25 million investment in the private equity fund, KH Growth, in 2007 and split a $500,000 fee.
One of the firms Ramirez helped recruit into the New York scheme was Aldus Equity Partners of Dallas, whose founding partner Saul Meyer also has pleaded guilty to securities fraud and paying kickbacks to Morris for New York State Pension fund business.
At the same time Meyer was paying kickbacks in New York, his company was being paid more than $1.5 million a year to serve as an independent adviser to the New Mexico State Investment Council and Educational Retirement Board.
Meyer and his partners recommended six of the seven investments involving Wetherly and Correra to the SIC and ERB.
Meyer said in his New York guilty plea that on numerous occasions "contrary to my fiduciary duty, I ensured that Aldus recommended certain proposed investments that were pushed on me by politically connected individuals in New Mexico.
"I did this knowing that these politically connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico."
Meyer is cooperating with the investigation in New York and federal investigators in New Mexico.
While Wetherly will no longer function as a placement agent, the company will continue its other business.
The New York Attorney General's Office has reached civil agreements with nine companies that have paid back $120 million to the state pension fund there.
New Mexico had dealings with another company that has run into legal trouble in New York.
The New York Attorney General's Office has reached an agreement with Markstone Capital Group LLC, which agreed to return $18 million to the retirement fund.
Markstone's founding partner, Elliott Broidy, pleaded guilty to a felony charge of "awarding official misconduct" by providing gifts, political contributions and benefits valued at more than $1 million to a top decision maker at the New York pension fund and others.
The New Mexico State Investment Council invested $20 million with Markstone in 2004.