At issue is a provision in the Fraud Against Taxpayers Act that allows punitive damages to be sought for fraudulent acts against the state dating back to 1987. Several lower court rulings previously found that part of the law to be unconstitutional, because it allowed for retroactive punishment of defendants.
The one-hour hearing Thursday came after the state’s highest court agreed to hear an appeal of those rulings, which had weakened the two lawsuits filed by Frank Foy, a former chief investment officer for the Educational Retirement Board.
Foy’s attorney, Victor Marshall, argued the prohibition against federal or state governments enacting retroactive laws applies only to criminal statutes, not civil ones.
Though the Supreme Court did not issue an immediate ruling, Marshall told the Journal he was glad to hear the justices ask about the legislative intent behind the 2007 law.
“I’m encouraged the court was asking good questions to move these cases forward,” he said after Thursday’s hearing.
However, Peter Simmons, a New York-based attorney who represented various Wall Street financial firms that are listed as defendants in the suits, told the Supreme Court that upholding the taxpayer fraud act could mean an excessive financial liability for events that had already occurred when the law was enacted.
Justice Richard Bosson responded later in the hearing by saying, “This statute was passed with a specific set of defendants in mind – your clients.”
The Foy lawsuits claim state officials, financial advisers and the Wall Street firms executed pay-to-play schemes that led to the loss of hundreds of millions of dollars at the expense of the State Investment Council and the teacher pension fund.
Specifically, the suits revolve around more than $22 million paid in fees that Marc Correra shared in from 2003 to 2009 by firms seeking investments from the SIC and ERB. Correra is the son of a former confidant of then-Gov. Bill Richardson, Anthony Correra.
The Supreme Court also heard an appeal Thursday from three of the defendants in the Foy case, who said they should be dismissed from the lawsuits because they were public officials at the time the investments were made. One of those defendants is former ERB Chairman Bruce Malott.
The courtroom was packed for Thursday’s hearing, mostly with attorneys in the case, prompting the Supreme Court to open an overflow room so that more could follow the proceedings via video.
It was unclear Thursday when the Supreme Court will issue a ruling on the case. In the meantime, the Foy lawsuits will remain in limbo.