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Friday, August 28, 2009
Feds Criticize Gov.'s Office But Skip Indictments
By Mike Gallagher And Dan Boyd
Journal Staff Writer
Gov. Bill Richardson and two top advisers can breathe a sigh of relief over the Justice Department's decision not to pursue indictments in connection with a $1.6 billion highway bond deal, but if they were looking for clear vindication from prosecutors, they didn't get it.
A letter to defense lawyers from U.S. Attorney Greg Fouratt sent late Thursday said the United States "will not seek to bring charges against your clients" arising out of the New Mexico Finance Authority's award of financial work to California-based CDR Financial Products.
Fouratt went on to say, however, that 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 ..."
Fouratt would not comment and would not provide a copy of the letter.
The letter said, "It is not to be interpreted as an exoneration of any party's conduct."
Richardson spokesman Gilbert Gallegos responded late Thursday, saying, "The prosecutor's letter is wrong on the facts and appears to be nothing more than sour grapes."
The investigation cost Richardson a spot in President Barack Obama's Cabinet as commerce secretary. The governor withdrew his name in January when it became clear the probe would not end soon.
The decision not to pursue indictments was made by the Department of Justice in Washington, D.C., according to attorneys familiar with the case — a development that prompted questions by Republicans in New Mexico about possible political tampering.
Richardson's office earlier Thursday issued a statement saying he had been vindicated — although it was before his lawyers received any formal notification and before the Journal informed Gallegos about Fouratt's letter.
"Governor Richardson has known all along that neither he nor any staff members committed any transgressions during their successful fundraising back in 2004," Gallegos said in the initial statement from the governor's office. "The U.S. Attorney's thorough and lengthy investigation has apparently determined the same thing — that no indiscretions occurred."
Gallegos was traveling with the governor on a trade mission to Cuba and commented by e-mail and telephone from Havana.
Contributions
The investigation dealt with whether more than $100,000 in political contributions made by CDR and its principals influenced the company's selection as an adviser to the New Mexico Finance Authority for the GRIP bond program.
It focused on Richardson, his former chief of staff and confidant, Dave Contarino, and UNM Executive Vice President David Harris, who was in charge of the Finance Authority in 2004 when the bond program was initiated.
The investigation became public last summer when FBI agents interviewed members of the Finance Authority board and Harris, its former executive director.
Last fall, a federal grand jury subpoenaed records from Richardson's office and from his political advisers.
The investigation gained national attention when Richardson pulled out of the commerce position.
"Governor Richardson chose to remain silent and let the justice system run its course," Gallegos said in the statement Thursday.
Richardson attorney Peter Schoenburg had no comment Thursday night in response to Fouratt's letter.
Harris' attorney, Paul Kennedy, said his client was relieved the investigation has concluded and "compliments the FBI and U.S. Attorney's Office on a very competent, thorough and professional investigation."
He said his client was grateful for the "unstinting support" of UNM President David Schmidly and the regents.
"He is very happy this chapter in his life is closed," Kennedy said.
Attorneys for Richardson, Harris and Contarino in April signed 90-day waivers of the statute of limitations to have the case reviewed by top prosecutors in Washington, according to attorneys familiar with the case.
A five-year statute of limitations was set to expire in April on some of the incidents under investigation that occurred in 2004 when the highway bonds were sold.
In return for waiving the statute of limitations, defense attorneys were promised they would have the opportunity to present evidence and arguments that no crimes had been committed.
An additional 30-day waiver was agreed to in July, but it does not appear the attorneys ever made the trip to Washington.
Federal white-collar crimes normally have a statute of limitations of five years, but it is not unusual for potential defendants in securities or tax cases to waive the statute of limitations to gain time to develop arguments that the activities in question were legitimate.
The attorneys for Richardson and his aides asked for such review at the Justice Department early this year.
Explanation sought
State Republican Party Chairman Harvey Yates Jr. said Attorney General Eric Holder owed an explanation on how the decisions were made.
Democrats fired back.
Josh Geise, executive director of the Democratic Party of New Mexico, accused Yates of having a "short memory."
"It was (former U.S. Rep.) Heather Wilson and the Bush White House that politicized the attorney general's office," Geise said in an e-mail to the Journal.
"In short, this is a total vindication of Governor Richardson and his senior advisers who have been subjected to a year of unfounded rumors, leaks and attacks," Geise said.
The state's political Establishment has been rocked by the CDR probe and by several other pending investigations involving state retirement and escrow fund investments. One involves the son of a Richardson insider sharing in $23 million in finder's fees for State Investment Council business.
The office of New Mexico Attorney General Gary King, a Democrat, is prosecuting two former state officials in separate cases, and Lt. Gov. Diane Denish, a Democrat who hopes to win election to succeed Richardson next year, said Thursday that public confidence had been eroded.
Questions about bid
CDR was not the top-ranked advisory firm among those competing to work for the Finance Authority, and the Journal reported last fall that there were questions surrounding the bid-scoring documents that led to CDR's hiring.
The Finance Authority was in charge of financing what is known as Governor Richardson's Investment Partnership, a $1.6 billion bond deal that included the Rail Runner commuter train.
The company was selected in March 2004 to oversee $420 million in interest rate swaps, a complex area of bond finance the authority had never been involved in before or has since. CDR was paid more than $1 million for its work on the bond deal.
In June 2004, CDR also received a sole-source, no-bid contract to manage the escrow accounts created to hold funds the state received from the bond sale. The firm earned $443,000 for the escrow work.
During the time it was getting the state work, CDR donated $100,000 to Richardson political committees.
Last fall, a federal grand jury subpoena was served on Richardson's office seeking all correspondence and other communications between Richardson's staff and senior officers of CDR.
After winning the swap business from the state, CDR officials paid for dinner and Lakers basketball tickets for Harris and Contarino in Los Angeles.
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