SANTA FE – An adviser to New Mexico’s State Investment Council faces possible termination of its contract because it invested state money in an Albuquerque-based spinoff company – one that plans to use the same technology as another company with a rocky track record – without giving the council notice.
A motion to sever the contract with Santa Fe-based Sun Mountain Capital, the SIC’s in-state venture capital adviser, was put on hold Tuesday because it was not listed on the council’s agenda. Council members plan to take the issue up again at next month’s meeting.
“The whole issue is one of confidence and credibility,” said SIC member and former state Sen. Leonard Lee Rawson of Las Cruces, who made the motion. “The relationships, from the outside, look too close.”
Between 2008 and this year, Sun Mountain Capital invested $2.5 million in state venture capital money in Growstone, which is completing a facility at Albuquerque’s Cerro Colorado landfill to produce an agricultural product from recycled glass.
Rawson said he found out about the most recent investment of state dollars into Growstone through recent media reports, which included a Journal story published March 11.
The Growstone investment came after the SIC in 2004 approved a $9 million investment in Earthstone International, a company founded by campaign contributors to then-Gov. Bill Richardson that was largely unsuccessful in marketing its original products, including a grill cleaner.
An additional $2 million in state money later was added to the original Earthstone investment.
Both Earthstone and Growstone were co-founded by Andrew Ungerleider and his wife, Gay Dillingham, who donated more than $8,600 to Richardson’s gubernatorial and presidential campaigns in 2006 and 2008.
Ungerleider told the Journal this month that the contributions were intended to back Richardson’s “progressive green agenda” and were not given to sway state investments.
Dillingham was appointed to the state Environmental Improvement Board in 2003 by Richardson and became chairwoman. The board passed controversial cap-and-trade rules for greenhouse gases that were rescinded this year by new EIB members appointed by Gov. Susana Martinez.
Martinez, who took office in 2011 and serves as chairwoman of the State Investment Council, said Tuesday that the decision to invest money in Growstone should have been brought to the council’s attention.
“There should have been information provided to this council for the mere fact of allowing us to provide input,” Martinez told the Journal.
Martinez said she planned to research the issue more before deciding whether to support the motion to terminate the state’s contract with Sun Mountain next month.
The managing partner of Sun Mountain, Brian Birk, told Martinez and other SIC members on Tuesday the company was authorized to invest state money without having to ask for approval, and he sought to dispel suggestions of a conflict of interest.
Birk, who said he serves on the board for Growstone because of the state’s investment in the company, recently told the Journal the decision to invest in the spinoff company was made with no consideration of the state’s previous investment in Earthstone.
He acknowledged Tuesday that the situation regarding the recent investment could have been handled differently.
“I believe we should have done a better job of communicating with you, and I apologize for that,” Birk told SIC members.
Sun Mountain Capital manages nearly $90 million in state investments under New Mexico’s private equity program, according to the State Investment Office.
In an interview late Tuesday, Rawson said he believes Sun Mountain’s investment decision has put the SIC in an “indefensible” position.
“If we don’t do anything, we are condoning the cronyism of the past,” Rawson said.
— This article appeared on page A1 of the Albuquerque Journal