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Tuesday, March 16, 2010
CDR Exec Admits to Bid Rigging
By Mike Gallagher
Journal Investigative Reporter
The point man for a California firm that was at the center of a federal pay-to-play investigation involving two lucrative contracts from the Richardson administration pleaded guilty in New York on Monday to conspiring to rig bids on bond deals nationwide.
The New Mexico investigation didn't produce any indictments, but it derailed Gov. Bill Richardson's nomination as commerce secretary in the Obama administration and ended with stinging criticism from the top federal prosecutor here. Richardson aides have called the investigation here a political witch hunt and say the governor's administration acted properly.
Douglas Goldberg, a former vice president of CDR Financial Products, admitted in federal court in Manhattan on Monday that he was involved nationally in bid rigging of investment agreements and other contracts involving municipal bonds from 1998 to at least November 2006. He is cooperating with authorities.
Goldberg was involved in getting CDR hired in 2004 to work on the $1.6 billion state bond program in New Mexico known as Governor Richardson's Investment Partnership.
The company won a contract as an adviser on exotic financing arrangements that were not described in the request for proposals issued by the New Mexico Finance Authority.
It later received a no-bid, sole-source deal to manage the escrow account for the bond proceeds from the authority, which was charged with handling the GRIP financing for the Rail Runner and other New Mexico transportation projects.
CDR founder David Rubin and his firm contributed more than $100,000 to Richardson-affiliated political groups in 2003 and 2004. Some of the contributions, including one for $75,000, were made shortly before or after CDR won approval to do work for the finance authority.
A Journal review of finance authority records raised questions about the bid process used to hire CDR: The initial scoring by staff was changed and there was never any contract signed between the state and CDR stating exactly what the company was supposed to do in its role as adviser.
Over the course of a year, CDR was paid $1.4 million by New Mexico. Part of that came from bond proceeds and the rest from money the company saved the state by handling the escrow account.
Federal authorities in New Mexico began investigating the deal in the summer of 2008 and a federal grand jury issued subpoenas for documents from the finance authority and Richardson's office for correspondence and political contributions.
Investigators in New Mexico were particularly interested in Goldberg's contacts here.
The federal grand jury in New Mexico, according to the subpoena made public by Richardson's office, wanted any correspondence between Richardson's aides and Goldberg.
In 2004, Richardson's top aide, David Contarino, and David Harris, who had just left the job as executive director of the finance authority, traveled to Los Angeles for a night on the town with CDR executives, including Goldberg.
Contarino and Harris were treated to a Lakers basketball game and dinner at The Palm restaurant courtesy of CDR.
The federal investigation in New Mexico ended in August 2009 without returning indictments. The decision to close the case without pursuing indictments was made by the Department of Justice in Washington, D.C., according to attorneys familiar with the case.
A letter from U.S. Attorney Greg Fouratt in New Mexico to attorneys for Richardson and others said the investigation revealed that CDR and its officers made substantial contributions to Richardson's political organizations while the company was seeking the state work and that "pressure from the governor's office resulted in corruption of the procurement process so that CDR would be awarded such work."
The three-paragraph letter, obtained by the Journal from private attorneys involved, said the notification "shall not preclude the United States or the grand jury from reinstituting such an investigation without notification if ... circumstances warrant ..."
The letter said the document "is not to be interpreted as an exoneration of any party's conduct."
Richardson spokesman Gilbert Gallegos said at the time the letter amounted to "sour grapes" on Fouratt's part.
The investigation was reported on locally but gained national media attention when Richardson was nominated for commerce secretary. Richardson withdrew from the nomination when the investigation continued into 2009.
Goldberg is the third CDR employee in recent weeks to plead guilty in a four-year-old probe by the Justice Department into municipal bond service contracts.
Last October, several CDR executives including Goldberg and Rubin were indicted on charges of bid rigging and fraud.
Rubin has pleaded not guilty and is awaiting trial.