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          Front Page  news  state

Pay To Play Inquiry Derails Cabinet Post

By Mike Gallagher
Copyright © 2009 Albuquerque Journal
Journal Investigative Reporter

          It was a recipe for a typical New Mexico political stew: Start with two lucrative contracts worth $1.4 million, stir in at least $100,000 in political contributions, add a dash of questionable bid procedures and top it off with a heaping tablespoon of suspicious timing.
        This is the concoction that boiled over into the federal investigation that has derailed, at least for now, Gov. Bill Richardson's ambitions for a seat in President-elect Barack Obama's cabinet.
        The Journal first reported in August that the FBI was interested in how a small Beverly Hills financial firm got involved in the $1.6 billion GRIP transportation bond issue.
        That investigation has progressed to the grand jury stage, and some testimony has been presented. Several people prominent in Richardson's political circle have obtained attorneys, as have several former employees of the New Mexico Finance Authority.
        Allegations of "pay to play" are nothing new in politics, and there is no indication Richardson is a target at this stage. However, the investigation and underlying facts would serve up plenty of ingredients for a Senate confirmation grilling.
        The big picture is fairly simple.
        CDR Financial Products LLC of Beverly Hills was paid $1.4 million from work it did on behalf of the New Mexico Finance Authority, which issued GRIP transportation bonds.
        David Rubin, the company's principal owner, made at least $100,000 in contributions to Richardson-backed political committees about the time the firm got the work with the finance authority.
        Two substantial contributions were three months apart and generally coincided with the separate awards to CDR — one of them a no-bid, sole-source deal.
        In August, FBI agents were interviewing finance authority board members and David Harris, a former authority executive director and Richardson adviser.
        U.S. Attorney Greg Fouratt and FBI spokesmen have declined to comment on the investigation.
        Richardson issued a statement that he expected all state employees to cooperate with federal investigators.
        There is no hint as to when the investigation might be concluded, and things percolated quietly until December, when several national news organizations picked up on the story.
        Still, there was no public indication as recently as last week that it posed a serious problem for Richardson's appointment.
        In his statement announcing he was withdrawing his name from nomination, Richardson said he expected that the investigation would find that nothing wrong was done.
        CDR gets slice of deal
        Federal investigators in a number of states have been investigating the activities of CDR Financial since 2006.
        The company is a specialty firm that deals in complicated financial packages called SWAPS, which are essentially investment trades to offset interest rate risks.
        CDR was one of six firms competing for work in 2004 when the finance authority was seeking a financial adviser on the GRIP bond package.
        CDR Financial was not rated as the most qualified company and another firm was hired as the authority's financial adviser, according to state records.
        But CDR was given a piece of the deal anyway because of its background in SWAPS. That led to questions because that particular expertise wasn't sought in the state's bid requests, and state officials have conceded that those procurement requests were not up to standards.
        CDR was formally brought in to the deal in March 2004, based on the recommendation of the finance authority's staff and a full board vote — just in case the finance authority decided at some point to do SWAPS.
        In fact, it did a SWAP the next month — the first and only one in state history. CDR was paid more than $950,000 from bond sale proceeds.
        Three months later, in June, CDR received a no-bid deal from the authority to handle escrow accounts that were part of the GRIP bond sale. Again the staff recommended CDR get the work and the board, made up mostly of Richardson appointees and Cabinet members, approved.
        GRIP is short for Governor Richardson Improvement Program and paid for a wide range of highway projects and the Rail Runner commuter train.
        CDR's no-bid contract
        Political donations are the next piece of the pie.
        At the same time his company was seeking work from the New Mexico Finance Authority, CDR owner Rubin was making political contributions to Richardson political committees.
        The timing of a $75,000 contribution from Rubin to Si Se Puede is of particular interest to investigators.
        Si Se Puede was the political committee formed to pay the expenses of Richardson and his staff at the 2004 Democratic National Convention in Boston.
        The contribution was made five days before the finance authority staff recommended that CDR receive the no-bid contract to handle escrow accounts.
        The no-bid deal was approved by the board 12 days after the contribution was made.
        Rubin's spokesman denied any wrongdoing and said the contributions were publicly reported.
        Rubin also made a $25,000 contribution to Moving America Forward, a Richardson PAC that registered Hispanics and Native Americans in the Southwest to vote.
        State officials have praised CDR's work, and say the company was paid out of the sale proceeds for its work on the GRIP bonds and from savings to the state in handling the escrow account.
        Richardson also received a $10,000 contribution from Rubin in 2005 to his re-election campaign.

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