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Thursday, October 22, 2009
State Investment Chief Quits
By Mike Gallagher
Journal Staff Writer
Faced with the prospect of a no-confidence vote, State Investment Officer Gary Bland resigned Wednesday as New Mexico's role in a national institutional investment scandal continues to grow.
An emergency meeting of the State Investment Council scheduled for this morning was canceled late Wednesday after Gov. Bill Richardson's office released Bland's resignation letter.
Bland stepped down in the wake of disclosures that a man with close ties to Richardson was paid millions of dollars in "finder's fees" by companies seeking state investment business, and that state investment decisions were made to benefit "politically connected" individuals in New Mexico.
The meeting agenda said only that today's meeting was to discuss personnel matters, but the Journal learned that a subcommittee had asked that a motion for a vote of no confidence in Bland be heard by the entire Investment Council.
The resolution obtained by the Journal also proposed restricting Bland's ability to make investment decisions and called for the governor to investigate whether he should be removed from office and suspended without pay during the process.
Richardson's office released a copy of Bland's letter, which said, "Clearly I am saddened and disappointed to render my resignation as State Investment Officer."
Gilbert Gallegos, the governor's deputy chief of staff, said Richardson "has accepted Gary Bland's resignation and thanks him for his service to New Mexico."
Politically connected
Bland, who was appointed by Richardson with advice and consent of the state Senate, was paid $307,199 a year to direct day-to-day investment operations of the state's $13.1 billion in permanent funds. He also serves on the board that directs investment of teacher retirement money.
Earlier this month, the founding partner of a Dallas firm the state hired on Bland's recommendation — and paid $1.5 million a year — for investment advice pleaded guilty in New York to paying kickbacks in return for New York pension fund business under the guise of third-party marketing fees.
But the admission of wrongdoing didn't stop at the state line.
In his plea, Saul Meyer of Aldus Equity told the New York court, "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."
The FBI and Securities and Exchange Commission have been investigating third-party placement agent fees paid by firms that received state investments from the SIC and the Educational Retirement Board to which Bland was also appointed by Richardson.
Federal grand jury subpoenas have been served on both agencies, and Meyer agreed in his plea deal to cooperate fully with federal investigations in New Mexico.
The Journal has learned that in recent months, Bland has spent hours with investigators from the Securities and Exchange Commission at the agency's Denver office and with FBI agents, apparently without an attorney.
In addition to appointing Bland, the governor also appoints a majority of the Investment Council's members, including several of those who were pushing for the no-confidence vote.
Bland did not respond to requests for comment made to council spokesman Charles Wollmann. Other members of the council did not return Journal calls Wednesday.
SIC changes
In August, the council approved the staff's recommendation to create a subcommittee to serve as an audit committee, set the board's agenda and review council operations.
Several council members have expressed concerns over the past several months about the involvement of third-party marketers in state investments.
The resolution seeking the no-confidence vote was signed by State Land Commissioner Patrick Lyons and three Richardson appointees — Andrew Davis, Peter Frank and Stephen Feinberg.
Bland initially insisted at public meetings and in interviews that there was no problem with third-party marketing fees because they are not paid by the state and said any problems involving the fees could be solved by the state's new requirement that they be made public.
Despite Bland's comments, Richardson ordered a halt to the SIC doing business with investment funds that paid third-party marketing fees and eventually ordered Aldus Equity of Dallas fired after published reports of Aldus involvement in the New York scandal.
The company initially claimed it had done nothing wrong, but Meyer eventually was charged in the New York investigation.
He subsequently admitted in a New York court that he made false representations of material facts and concealed material information while advising the New York and New Mexico funds.
Meyer, who said he was aware he was violating his fiduciary duty to New Mexico by making politically influenced investment recommendations, faces up to four years in New York state prison and is cooperating with prosecutors in New York and federal authorities in New Mexico.
Meyer was a founding partner of Aldus Equity, which in 2004 became an adviser on private equity investments to the New York State Common Pension Fund and the New Mexico State Investment Council. In 2006, the firm was hired by the New Mexico Educational Retirement Board.
Last spring, the State Investment Council and the ERB revealed in response to requests for information that Marc Correra shared in more than $22 million in so-called finder's fees paid to him by companies for his role in helping secure investments from the Investment Council and the ERB.
He is the son of Anthony Correra, a disbarred securities dealer from New York who is a close friend of and adviser to Richardson.
Anthony Correra recommended Bland for the position of State Investment Officer, and Bland said he talked with Anthony Correra almost daily about investments.
Attorneys for both Correras say they have done nothing wrong.
Gilbert Gallegos, Richardson's deputy chief of staff, said, "The Governor's Office is not aware of any activity outlined by the attorney general of New York. As we have previously explained, Governor Richardson never spoke with Marc Correra about any state investments, and the governor never had any personal contact with Saul Meyer."
Gallegos said the governor will start the process to name a successor to run the State Investment Office, where a spokesman said the day-to-day operations will not be interrupted.
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