As Seen in Journal
E-mail Story
Print Friendly
Send E-mail
Reprint storyPlay Puzzles and Free Games
Front Page 
paperboy text news state
Sunday, March 14, 2010
Correra Made $2 Million on N.M. Hedge Fund Deals
By Mike Gallagher
Copyright © 2010 Albuquerque Journal
Journal Investigative Reporter
Two hedge fund management firms paid former Santa Fe broker Marc Correra more than $2 million in finder's fees for letting them know that New Mexico's State Investment Council and Educational Retirement Board might be in the market for their services.
The referrals also paid off big time for the hedge fund managers, who received contracts to manage $400 million worth of state investments.
They didn't work out quite as well for the state.
The state agencies eventually withdrew funds from Dallas-based HFV Asset Management because of what they deemed to be poor performance and are now withdrawing remaining funds from the other hedge fund company after deciding to manage the money in-house.
Why the hedge fund management firms thought they needed Correra's services remains a mystery to staff members at the SIC and ERB because both agencies had used national trade publications to publicize their interest in seeking hedge fund managers.
Correra does not appear to have done much for the money.
Court records in a federal lawsuit Correra filed in Chicago against one of the firms indicate he did little more than send the addresses of the SIC and the ERB to the hedge fund managers as potential contacts. Under terms of his agreement with the companies, he was not allowed to be involved in negotiations or presentations.
Correra is at the center of federal criminal and regulatory investigations into how the SIC and ERB made investment decisions over the past several years.
One former state investment adviser, who was not involved in the hedge fund deals, has said in a plea bargain in New York that he directed investments in New Mexico to benefit politically connected individuals.
Correra's father, Anthony Correra, was a close friend and political supporter of New Mexico Gov. Bill Richardson and helped select former State Investment Officer Gary Bland.
Following up on Correra's referral, HFV Asset Management and TAG Associates LLC made joint proposals to the SIC in 2005 and the ERB in 2006 on managing hedge fund investments.
Hedge funds are usually used by wealthy individuals and institutions and employ aggressive investment strategies that are unavailable to other types of funds. They are also exempt from many rules and regulations that govern mutual funds.
In 2005, Bland signed off on investments with HFV/TAG that eventually reached more than $300 million.
The ERB investment in 2006 was much smaller, $50 million, but there was a split between staff and political appointees in their assessment of the proposals.
Records show that Bland, who as state investment officer is an ERB board member, scored the HFV/TAG proposal the highest — giving it 105 out of 100 possible points.
ERB Chairman Bruce Malott and acting State Treasurer Doug Brown, both Richardson appointees, scored the HFV/TAG proposal at 96 and 91 points, respectively.
ERB staff members and a consultant all scored HFV/TAG near the bottom of the 12 finalists that made presentations. The scores by staff: 45, 50, 59, 65 and 65.
The ERB's four-member investment committee that included Malott, Brown and Bland, plus Executive Director Evelyn Hunemuller, then voted to proceed with the $50 million investment.
Brown was tapped by Richardson to fill in as treasurer when Robert Vigil stepped down amid criminal charges. By law, the treasurer serves on both the SIC and ERB.
Brown, who currently serves as dean of the Anderson School of Management at the University of New Mexico, said he didn't remember specifics of the proposal.
"There was a rich pool of managers to choose from, and many seemed acceptable," he said. "I just don't specifically remember this firm. At the time, I must have been impressed."
He also said he didn't know about the activities of Marc Correra and other third-party placement agents.
"I am dismayed that these big fees were paid to find us," Brown said. "Ultimately, those fees go into the fees the state pays the managers."
He added, "I never met either Correra or know them. And I didn't know of Marc Correra's involvement in any of the investments."
Malott pointed out that these decisions were made four years ago, "long before I became aware of any of the problems reported in the press over the last year regarding third-party marketing fees."
"The SIC had successfully invested in this hedge fund, and the state investment officer raved about it," Malott said. "So I followed his recommendation."
Correra lawsuit
The lawsuit filed by Marc Correra in Chicago was against TAG Associates LLC, which took over HFV's management role in 2008.
Under his finder's fee deal, Correra claimed he was supposed to be paid more than 20 percent of the management fees the companies earned off the state investments.
TAG Associates stopped paying after the New York pension fund scandal became public last year and investigators began looking into ties between that scandal and state investments in New Mexico.
Barrett Wissman, a managing director of HFV, pleaded guilty last year to securities fraud in the New York pension fund scandal.
Correra claimed TAG Associates breached its contract when it cut off the payments, and he asked the court to order the fees to be paid and a jury to determine other damages.
His lawsuit was dismissed on technical grounds two days after it was filed, but it can be refiled.
According to the lawsuit, Correra has lived in New Mexico, Texas and Paris during the past three years.
His Albuquerque attorney, Sam Bregman, had no comment about the lawsuit, which was filed by two law firms based in Chicago and Boston.
Fee arrangement
Documents in the lawsuit show that the fees to Correra were being paid through another company, Cabrera Capital Markets, a Chicago-based broker-dealer.
Correra's lawsuit alleges HFV and TAG agreed to pay Cabrera 25 percent of the fees the firms earned managing the state's investment money. Correra claimed he was then entitled to 90 percent of the fees paid to Cabrera.
In 2007, Correra signed on with another Chicago-area broker-dealer as an independent contractor, and his fees continued to flow from Cabrera to his new firm.
SIC staff members said the fee arrangement was not properly disclosed to the SIC and staff.
Richardson said last year through a spokesman that he was unaware of the practice of firms paying third-party placement fees.
He ordered the SIC, which he chairs, not to invest in firms that had such arrangements after the connections between the New York pension scandal and New Mexico became public.
Bland resigned last October in the face of a no-confidence vote by an SIC subcommittee and insists he has done nothing wrong.
ERB money
In 2008, HFV returned the portion of the Educational Retirement Board money it was handling, but TAG continued to manage money for the fund.
TAG notified the ERB at that time that Cabrera Capital Markets was receiving a fee for acting as a consultant. The letter did not mention Correra's role or the 90 percent share of the fees funneled to him by Cabrera.
In previous interviews, staff members said they were unaware of the fee arrangements the firms had with Correra.
Former ERB investment officer Frank Foy has since filed two lawsuits under the Fraud Against Taxpayers Act alleging widespread corruption in the state's investment practices.
Foy said the problem most of the staff had with the HFV/TAG proposal was that it was difficult to figure out how the firms would manage the investments. He scored it 50 out of a possible 100.
"The ERB staff ranked HFV at the bottom, and we had no idea Marc Correra was getting paid," Foy said.
"At the ERB, I never saw or heard of Marc Correra."
You also can send comments via our comment form
|
|
