Frank Foy on Thursday filed an amended complaint in state court combining his two recently revived Fraud Against Taxpayers lawsuits dealing with investments by the State Investment Council and the ERB.
He brought the cases in 2008 and 2009 under the state’s Fraud Against Taxpayers Act, alleging a pay-to-play scheme that cost New Mexico taxpayers as much as $200 million in investment losses.
The cases were put on hold after lower courts ruled that the provision in the Fraud Against Taxpayers Act allowing triple damages was unconstitutional. The Court of Appeals had reasoned that, because triple damages were such a severe monetary penalty, they were criminal in nature and could not be applied to anything that occurred before the law was enacted in 2007.
The state Supreme Court reversed that decision and ruled the cases could proceed as a single consolidated lawsuit assigned to a pro tem judge.
The state Supreme Court ruled that the Fraud Against Taxpayers Act was intended to be remedial in that it compensates the state for frauds committed against it, that the damages provision encourages people to bring actions to root out fraud and that the triple damages provision was constitutional.
Foy’s amended complaint filed by attorney Victor Marshall names 107 defendants, many of whom were named in the original cases, and makes many of the same claims that financial firms obtaining state investments paid millions of dollars to Marc Correra in order to get the investments.
Marc Correra shared in more than $22 million in fees from firms that received investments from the SIC and the ERB. His then-wife worked in Richardson’s office.
Richardson has denied knowing about the fees Marc Correra received. Correra’s father, Anthony Correra, was a key Richardson advisor and close personal friend, and at one time had a desk at the SIC.
Meanwhile, Attorney General Hector Balderas’ office said in court filings that it intends to ask pro tem District Judge Louis P. McDonald to dismiss the lawsuit.
Balderas’ predecessor, Gary King, initially approved both of Foy’s civil lawsuits, but changed his mind and sought to dismiss the cases in favor of alternative actions filed by the SIC and the ERB.
Pension fund scandal
Foy filed his first lawsuit under seal in 2008 alleging the ERB and the SIC lost more than $100 million in investments in mortgage-backed securities with Vanderbilt Finance LLC of Chicago.
Marc Correra received more than $5 million in marketing fees from Vanderbilt for help in securing the investments.
That lawsuit was put on hold as Foy appealed a ruling by then-District Judge Stephen Pfeffer of Santa Fe that the penalty provision of the Fraud Against Taxpayers Act was unconstitutional.
Foy’s second lawsuit named more than 70 defendants involved in state investments in private equity and hedge funds.
The firm advising the SIC and ERB on such investments, Aldus Equity of Dallas, was enmeshed in a pay-to-play pension fund scandal in New York state that came to light in March 2009.
Aldus got involved in New Mexico investments in 2004. Many of the firms Aldus recommended for state investments had connections to the New York scandal or paid fees to Marc Correra and other third-party placement agents.
Saul Meyer, the former head of Aldus, admitted in a guilty plea in New York that he placed New Mexico government investments with financial firms for political reasons.