no-money-imageGov. Bill Richardson took the extraordinary step Thursday of banning the use of third-party agents in some state investments, a controversial practice that has burst into the spotlight as names involved in a New York investment scandal have popped up here.

“I feel strongly that a ban on these agents is necessary to restore confidence in our investment practices,” Richardson said in a press release.

“The practice of fund managers paying huge fees to third-party agents may be legal and legitimate, but the potential for a conflict of interest is troubling. I’d rather remove that potential conflict and be confident that our investments are not tainted in any way.”

One legislative leader said the governor’s action comes too late, especially after it was revealed that some of the agents making big money in such investment deals were either close to the governor or are relatives with close associates with Richardson.

“Revelations that politically connected and influential friends of the governor were paid millions of dollars for steering state investments to their clients are an alarming wake-up call for legislators to oversee better how and where state money is invested,” Sen. President Pro Tem Tim Jennings wrote in a letter publicly released Thursday.

A State Investment Council document released earlier this month shows that Marc Correra, the son of a close confidant of Richardson, or his company made more than $10 million as a third-party agent over several years. Guy Riordan, once a confidant of Richardson before he was tangled up in the recent state treasurer scandal, also made money acting as a third-party agent, also called a third-party marketer. According to the document, Riordan split a $1.235 million fee in one deal and then made more than $300,000 on another, the documents show.

Third-party agents are paid not by the state but by managers who are trying to interest the state — or any one of several agencies that make certain investments — to put money into their funds. In theory, those funds would manage the state’s investment and earn it a return.

The news that some of the third-party agents were Richardson associates adds one more scandal that the governor is dealing with. He withdrew as President Obama’s commerce secretary nominee in light of a federal inquiry into an alleged pay-to-play scheme at the New Mexico Finance Authority.

The latest scandal involving New Mexico investments is adding to the argument that Richardson’s opponents, such as Jennings, are using to cast a shadow over his administration.

“The tangled and troubling tale that has emerged is one in which politics seems to have played a role equal to that of investment fundamentals in the decisions as to how the state invests billions of dollars of trust funds,” Jennings wrote.

Jennings also suggested in his letter that the Legislature override one of Richardson’s vetoes from this year’s legislative session. The legislation, SB 460, would have increased the number of members on the State Investment Council to 13, up from nine, while reducing the number of appointments made by the governor.

The Legislature can override the veto during the 2010 session if it chooses.

The governor’s office responded to Jennings’ attacks Thursday with a withering retort.

“Not surprisingly, Sen. Jennings doesn’t know what he’s talking about,” Richardson spokesman Gilbert Gallegos said in an e-mail as a response to Jennings’ letter. “He’s trying to exploit the issue to score political points.”

Gallegos said that the state did not pay the third-party agents and that the governor did not know the amount of money some of these third-party agents were pulling down.

Earlier in the day Gallegos had told KUNM that until recent weeks the governor’s office did not know about the amounts of money paid to third-party agents.

“The amounts of money (paid to third-party agents) were not disclosed,” he told KUNM. “They haven’t been traditionally been disclosed anywhere, not in any state, or in any other government because they are not deals that involve the state of New Mexico.”

Gallegos went on to say that the state focused not on what agents were paid but on making sure New Mexico was seeing a good return on its investments.

The governor’s action Thursday comes as yet another response to a scandal that appears to be only growing.

The scandal exploded into the public earlier this month when it was revealed that a third-party agent in two New Mexico investment deals, Henry “Hank” Morris, had been indicted in a corruption scandal in New York. Morris, a former aide to the New York comptroller, was among those indicted as investigators examine “millions of dollars in payments that several hedge funds and private equity firms paid to placement agents” — often called third-party marketers — during the tenure of former Comptroller Alan Hevesi.

Earlier this month New Mexico suspended business with Aldus Equity, which has served as an adviser on national private equity funds and is involved in a pay-to-play scandal in New York. On Wednesday, Richardson ordered the state’s investment officer, Gary Bland, to initiate termination of Aldus Equity Partners’ relationship with the state.

That action came after it was learned that the FBI had questioned officials from two state investment agencies about Aldus Equity. The Associated Press reported on the FBI’s interest last week.

The federal agents met earlier this month with officials from the State Investment Council (SIC) and Educational Retirement Board (ERB) about the firm, the news service reported.

Asked if there were inappropriate relationships between Aldus Equity and some of the third-party agents involved in New Mexico investments, Gallegos told KUNM on Thursday, “At this point it is a big question of ours. There have been a number of allegations in a court case in New York.”