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Sunday, December 26, 2010
Scandals Dogged Richardson's Terms
By Mike Gallagher
Copyright © 2010 Albuquerque Journal
Journal Investigative Reporter
Gov. Bill Richardson took the oath of office in 2003 under the shadow of two federal investigations — one involving national security and the other dealing with stock price manipulation.
He leaves office this week with another probe lingering, this one into how the son of a good friend and political adviser made millions of dollars from state investments.
In between, there was the investigation into allegations of state contracts for campaign cash that derailed his nomination to President Barack Obama's Cabinet.
While Richardson retained his national media profile, courting the likes of CNN's Wolf Blitzer, he was dogged during his years as governor by allegations of pay-to-play politics and showering insiders with state contracts. In the end, they tarnished his legacy and derailed his bid for a prominent spot in the Obama administration.
When Richardson was elected in 2002, federal investigators were looking into leaks surrounding the investigation of former Los Alamos National Laboratory scientist Wen Ho Lee during the time Richardson served as secretary of energy.
Lee's name was leaked to the press before he was charged, and Richardson was named by a federal appeals court judge as one potential leaker.
After he was indicted, Lee was held in solitary confinement without bail for months. The case eventually fell apart. Lee pleaded guilty to a minor charge and was sentenced to time served.
The investigations into the identity of who leaked Lee's identity ended without reaching a conclusion.
The stock fraud investigation involved a California technology company, Peregrine, once headed by the brother-in-law of Richardson's wife. Richardson served on the board of directors of Peregrine and was never charged in the federal fraud case, although the brother-in-law did go to prison.
Richardson's defenders argue that nothing federal investigators have uncovered has implicated him personally as his second term comes to an end.
Always big in scale
Whether it was the investigations, or a billboard bearing his larger-than-life image over New York's Times Square in 2003, or his $360 million tax cut, everything about Richardson's administration seemed bigger.
In part, this was due to Richardson's consolidation of power within his office. No one since Clyde Tingley in the 1930s held such a tight rein on the decision-making processes within state government.
Richardson's appointments of political advisers, supporters and contributors went deep into state agencies, boards and commissions, eliminating the usual buffers that protected governors in the past from policies gone wrong.
He demanded letters of resignation from his appointees to boards, commissions and university regents so he could fire them at any time if they failed to do his bidding. He placed highly paid political associates at the University of New Mexico, and some of his cronies got rich off of deals with the state.
Within six months after Richardson took office, seven of his appointees resigned or were removed for legal or ethical problems.
Those were the first warning flags.
It also became clear early on that Friends of Bill, large contributors to his first run for governor and members of his personal inner circle, stood to benefit from their ties to the administration.
State Investment Council
Friends, political insiders and donors collected millions of dollars in third-party marketing, or finder's, fees from firms selected to manage alternative investments by the State Investment Council, which Richardson chairs, and the Educational Retirement Board.
A federal grand jury has subpoenaed records from Richardson's office as well as the agencies. Former State Investment Officer Gary Bland resigned last year, and ERB Chairman Bruce Malott, the governor's campaign treasurer, resigned earlier this year.
Richardson, Malott and Bland were all close friends of Anthony Correra, whose son, Marc, shared in more than $22 million in third-party fees. Richardson and Malott said they didn't know Marc Correra was receiving fees. Bland said he was aware that Correra was doing business with firms seeking state investments.
Malott quit the ERB after the Journal interviewed him about a $350,000 loan he received from Anthony Correra.
The New Mexico scandal came to light after an investigation into similar conduct by the New York Attorney General's Office into investments made by that state's pension fund.
At least eight people tied to the New Mexico scandal have pleaded guilty to state charges in New York, including former SIC and ERB investment adviser Saul Meyer.
As part of his guilty plea in New York, Meyer said, "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 State Investment Council and the ERB revealed in response to requests for information that Marc Correra shared in more than $22 million in finder's fees paid to him by companies for his role in helping secure investments from the Investment Council and ERB.
The investigation has continued for more than 18 months and shows no signs that it will be resolved before Richardson leaves office.
Pay-To-Play 1
Frank Foy, former chief investment officer for the Educational Retirement Board, alleged in a Fraud Against Taxpayers civil lawsuit that the ERB and SIC invested and lost $90 million as a result of a pay-to-play arrangement.
Foy claimed the state invested the money with Vanderbilt Capital of Chicago in return for $15,000 in campaign contributions to Richardson's failed 2007 presidential campaign.
Vanderbilt specialized in collateralized debt obligations, which were at the heart of the financial crisis. The state's losses in Vanderbilt investments could be more than $200 million by one state estimate. The company also paid third-party fees to Marc Correra and is part of the pending federal grand jury investigation, according to subpoenas issued to state agencies.
