Attorney General Gary King says that the state should not be responsible for the legal fees incurred by former Educational Retirement Board member Bruce Malott.

Malott has racked up at least $300,000 in legal fees using a private attorney. King’s office says that the state isn’t on the hook for the private attorney because the state is already providing Malott with a state lawyer.

“Reading Section 22-11-13(H) in light of the other statutes that provide legal representation to state officers and employees, we do not believe it requires the state to reimburse Mr. Malott and other ERB members for expenses resulting from privately retained counsel, particularly when an attorney has been made available at state expense through RMD,” the opinion by King says.

Malott has also hired a public relations firm to help him.

Malott quit from the ERB after media asked him about a $350,000 loan he received from Anthony Correra, the father of Mark Correra. Mark Correra received $22 million in third-party marketing fees from the state.

The Independent reported at the time:

Malott is no newcomer to controversy. Last year, as The Independent reported, federal investigators subpoenaed “e-mails, including attachments, to or from Bruce Malott from Jan. 1, 2003 to the present” as part of a wide-ranging criminal inquiry related to New Mexico investment deals. Malott also is a defendant in an ongoing lawsuit brought by ERB’s former investment officer, Frank Foy, who has alleged a pay-to-play culture at New Mexico’s investment agencies.

Last year The Independent noted how Malott’s auditing firm, Meyners + Company, had grown from a bit player to a powerhouse in New Mexico government while Bill Richardson was governor.

The Attorney General’s opinion also says that the state is not responsible for any of the expenses Malott has related to the public relations firm he hired or any other “non-legal” expenses.

Malott acknowledged to the Journal receiving a $350,000 loan from Anthony Correra, father of Marc Correra who shared in the fees paid out from dozens of investment deals involving the ERB and the State Investment Council.

Malott told the Journal he had no idea at the time that Marc Correra was receiving the fees from the ERB, an agency he was charged with helping to oversee.

Malott is no newcomer to controversy. Last year, as The Independent reported, federal investigators subpoenaed “e-mails, including attachments, to or from Bruce Malott from Jan. 1, 2003 to the present” as part of a wide-ranging criminal inquiry related to New Mexico investment deals. Malott also is a defendant in an ongoing lawsuit brought by ERB’s former investment officer, Frank Foy, who has alleged a pay-to-play culture at New Mexico’s investment agencies.

Last year The Independent noted how Malott’s auditing firm, Meyners + Company, had grown from a bit player to a powerhouse in New Mexico government while Bill Richardson was governor.

Since Richardson took office in 2003, the Albuquerque-based auditing firm where Malott is a principal, 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 been appointed to a number of state boards during Richardson’s tenure as the state’s chief executive. 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 showed.

Richardson appointed Malott to the ERB board.

The ERB sent out a late-morning new release announcing that Mary Lou Cameron, the board’s vice chairman, would replace Malott temporarily as board chairman until members elect officers at an upcoming meeting.

The suit sought to recover $150 million to $230 million in taxpayer money lost due to what Foy has alleged was fraud of a state investment fund and educators’ pension fund. When reached this morning by The Independent, Foy’s attorney, Victor Marshall, declined to comment on what Foy’s options are following the suit’s dismissal.

Marshall told the Journal that some of the actions the suit covers happened after the state law took effect, and that the New Mexico state constitution allows for retroactive civil statutes.

The suit is one of two Foy has filed. The suit dismissed Wednesday was filed in the summer of 2008 under seal, but was made public in January of 2009. It was later amended to include Marc Correra and Anthony Correra. Anthony Correra is a friend and fundraiser for Gov. Bill Richardson. Marc Correra, Anthony Correra’s son, shared in $22 million in so-called third-party marketing fees in several dozen investments the State Investment Council and the Educational Retirement Board made in the years leading up to the Wall Street crash.

Some of those investments have tanked, costing the state millions of dollars.

Foy filed a second, expanded lawsuit last summer.

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.

Changes envisioned in the legislation include a lessening of the governor’s authority over the State Investment Council and a reduction in the portfolio of the agency’s top staff member — the State Investment Officer.

The proposal, sponsored by Sen. Tim Keller, D-Albuquerque, comes amid an ongoing investment scandal and questions about whether Gov. Bill Richardson has too much authority over the agency.

Currently, Richardson appoints the State Investment Officer who, in turn, can hire and fire advisers and outside managers helping the agency.

Under the legislation the State Investment Council, and not the governor, would hire the State Investment Officer. The council also would gain hiring and firing power over advisors and outside managers.

Other changes contemplated in the bill would require more investment expertise among SIC members, so that they possess greater know-how to assess investment decisions. Also the Legislature would gain more say in who sits on the SIC board.

In essence, the bill de-centralizes authority, Keller said.

It also “would reduce the conflicts of interest,” Keller added.

“I like the requirement of experience in investments,” said Sen. John Ryan, R-Albuquerque. “I know you are going after the State Investment Officer having too much power.”

The reforms the bill envisions for the State Investment Council board are similar to the changes corporate boards across the country underwent following the disastrous Enron collapse, Keller said. 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.

