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Malott’s firm has seen boom in state auditing contracts under guv
ALBUQUERQUE — The auditing firm headed by Education Retirement Board chairman Bruce Malott has grown from a bit player to a powerhouse in New Mexico government while Bill Richardson has been governor, state records show.
Since Richardson took office in 2003, the Albuquerque-based auditing firm where Malott is a principal, Meyners + Company, has won nearly $7.8 million in public auditing contracts, according to state records, compared to $274,000 in such work the firm did in the five years prior to 2003.
Malott is a Richardson friend who was treasurer of Richardson’s 2002 gubernatorial primary campaign and has since been appointed to a number of state boards. Another principal in Malott’s firm acted as treasurer for Richardson’s gubernatorial bids in 2002 and 2006, as well as his presidential campaign, election records show.
Records for the last year available — fiscal 2008 – show that Meyners + Company performed 21 state, county and municipal government audits and received $2.3 million in payment. The year before, the firm took in $2 million in fees for 20 audits. Here are the records for fiscal 1998, 1999, 2000, 2001 and 2002.
Since 2003 Meyners has also audited many of the state’s largest agencies, including the corrections, health and general services departments, and the state’s largest county — Bernalillo — as well as a few municipalities and villages.
Prior to Richardson’s election as governor, by contrast, Meyners appeared to have barely been in the government auditing business. From fiscal year 1998 through 2002, the firm performed one public audit a year, receiving from $21,163 to $75,655 in annual fees. Its only public client for three of those years — fiscal 1998, 1999 and 2000 — was the Department of Education, since renamed the Public Education Department, records show.
In 2001, the firm audited the Roswell Independent School District. A year later, it audited the Commission for the Blind, state records show.
The firm also audited the Region III and Region VII housing authorities, which crumbled in scandal in 2006 after the Albuquerque-based Region III authority defaulted on $5 million in bonds it owed the state.
Malott is currently facing allegations from former state investment officer Frank Foy that Malott pressured him to make investments in a deal that ultimately lost the state nearly $90 million.
Foy has further charged in a 26-page civil complaint that Malott has used his post to generate a lucrative business in state contracts for his firm.
Meyners’ attorney labeled Foy’s accusations “absolutely false” Tuesday.
Sam Bregman, an attorney representing Meyners, said the explosion in the firm’s government auditing business mirrored the firm’s growing expertise, and had nothing to do with politics.
“Meyners + Company has certainly grown, but that is because they have brought on five certified government financial managers” who have an expertise in government auditing, Bregman said.
“There’s only three firms (in New Mexico) that can do the major departments when it comes to auditing.”
Asked when Meyners hired the specialized managers, Bregman said he didn’t know, but that it was “some time ago.”
“The implication that somehow Meyners + Company has done anything wrong is just shameful and is not acceptable,” Bregman said.
“To the contrary, the evidence is clear they are the most qualified firm to do financial audits in state governments. Their government practice has grown because of their expertise in it. He (Foy) is trying to throw things out to see what sticks to the wall. Meyners + Company has done nothing wrong. Anything to the contrary is just B.S.”
Meyners + Company is no stranger to New Mexico politics.
Reta D. Jones, who has been a principal at Meyners + Company since 1998, acted as treasurer for both of Richardson’s gubernatorial bids in 2002 and in 2006 (pdf), records show. State campaign finance reports show that the phone number and address she listed as contact info are the main number and address for Meyners.
Jones, who has sat on the State Lottery Authority for several years, was elected chairwoman in fiscal 2006.
Malott, meanwhile, was treasurer for Richardson’s campaign in the 2002 gubernatorial primary.
Explosion of business
Firms that perform public audits win the work from the Office of the State Auditor, which is required by New Mexico law to conduct annual financial audits of all government agencies in New Mexico.
The office doesn’t have the resources to conduct all the audits, so it contracts out the work. The state auditor is a statewide elective office.
The public audits that Meyners performed jumped from one in 2002, to nine in 2003, which were worth $131,585 in fees. That was followed by eight audits in 2004 worth $403,966; 14 audits in 2005 worth $1.09 million in fees; and 16 audits in 2006 worth $1.751 million in fees. The last two years, however, show that Meyners wracked up serious fees, doing 20 audits in 2007 worth more than $2 million; and 21 audits in 2008 worth more than $2.3 million in fees, records show.
Among the audits Meyners conducted at the beginning of this explosion of growth in 2003 and 2004 were of the Region III and Region VII housing authorities. Both housing authorities collapsed amid scandal in 2006.
The audits of both regional housing authorities didn’t indicate the sort of widespread problems that were eventually uncovered when Region III defaulted on $5 million in bonds it owed the state.
In fact, Meyners + Company gave the Las Cruces-based Region VII a clean bill of health — revealing no findings in its audits — and uncovered only a handful of minor findings in its audits of Region III.
A 2006 State Investment Council report and state auditor special audits released last month revealed widespread misuse of the bond money, a number of questionable expenditures and transactions and an extreme lack of documentation for financial records — documentation that was never kept or was taken or destroyed.
The attorney general, following more than two years of conducting a criminal investigation of the housing authorities, is preparing to take the case before a grand jury to seek one or more indictments.
NMI’s Heath Haussamen contributed to this story.