The agency filed two suits this week against Aldus and other defendants in the Santa Fe state district court, according to the state’s case look up system.

According to the Journal, the agency is accusing the Dallas firm of racketeering, fraud, breach of contract and professional negligence in the lawsuits.

The “ERB put more than a half-billion dollars into equity funds on Aldus’ recommendation,” the Journal reports. The paper then goes on to say of the lawsuit:

“It claims the ERB paid more than $1.8 million for services ‘inadequately and illegally rendered. The ERB missed investment opportunities and made investments it likely wouldn’t have if Aldus officials had been giving good financial advice instead of serving the interests of their friends and connections.”

Aldus’ founder Saul Meyer has pleaded guilty to securities fraud in New York.  In his pleadings in New York Meyer admitted that on numerous occasions, contrary to his fiduciary duty to the state, his company had “recommended proposed investments that were pushed on him by politically-connected individuals in New Mexico.” Meyer went on to say in that statement that he knew “that these politically-connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico.”

The ERB’s plans to sue Aldus are well documented and represents more than a year of work in getting the suit ready.

In June ERB’s chief counsel Chris Schatzman told The Independent that Aldus Equity had recommended 28 or 29 investments to the ERB, but the agency had invested in around 20.

I wrote last week how a guilty plea by Hevesi might lead to repercussions in New Mexico.

Among the allegations listed in a criminal complaint issued by the office of New York Attorney General Andrew Cuomo last year were that the founder of New Mexico’s former financial adviser, Aldus Equity, helped Dan Hevesi, Alan Hevesi’s son, win a lucrative contract in New Mexico for a firm he was representing in return for Aldus’ increased business in New York. At the time, Dan Hevesi was acting as a third-party marketer.

Aldus’ founder, Saul Meyer, pleaded guilty to securities fraud last year  in the New York criminal probe.

The question is, if Hevesi pleads guilty, what kind of cooperation, if any, will the former New York comptroller be required to give federal investigators currently looking at New Mexico’s state investment agencies?

The Times reports that Hevesi, citing people with knowledge of the case, is expected to cooperate in New York’s investigation. It says nothing about him cooperating with federal investigators, which doesn’t mean that kind of cooperation is off the table. Maybe the elder Hevesi has information. Maybe he doesn’t. Time will tell if such an agreement is struck.

The New Mexico connections to the New York probe are interesting, although no one in law enforcement has said they broke the law.

The younger Hevesi received $250,000 in third-party marketing fees related to one New Mexico investment deal through the New Mexico State Investment Council, state records show.

Henry, “Hank” Morris, one of Alan Hevesi’s most trusted aides who was charged with 123 counts in New York’s criminal investigation last year, received at least $150,000 in third-party marketing fees related to New Mexico investment deals, the documents also show.

The New York investigation has also turned up other curious and odd connections to New Mexico If Hevesi pleads guilty, he’d be the highest New York state official to plead guilty in that state’s long-running pay-to-play criminal investigation.

The revelation comes thanks to a court memo produced earlier this year prior to Hassan Nemazee’s 12-year prison sentence after he pleaded guilty to fraud, the Journal says.

Before his fall from grace, Nemazee was a high-flying fundraiser for high-profile Democrats, including Hillary Clinton. He also contributed to Richardson’s re-election in 2006, the Journal reports.

The unstated question, in today’s Journal story is whether Nemazee might have used his political connections to get a big, lucrative contract for his firm, Carret Asset Management.

The Journal story offers no definitive answers about what ultimately happened with Nemazee and Carret, and raises as  many questions as it answers. That’s not a knock, just an observation. These stories are hard to report, and even harder to write.

The implication of influence-peddling hangs in the air because news of Nemazee’s sentencing memo comes as federal authorities are continuing to investigate how certain New Mexico investment deals were inked, and whether politically connected individuals played an out-sized role  in those agreements.

Gary Bland, who was the State Investment Officer for most of Gov. Bill Richardson‘s tenure, resigned in October of last year, only days after New Mexico’s former investment adviser, Saul Meyer of Aldus Equity, pleaded guilty to securities fraud in New York.

In a statement released at the time by the New York Office of the Attorney General, which prosecuted Meyer, Meyer admitted to pushing certain deals to New Mexico’s two investment agencies — the SIC and Educational Retirement Board(ERB) — as the state’s investment adviser because politically connected individuals here recommended them. Meyer didn’t name names in that statement.

The sentencing memo the Journal quotes from in today’s story hints that Nemazee might have played a bigger role than previously understood in Carret’s landing the 2007 contract to manage state investments.