Pay-To-Play 2
The contributions from the owners of Vanderbilt Capital seem small compared with those made by others getting state business during Richardson's tenure.
Richardson raised more than $8 million in cash and in-kind contributions in his 2002 campaign for governor and more than $13 million for the 2006 election.
Over the past eight years, Richardson has insisted time and again that there was no connection between political donations and state business.
But the list of contributors doing business with the state is lengthy and includes companies running private prisons, companies feeding state prison inmates, health plans contracted to served state Medicaid patients, state highway contractors, law firms with state contracts, and many others.
In the 2006 election cycle, for instance, three health plans awarded state contracts to manage care for Medicaid beneficiaries contributed more than $157,000. The company managing the state behavioral health care system in 2006 contributed $50,000.
A California development company, RS Investments, that wanted to build 15,000 homes in the Los Lunas area contributed $75,000.
The company wanted an improved interchange on I-25. Richardson requested $4 million for the project. The Department of Transportation spent about $3 million on it before deciding to bring the project to an end because the developer never came up with its share of the money.
Friends of Bill
If contributions weren't enough, companies seeking state business or trying to keep the state from regulating their industry or product hired some of Richardson's closest political advisers as consultants or lobbyists.
When the state considered regulating the artificial sweetener aspartame, a Japanese manufacturer hired longtime Richardson pals and advisers Mike Stratton of Denver and Butch Maki as lobbyists. The regulatory move eventually stalled.
Maki, who, with his daughter, owns a security company with a University of New Mexico contract, was also a lobbyist to Richardson contributor BNSF Railway. The railway sold the state its rail line from Belen to the Colorado state line for Richardson's Rail Runner Express commuter train.
The state uses only the tracks from Belen to Santa Fe and has no plans for the 200 miles of track from Lamy, east of Santa Fe, to the border.
When the Virginia-based Value Options was competing with a subsidiary of United Health Care for the state contract to manage behavior health care, each company reached out for consultants with close ties to Richardson.
Value Options hired David Contarino, Richardson's former chief of staff and campaign manager. United Health Care hired Stratton. United Health's subsidiary eventually won the contract.
But hiring friends of Richardson didn't always help a project along. For instance, he vetoed legislation that would have helped provide financing for one of Maki's pet projects to expand telephone service on Navajo lands.
GRIP bonds
In August 2009, another federal grand jury probe ended without returning indictments but with no clear exoneration for Richardson's administration.
But not before it derailed Richardson's chances of being a member of President Obama's Cabinet.
Richardson withdrew his nomination as commerce secretary in early 2009 because of an investigation that focused on how California-based CDR Financial Products secured a contract to be an adviser on the $1.6 billion GRIP highway bond program.
That program funded road construction throughout the state and the Rail Runner commuter train.
CDR's founder and owner, David Rubin, gave at least $110,000 to Richardson's campaign, and various political committees (Moving America Forward and Si Se Puede) at the time Rubin's firm secured the contract.
The two committees received more than $190,000 from financial firms involved in the GRIP bond deal.
CDR's lobbyist at the time was Stratton, the Richardson political adviser from Denver.
Richardson's closest staff advisers, Contarino and David Harris, who were involved in the contract and donations, traveled to California on CDR's dime to be treated to a Los Angeles Lakers game and dinner at an exclusive restaurant.
The investigation ended with no charges filed.
But the U.S. attorney at that time, Greg Fouratt, said in a letter to attorneys for Richardson, Rubin and others that the lack of indictments should not be seen as exoneration.
Fouratt said the investigation revealed that CDR and its officers made substantial contributions to Richardson's political organizations while the company was seeking the work and that "pressure from the Governor's Office resulted in corruption of the procurement process so that CDR would be awarded such work."
The three-paragraph letter — obtained by the Journal from private attorneys in the case — said the notification "shall not preclude the United States or the grand jury from reinstituting such an investigation without notification if ... circumstances warrant."
The letter said, "It is not to be interpreted as an exoneration of any party's conduct."
Rubin and others in his firm were subsequently indicted in New York on federal charges of rigging municipal bond bids across the nation, including New Mexico. Charges in New York are pending against Rubin. Several former employees and officials at major banking firms have pleaded guilty as a result of that investigation.
Moving America Forward
In 2003, Richardson founded a political action committee to raise money for a voter registration drive in Native American and Hispanic communities. The committee spawned a secretive foundation of the same name that raised $1.7 million. Richardson and his advisers have refused to disclose who donated to the foundation.
