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Tuesday, June 30, 2009
UPDATED: Broker Shares in $22 million for N.M. Investments
By Barry Massey
Associated Press
SANTA FE — A politically connected Santa Fe broker shared in about half the $48 million in fees paid to third-party placement agents by firms that won state investment deals.
Placement agent fees are not illegal but have come under scrutiny in New Mexico because of a corruption scandal involving a New York state pension fund. New York prosecutors say investment firms paid kickbacks to win pension business, with the payments often disguised as fees to placement agents.
No charges have been filed in New Mexico, but federal agents have interviewed staff at the State Investment Council and the Educational Retirement Board and a grand jury has subpoenaed documents related to placement agent fees on New Mexico investments.
According to state records, broker Marc Correra got a share of nearly $22 million in fees for helping money management firms win about $1.5 billion in investments with the State Investment Council and a state educational pension fund in 2003-2008. The agency manages state endowment funds valued at about $11 billion.
State Investment Officer Gary Bland said Tuesday he was aware that placement agents, including Correra, got fees, but at the time that the investment deals were approved, he didn't know the amount of the fees.
"Some we were aware of because you know that when a broker comes in and makes an introduction, he's going to get compensated in some form. Nobody does anything for free. But the amounts, the percentage amounts and the extent, we didn't have a grasp of," Bland said in an interview after a meeting in which the council staff released updated fee information.
The precise amount Correra received remains unclear because the agencies say they do not know in some instances how fees were split among Correra and other brokers.
Correra shared in the largest amount of fees of any placement agent or broker involved in state investment deals, according to records of the council and the pension agency, the Educational Retirement Board. At least two other brokers and their firms got a piece of nearly $4 million in fees.
Neither Correra nor his lawyer immediately returned telephone calls seeking comment on the council's latest disclosures. His lawyer previously has said that Correra earned investment fees through hard work.
The State Investment Council, in response to the ongoing New York investigation, banned the use of third-party marketing agents by firms trying to obtain investment business with it.
The council's latest tally showed nearly $6 million in previously undisclosed fees to Correra and other brokers. In April, the council initially released a list of fees paid to placement agents.
The council's update also confirmed what the educational pension fund had previously reported: that Correra shared in $2 million in fees for $90 million in investments in now-worthless collateralized debt obligations with Vanderbilt Financial Trust.
The council and the pension fund lost their investments, which were approved in 2006, when values dropped sharply because of a credit crisis and financial meltdown that caused investors to abandon all but the safest forms of debt.
The investments were securities backed by pools of mortgages or other assets.
Correra also shared in nearly $3.6 million in fees on other Vanderbilt investment funds approved by the council in 2004 and 2005. Those fees had been previously undisclosed. Bland said Correra "brought Vanderbilt in for the initial presentation" to the council staff on collateralized debt obligations because it was a new area of investments for the agency.
Bland said he knows Correra. Bland serves on the board of directors of several nonprofit organizations with Correra and is a friend of Correra's father. However, Bland said investment decisions have been based on the quality and potential performance of proposed investments, and were not influenced by political considerations.
Correra is the son of a Richardson political supporter, Anthony Correra. The elder Correra was named by Richardson in late 2002 to a committee that screened state investment officer candidates for the governor's incoming administration. Richardson picked Bland for the job.
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