Until now Hassan Nemazee was viewed publicly as a silent partner with no say in day-to-day operations for Carret because that’s what Carret told State Investment Council staff last year, the Journal story reports.  But the the sentencing memo the Journal quotes from says Nemazee “had the most contact at the initiation of the relationship between the asset manager (Carret) and the New Mexico entities and could provide insight into how the business relationship was formed and furthered.”

Carret apparently told state officials that Nemazee was a silent partner with little say in day-to-day operations.

Carret, which managed a stock portfolio for the SIC, was fired earlier this year by that agency.

Today’s Journal story is another reminder that federal investigations are still looking into New Mexico investments. Both the State Investment Council and Educational Retirement Board have received federal subpoenas. And the SIC has talked openly in recent months of cooperating with federal authorities investigating the agency and its dealings.

Meanwhile, both the SIC and ERB have said they are looking into trying to recover taxpayer money lost to fraud.

A request for proposals (RFP) will be sent out next month with the goal of hiring a firm by mid-September to lead the agency’s effort to recover lost taxpayer money, State Investment Officer Steven Moise said Tuesday.

With the State Investment Council’s decision, the agency joins a growing list of institutional investors across the country that are trying to recover money lost due to the recent meltdown in investment markets.

“I don’t know what the pipeline looks like,” Moise said. “We are going to move forward as quickly and as aggressively as possible from this point forward.”

Attorney General Gary King, with whom the SIC will work in recovering the money,  said Tuesday that New Mexico might find common cause with other states that have lost money and might join together to recover money.

“Some of these cases we’re looking at may be class action suits,” King told the Independent.

King said his office already is working on a couple of cases involving the recovery of lost taxpayer money due to investments that soured and that he envisioned working with the SIC on several fronts as that agency’s efforts ramped up.

“We may be looking for instances where we will be co-counsels,” King said.

Moise could not give a dollar amount of what his agency would seek to recover “because we are analyzing those right now,” he said.

But he said the agency would target taxpayer money lost due to potential fraud as well as money that went toward what is known as third-party placement fees. Those types of fees are paid to individuals who play matchmaker between institutional investors like the SIC and fund managers who are looking for investors in their funds.

The SIC has lost tens of millions of dollars in investments that went sour in recent years, some say because of fraud.

A whistle blower and former investment officer at the Educational Retirement Board, meanwhile, has pegged the loss of New Mexico public money lost due to potential fraud at more than $280 million.

The fees targeted for recovery could involve investments where the state lost money or fees that appear questionable, Moise added.

Moise said he didn’t know how much the firm his agency hires to lead the recovery effort will make, but he was emphatic that it would be much less than the 20 percent to 33 percent of the recovered funds firms typically make in such arrangements.

Decision to go after lost  money follows months of scrutiny

The agency’s decision to begin recovering lost money due to potential fraud comes after months of criticism about New Mexico’s inaction while at the same time the SIC has found itself engulfed in a full-blown scandal. The agency figures in investigations by both the U.S. Attorney’s Office and the federal Securities and Exchange Commission.

What had been concerns over lost taxpayer dollars during the economic downturn exploded into a full-blown scandal last fall when the state’s former investment adviser, Saul Meyer pleaded guilty to securities fraud in New York. Meyer advised the SIC and another state investment agency, the Educational Retirement Board.

In his pleadings Meyer admitted that on numerous occasions, contrary to his fiduciary duty to the state, his company had “recommended proposed investments that were pushed on him by politically-connected individuals in New Mexico.” Meyer went on to say in that statement he knew “that these politically-connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico.”

Former State Investment Officer Gary Bland, who helped hire Meyer, resigned days after Meyer’s guilty plea and admission.

Meyer hasn’t named any of those politically connected individuals exerting pressure, but one man – Marc Correra – has attracted attention. Correra, the son of Anthony Correra, a friend and fundraiser for Gov. Bill Richardson, shared in $22 million of third-party placement fees in several investment deals involving the State Investment Council and the Educational Retirement Board. Some of those investments lost money.

No one in law enforcement has accused Correra of wrongdoing and his attorneys have said he worked hard for the money.

A complete reorganization

The extra scrutiny surrounding the SIC ultimately led to a wholesale re-organization of the agency during this year’s legislative session when state lawmakers passed a law making several changes to how the agency is run, including impaneling a new Council and changing how decisions are made.