Anthony Correra, so prominent in the state investment investigation, was one of the board members.
Board members interviewed by the Journal said they knew next to nothing about the foundation and didn't attend any meetings.
The donors were never identified by officials with the foundation who cited IRS legal provisions allowing them to keep the names secret.
Racinos
Richardson's biggest in-state fundraisers have been involved in the horse racing and casino business, or have at least tried. Richardson appoints the members of the state Racing Commission and the Gaming Control Board, which grant licenses and regulate the industries.
Anthony Correra's son Marc Correra was a partner in the application for a racetrack and casino to be built in Raton. The public revelations about his sharing in $22 million in fees from firms getting state investments brought his involvement in the deal to an abrupt halt.
Whether the Raton racino will ever be built remains to be seen. The main applicant, Canadian developer Michael Moldenhauer, failed to meet deadlines for getting a temporary casino up and running and missed a Memorial Day deadline for hosting a live race meet. His gaming license has been voided, and the status of his racing license has yet to be decided.
Earlier in his administration, the Zia horse racing track and casino in Hobbs was up for grabs among a covey of Richardson pals, political contributors and racing heavyweights.
State Transportation Commission Chairman Johnny Cope was in the running but sold his interest to another Richardson insider, Santa Fe developer and art dealer Gerald Peters. His competitors included Ruidoso Downs owner R.D. Hubbard ,who partnered with Albuquerque Downs owner Paul Blanchard.
Hubbard and Blanchard, a close friend and political ally and fundraiser for the governor, eventually won approval to build the track and casino for $46 million in 2004. They sold it in 2007 for $200 million.
Peters has tried unsuccessfully to open a casino south of Las Cruces in partnership with Jemez Pueblo. He has also expressed some interest in the Raton racino.
Transportation headquarters
In 2007, Richardson had to pull the plug on a $350 million-to-$400 million plan to build a new headquarters building for the Department of Transportation.
A group led by Peters was selected to negotiate a contract with the department to develop the headquarters project, which had been supported by Cope.
While the project faced a number of questions, it also got caught up in the fallout of the Metropolitan Courthouse construction scandal.
At least three men who pleaded guilty to various roles in the construction fraud scheme — former court Administrator Toby Martinez, engineer Raul Parra, and construction manager Michael Murphy — were involved in various ways with the department's headquarters project.
Martinez, Parra and Murphy were charged along with former Democratic Senator Manny Aragon in an indictment alleging they were involved in skimming more than $4.2 million from the court construction. Murphy pleaded guilty to knowing about the plot but not reporting it to authorities.
A federal indictment alleged they were planning on a similar scheme at the Transportation Department.
When their involvement in the DOT headquarters project surfaced, Richardson ordered a halt to the project and an investigation into the bid procedures.
Manny Aragon
Richardson did what no one else could do — get Manny Aragon out of the State Senate. In 2004, Aragon was selected to be president of New Mexico Highlands University, giving up his decadeslong tenure as a powerhouse in the Senate. The firm conducting the search for the Las Vegas-based college was headed by a former Richardson Cabinet secretary, and Richardson had appointed most of the regents.
By the spring of 2006, the problem Richardson and Highlands regents faced was getting Aragon out of Highlands before the FBI took him away in handcuffs.
That's when an FBI investigation into Aragon's role in millions of dollars of fraud during the construction of the Metropolitan Courthouse in Albuquerque became public.
In July, Aragon agreed to a $200,000 buyout. He and others were indicted the following year.
Aragon pleaded guilty and was sentenced to federal prison in 2008.
Treasurer's Office
If not for the involvement of his close friend Guy Riordan, Richardson would have escaped any of the mud thrown up by the indictments and eventual prison sentences of former state Treasurers Robert Vigil and Michael Montoya.
Richardson was credited with acting quickly to stabilize the Treasurer's Office after the FBI raided then-Treasurer Vigil's office in September 2005. Richardson quickly called for Vigil's resignation, took other measures to protect the state's bond rating and called for ethics legislation.
A few months into the lengthy legal wrangle in Vigil's criminal case, allegations emerged that Riordan, the Richardson pal and Game Commission appointee, had made payoffs to Montoya in exchange for state bond business.
Richardson fired Riordan and donated more than $40,000 in contributions to charity but kept a shotgun that Riordan and others gave him as a gift.
Riordan was never criminally charged, but the Securities and Exchange Commission took regulatory action in banning him from the securities industry for life and fining him more than $1.5 million. Riordan has appealed that decision to a federal appellate court in Washington D.C.
Riordan claimed that the real target of federal investigators was Richardson.
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