SANTA FE, N.M. — The state Court of Appeals has ruled that lower courts correctly approved financial settlements between the State Investment Council and three investment firms to resolve cases stemming from the Bill Richardson administration pay-to-play investment scandal – despite violations of the state’s Open Meetings Act.
The settlements were challenged by Frank Foy, former chief investment officer for the Educational Retirement Board, who filed earlier Fraud Against Taxpayer Act lawsuits against the same financial firms in which he alleged investments from the State Investment Council and the Educational Retirement Board were made based on secret payments by the financial firms to investment advisers with political connections.
Foy has been at odds with the State Investment Council, the Attorney General’s Office and the Educational Retirement Board since he filed his first civil lawsuit in July 2008.
Court of Appeals Judge Michael D. Bustamante, in a 56-page ruling, shot down all of Foy’s technical arguments to throw out the settlements, finding that the lower court judges followed rules laid out in the Fraud Against Taxpayer Act in approving them.
But the court found that the State Investment Council had no authority to delegate the settlement decisions to a subcommittee and that the subcommittee violated the act by failing to notify the public that it was holding closed meetings to discuss litigation.
The Court of Appeals could have ignored the Open Meetings Act issue entirely but found that it involved an issue of “substantial interest.”
“The open meetings part of this decision is a great victory for transparency and for the people of New Mexico,” said Santa Fe attorney Daniel Yohalem, who represented the New Mexico Foundation for Open Government and the New Mexico Press Association. “The Court of Appeals has put a stop to a major ploy used by state boards and local governments to avoid taking action in the public’s eye.”
The court also ruled that the actions of the State Investment Council in violating the Open Meetings Act might be followed by other public agencies and therefore needed to be addressed.
Bustamante, with Judges Michael D. Vigil and M. Monica Zamora concurring, found that the public court hearings on the settlements reached and approved in secret by a subcommittee counteracted any violations of the Open Meetings Act, as did a public vote by the SIC almost 30 months after the first settlement was approved by the subcommittee.
“We recognize that our holding could be seen as stretching the notion of prompt remedial action beyond the breaking point, effectively giving license to public agencies to flout OMA (Open Meetings Act) standards without penalty,” Bustamante wrote.
The ruling emphasized that the court’s decision not to invalidate the settlements was based on the lower court reviews of the settlements in open court hearings.
“Without the presence of judicial review, we would not be tolerant of the delay seen here,” Bustamante wrote.