Prior to the new law, virtually all decision-making authority in many matters was given to the State Investment Officer. Now that power rests with the new Council, which is composed of several veterans of the previous board as well as several newly appointed members.

The new Council wasted no time striking out in a new direction Tuesday. In addition to agreeing to try to recover money, the Council voted to reduce the percentage of its $14.1 billion portfolio invested in the stock market, from above 60 percent to around 55 percent.

At more than 60 percent, the Council’s exposure to public equity – or the stock market – put it in the Top 10 percent of endowments, Allan Martin of  New England Pension Consultants, one of the Council’s long-time advisers, told Council members.

“The portfolio has had too much exposure to equity and that is something you corrected today,” Martin said.

The council also voted to fire four firms managing funds for the agency. “Some were performance related. Some were changes in personnel. And there were other concerns,” Moise said after the meeting.

In addition to those actions, the council also is considering a new policy that changes last year’s complete ban on investing in funds that use third-party placement agents. That ban was imposed after it was discovered how much Marc Correra had shared in of third-party placement fees over a period of several years.

Under the proposal this change would allow the Council to invest funds that use third-party placement agents as long as the individuals are not representing funds in New Mexico trying to do business with the SIC, said SIC spokesman Charles Wollman.

“Right now the Council cannot invest in any fund that uses third-party placement fees without voting in special exemption, which has never been done,” Wollman said.

Rosalyn Nguyen, the SIC’s associate general counsel, told members Tuesday that the complete ban on investing in funds that use placement agents had prevented the SIC from some good investment opportunities.

The board likely will take that up at its next meeting, officials said.

Moise and the Council have not agreed on a salary, Moise said Tuesday.

Moise replaces Bob Jacksha, who served as interim State Investment Officer after Gary Bland’s resignation in October.

Bland, a political appointee of the governor who made more than $301,000 per year, resigned days after New Mexico’s former investment adviser pleaded guilty to securities fraud in New York.

Saul Meyer, the founder of the investment firm Aldus Equity, admitted to recommending “investments that were pushed on him by politically-connected individuals in New Mexico” while Aldus was the investment adviser to New Mexico’s SIC and Educational Retirement Board, according to a New York attorney general news release announcing Meyer’s guilty plea.

The individuals in New Mexico Meyer spoke of haven’t been named publicly

Jacksha said Tuesday he is returning to the Educational Retirement Board as its chief investment officer.

Moise has served on the New Mexico Board of Finance for the past year.

Moise’s appointment is just the latest step in a reform effort at the State Investment Council, an agency at the center of an ongoing scandal. The agency is at the center of two federal investigations — one is a criminal probe, the other a Securities and Exchange Commission inquiry.

The Council itself was re-constituted after the Legislature passed a new law that requires multiple reforms.

The inquiry in New York has multiple New Mexico ties, with last fall’s guilty plea by New Mexico’s former investment adviser, Saul Meyer of Aldus Equity, perhaps the biggest.

Meyer pleaded guilty to securities fraud last and admitted that on numerous occasions, contrary to his fiduciary duty to the state, his company had “recommended proposed investments that were pushed on him by politically-connected individuals in New Mexico.” Meyer went on to say in that statement he knew “that these politically-connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico.”

Meyer’s admission and guilty plea was one of the factors that led members of the New Mexico State Investment Council to pressure New Mexico’s former State Investment Officer Gary Bland to resign. Bland resigned days after Meyer’s guilty plea.

But back to Loglisici. His role in the whole investment scandal is “a colorful one,” as the New York Times notes in its story today.

One of his brothers made a low-budget movie called “Chooch,” which the Albuquerque Journal’s Tom Cole wrote about almost a year ago.  The movie featured, among other things, a nine-pound dachshund named Kiwi Limone. Several prominent investors seeking pension fund business (in New York) put money into the movie-making effort.

It’s unclear how, if at all, Loglisci might have been involved with New Mexico’s investment agencies.

But in pleading guilty Wednesday Loglisci said that he helped steer pension money to political contributors to former State Comptroller Alan G. Hevesi and to companies that paid kickbacks to Mr. Hevesi’s top political consultant, Hank Morris, according to the Times.

Over the past three weeks, the bill worked its way through that chamber with multiple hearings before Senators passed it unanimously last week. The House amended the bill to remove changes to the Educational Retirement Board, Public Employee Retirement Board, campaign contribution limits and experience requirements and keeps the governor as the chairman; the Senate agreed to those changes.

“The bill is simplified and reflects a lot hard work by staff, the legislature and the Governor. … We are pretty much aligned in terms of balanced sweeping reform now,” Sen. Keller said in a press release.

