E-mail Story
Print Friendly
Send E-mail
Reprint story
Thursday, April 29, 2010
Court Tosses Investment Fraud Lawsuit
By Mike Gallagher
Copyright © 2010 Albuquerque Journal
Journal Investigative Reporter
A taxpayer fraud lawsuit filed to recover between $150 million and $230 million in losses to the state's investment pool and teachers pension fund was dismissed Wednesday in state court.
District Judge Stephen Pfeffer of Santa Fe ruled that the statute under which Frank Foy, the former investment officer for the Educational Retirement Board, filed the lawsuit can't be used for acts committed before the law's enactment.
Pfeffer concluded that the Fraud Against Taxpayers Act is penal in nature because the penalties involve triple damages and therefore can't be applied retroactively, based on state and federal Supreme Court rulings.
Foy and his attorney, Victor Marshall, were seeking to recover millions of dollars in bad investments the ERB and state Investment Council made in subprime mortgage deals marketed by Vanderbilt Financial Advisors.
The lawsuit alleged widespread corruption in the placement of state investments by the SIC and ERB. The three dozen defendants denied the claims.
Marshall said that "with all due respect to Judge Pfeffer, he issued his opinion without any hearing, so he overlooked some key points raised by Frank Foy and Attorney General Gary King.
"First, it is a very serious matter when a judge strikes down a statute written by the Legislature, especially a statute to combat fraud," Marshall said. "Second, the defendants violated the Fraud Against Taxpayers Act after it became effective on July 1, 2007, so the judge's opinion does not apply to those violations. Third, in New Mexico, retroactive civil statutes are constitutional."
Gregg Fallick, one of the defense attorneys in the case, said, "I am very pleased that justice has been done and the court has dismissed the case."
Fallick represents Educational Retirement Board Chairman Bruce Malott, who was named as a defendant in the lawsuit.
From 2004 to 2006, Vanderbilt received almost $244 million of state investments from the SIC and ERB.
The Fraud Against Taxpayers Act became law in June 2007.
Vanderbilt specialized in investments in various investments based on subprime mortgages, often referred to as collateralized debt obligations, or CDOs.
The lawsuit originally was filed under seal in 2008 and unsealed in early 2009 after Attorney General Gary King gave Foy and Marshall the go-ahead to proceed without his office being involved.
The ERB lost almost all of the $40 million in one investment made with Vanderbilt Financial Trust, an investment vehicle organized by Vanderbilt Financial Advisors.
The SIC was involved in eight Vanderbilt investments, including Vanderbilt Financial Trust, in which the state lost $48 million of $50 million invested.
Overall, the SIC estimated its losses in the Vanderbilt investments in the range of $150 million. Marshall estimated the losses at nearly $230 million.
Foy's lawsuit was later amended to include Marc and Anthony Correra as defendants in the case.
Marc Correra, a former Santa Fe broker, received more than $5.5 million in fees in helping Vanderbilt get the state investments. His father, Anthony, was a close friend and political supporter of Gov. Bill Richardson, who was involved in the selection of Gary Bland as state investment officer.
Bland, who has denied any wrongdoing, resigned last October in the face of a no-confidence vote pushed by a subcommittee of the state Investment Council.
Foy has a second similar lawsuit, involving more than 70 defendants involved in other types of investments. That case is pending in state court in Valencia County.
You also can send comments via our comment form
|
|