The bill, as it goes tot he governor,  would de-centralize authority at the SIC, removing power from the State Investment Officer and giving it to the State Investment Council, but the governor would remain on the board.

It also:

• Would remove the State Investment Officer from the State Investment Council.
• Would give the State Investment Council the authority to select the State Investment Officer, not the Governor, as is the current practice.
• Would empower the Council to remove a member of the SIC for missing three meetings in a row.
• And would empower the SIC to hire and fire management services. That is now in the hands of the State Investment Officer.

The move to take authority away from the State Investment Officer came after revelations that former State Investment Officer Gary Bland made decisions on advisers and outside managers without informing the State Investment Council.

Bland, the former State Investment Officer, resigned in October after New Mexico’s former investment adviser pleaded guilty to securities fraud in New York. As part of the plea deal, Saul Meyer of Aldus Equity admitted to pushing certain deals to New Mexico’s two investment agencies — the SIC and Educational Retirement Board —because politically connected individuals here recommended them.

This post has been updated to add more information and correct errors in the sequence of passage. Sorry–we are sleep deprived.

“The purpose of this office is to try to recover any and all moneys possibly lost by the State Investment Council, ERB (Educational Retirement Board) and PERA (Public Employees Retirement Association),” Jennings said.

SB 269, sponsored by Jennings, D-Roswell, passed 30 to nothing in the Senate Tuesday afternoon.

The legislation would create an office of independent counsel empowered to issue subpoenas and forward possible criminal violations to the New Mexico Attorney General’s office.

So far, the State Investment Council has acknowledged losing tens of millions of dollars in investments gone sour while the Educational Retirement Board has lost $40 million. Pay-to-play allegations have swirled around the deals that ultimately went sour.

The bill also appropriates $400,000 for the new office.

Sen. Gerald Ortiz y Pino, D-Albuquerque, appeared concerned that the expenses for the new office would be paid for from the state’s investment funds, and not by moneys recouped by the special prosecutor.

“The chance of recovery is great with some of these funds,” Jennings responded. “It makes more sense than to say adios to those (lost) funds. We’ve never had anyone lose this much money.”

The idea of a special prosecutor, or independent counsel, comes at a time the State Investment Council is at the center of an ongoing scandal involving pay-to-play allegations. Federal authorities are investigating possible criminal and securities violations.

Meanwhile, former State Investment Officer Gary Bland resigned in October after New Mexico’s former investment adviser pleaded guilty to securities fraud in New York. As part of the plea deal, Saul Meyer of Aldus Equity admitted to pushing certain deals to New Mexico’s two investment agencies — the SIC and Educational Retirement Board —because politically connected individuals here recommended them.

Meyer didn’t name names. But Bland, who helped in hiring Meyer, appeared to be close to two people well known by now to those following New Mexico’s investment scandal: Marc Correra and Anthony Correra.

Marc Correra shared $22 million in fees over half a dozen years, according to spreadsheets provided by both the SIC and ERB. The huge amount of fees has provoked outrage from state lawmakers and others in recent months, fueled in part by some investments that have failed, costing the state more than $100 million by conservative estimates.

Marc Correra is the son of Anthony Correra, a friend of Richardson who was involved in the hiring of Bland, the former top staff member at the State Investment Council.

The elder Correra appears to have had a role in the hiring of Bland becoming the state investment officer.

No one in law enforcement has accused either Correra of wrongdoing. And Marc Correra’s attorneys in the past have said he worked hard to earn the fees he was paid.

The special prosecutor, as envisioned in the legislation, would determine if the money that New Mexico has lost was because of fraud and to recover those funds if possible.

If the Attorney General’s office doesn’t accept the referral the special prosecutor could continue to pursue his or her investigation.

The special prosecutor would work as an independent contractor with the New Mexico Attorney General for one year, with additional one-year extensions as an option. But it would be independent of the AG’s office and report to the Legislative Council and the Legislative Finance Committee.

Senators voted 37 to 0 to dramatically re-structure how the Council (SIC) is governed after increased scrutiny of the agency.

The unified vote comes after a drumbeat of revelations has put the agency at the center of an ever-widening investment scandal with ties to New York and California. It also has become the subject of a Securities and Exchange Commission probe and a federal criminal investigation looking into pay-to-play allegations.

“This unanimous vote in New Mexico is historic,” said Sen. Cisco McSorley, D-Albuquerque, moments after the vote. “It sends a message that we want to clean this up. We are united and we will stand behind Sen. (Tim) Keller and Sen. (Steven) Neville.”

The bill now goes to the House.

Among other things the bill that cleared the Senate would remove Richardson from the State Investment Council and give the Legislature more say over who sits on the board.

Other changes in the legislation include:

The move to remove hiring and firing powers from the State Investment Officer comes after revelations that Gary Bland made decisions on advisers and outside managers that the State Investment Council itself did not know about.

Bland, the former State Investment Officer, resigned in October after New Mexico’s former investment adviser pleaded guilty to securities fraud in New York. As part of the plea deal, Saul Meyer of Aldus Equity admitted to pushing certain deals to New Mexico’s two investment agencies — the SIC and Educational Retirement Board —because politically connected individuals here recommended them.

Meyer didn’t name names. But Bland, who helped in hiring Meyer,  appeared to be close to two people well known by now to those following New Mexico’s investment scandal: Marc Correra and Anthony Correra.

Marc Correra shared $22 million in fees over half a dozen years, according to spreadsheets provided by both the SIC and ERB. The huge amount of fees has provoked outrage from state lawmakers and others in recent months, fueled in part by some investments that have failed, costing the state more than $100 million by conservative estimates.

Marc Correra is the son of Anthony Correra, a friend of Richardson who was involved in the hiring of Bland, the former top staff member at the State Investment Council.

The elder Correra appears to have had a role in the hiring of Bland becoming the state investment officer.

No one in law enforcement has accused either Correra of wrongdoing. And Marc Correra’s attorneys in the past have said he worked hard to earn the fees he was paid.

Other changes contemplated in the bill passed by the Senate would require more investment expertise among SIC members, so that they possess greater know-how to assess investment decisions.

In essence, the bill de-centralizes authority and removes the chances for conflicts of interest, lawmakers have said.

“These practices all come from good government practices,” said Keller, D-Albuquerque, one of three sponsors of the bill.

The bill takes some cue from a just-completed outside review of the State Investment Council that recommended significantly reducing the governor’s power over the agency.

That report found that Richardson’s influence over the State Investment Council “is more far-reaching than it is for governors in most of the 14 other states with similar funds,” according to Chicago-based consulting firm EnnisKnupp.

In addition, decisions on how to invest New Mexico’s $13 billion worth of endowment funds were made internally and largely without scrutiny from the board appointed to oversee the state’s portfolio, the report said.

The reforms the bill envisions for the State Investment Council also bear  a passing resemblance to changes corporate boards across the country underwent following the disastrous Enron collapse. Under the Sarbanes-Oxley act of 2002, which was a response to Enron, WorldCom and other big company failures, corporate boards took on more responsibility for the financial health and oversight rather than leaving that up to executive staff.

Over the past two years, a similar upending has occurred in the investment world, partly due to institutional investors like the SIC, ERB and pension funds nationwide making bets on complicated investment tools that promised great returns but instead went sour.

The bill that passed the Senate has a competitor in legislation that would give the Legislature more say over who sits on the State Investment Council.

Earlier this week senators voted 33-4 to overturn Richardson’s 2009 veto of that legislation, which was sponsored by Neville. That legislation already is in the House.

For that override to become law the House must also override the governor’s veto by a two-thirds vote of those present.

Donna J. Hill, a records clerk at New Mexico State University, is the lead plaintiff. Hill is an ERB beneficiary and among approximately 95,000 former educators who lost out when ERB trustees approved bad investments for political reasons, according to the lawsuit, the Reporter explains.

The lawsuit appears based partly on Aldus Meyer founder Saul Meyer‘s admission that he recommended investments to the State Investment Council and ERB that were pushed on him by politically connected individuals here in New Mexico.

The class-action lawsuit also mirrors allegations in a lawsuit filed by Frank Foy, a former ERB investment officer, that some ERB members decided to invest public money out of political  interests.

Jonathan W. Cuneo, a Washington D.C.-based litigator, told the Reporter ‘s Corey Pein in an interview:

“My law firm has spent quite a bit of time looking at the public pension fund situation nationally, and we spent quite a bit of time studying the situation in New Mexico.”

When it comes to corrupt practices in public investments, “I certainly think New Mexico’s not alone,” Cuneo says.

In addition to Bland, the ERB, its board members and Meyer and Aldus Equity, the suit also has targeted Vanderbilt Financial Trust. The firm won $90 million in public money in an investment deal that later went sour, costing the ERB $40 million and SIC $50 million.