Keller’s bill in some ways takes its 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.

Richardson has said he is in favor of reforming the SIC. Keller also told members of the Senate Judiciary Committee on Wednesday that the governor supported the legislation provided that he could file some amendments.

Questions have swirled around SIC related to how much information and decision-making was kept from the State Investment Council during the tenure of former State Investment Officer Gary Bland. Bland resigned in October prior to a scheduled no-confidence vote by council members.

New Mexico in recent months has emerged as a hot spot in an ever-widening investment scandal with ties to New York state and California.

As a result, the federal Securities and Exchange Commission is conducting an inquiry into the agency.

The SEC inquiry, meanwhile, coincides with an ongoing criminal investigation that began earlier this year in New York. New Mexico’s former investment adviser, Saul Meyer of Aldus Equity, pleaded guilty there to securities violations. Meyer 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.

It is unclear who exactly the politically connected individuals are in Meyer’s statement.

But Bland 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.

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 consultants’ report appeared to be a strong sign that the state lacked the kind of oversight required when a state agency makes important decisions about how to invest.

Beefing up the board’s oversight authority is exactly what his bill is attempting to do, Keller said.

Gov. Bill Richardson

As 2009 staggers into the history books, exhausted and a bit lighter in the pockets than when it first appeared on the scene, let’s acknowledge this: the year gave us plenty to write about.

Accusations of pay-to-play, former elected officials getting indicted, electoral surprises and an occasional David toppling a Goliath — 2009 produced it all, giving the year a healthy luster of newsworthiness despite its threadbare look.

The year showed incredible stamina, in fact, with a steady drumbeat of scoops, gotchas and revelations, exhausting many a political junkie and news professional. And 2009 didn’t take long to demonstrate its capacity to shock.

On the fourth day of 2009, an announcement in Washington landed in New Mexico with all the percussive power of a bombshell: Gov. Bill Richardson was withdrawing as President Obama’s commerce secretary, citing a federal corruption investigation into how his administration conducted business.

And the news kept coming.

Some 360 later, the year is ending the way it began — scrutiny, including from federal prosecutors, on how the state invested its money over the past half decade.

In between those two bookends, the state of New Mexico also came to the disturbing realization that it was broke, Albuquerque’s longtime mayor fell short of winning a third four-year term — knocked off by a long-shot two-term GOP state lawmaker — and two former elected officials found themselves on the business end of a criminal indictment.

It’s unclear whether what transpired this year will change the political dynamic here in New Mexico, or lead to more government transparency. But before The New Mexico Independent gets back into the daily grind, let’s take a deep breath and reflect on the busy year that was.

Click here to begin with: Scandals

According to a story in the Albuquerque Journal today by Mike Gallagher, the governor’s office won’t even say whether it has received subpoenas from a federal grand jury or the Securities and Exchange Commission regarding state investment business.

A bit of inconsistency is at play here, as Gallagher points out. The governor’s office publicly released a subpoena related to a different federal investigation in February of this year. That inquiry ended without criminal charges in August, although it wasn’t the clear victory the governor and his people had hoped for.

After the governor released the subpoena earlier this year, the New Mexico Finance Authority, State Investment Council and Educational Retirement Board all rejected requests for the release of similar subpoenas related to federal investigations.

All three agencies, however, later reversed course and followed the governor’s office in releasing subpoenas.

Which makes it curious as to why, 10 months later, the governor’s office is not even acknowledging whether it has received a subpoena from federal prosecutors and regulators scrutinizing New Mexico’s investments.

Gallagher writes that the Journal had requested copies of any subpoenas the governor’s office had received related to the ongoing federal investigations.

Here’s an excerpt from the Journal’s story that recounts the response from the governor’s office:

“Any responsive records the Governor’s Office may have received would be exempt from disclosure. Such documents would relate to a matter that is or will be before a federal grand jury. This office will not release records of this nature pursuant to the federal rules governing grand juries.”

The letter went on to say, “There are also countervailing public policy considerations that warrant denial of your request as well, including but not limited to this Office’s effort to cooperate and not unduly interfere with any federal grand jury investigation(s).”

Gallagher points out that federal rules require secrecy from members of the grand jury, court employees, prosecutors and agents, but that same obligation does not extend to witnesses, i.e., people who receive subpoenas.

The federal investigations are another black eye for New Mexico, especially with the state’s former financial adviser pleading guilty to corruption in October as part of a pay-for-play investigation in New York. Gary Bland, the State Investment Officer, meanwhile, resigned in October in advance of a no-confidence vote from members of the State Investment Council. One member, State Land Commissioner Pat Lyons, told the Associated Press that a private firm hired by the council had discovered that Bland had “pressured investment firms doing business with the state to hire certain third-party marketing or placement agents.

No one has named the third-party marketer involved. But one name has repeatedly surfaced during New Mexico’s scandal involving third-party marketers: Marc Correra.

Correra shared in $22 million in fees over several years as a third-party marketer, meaning he played matchmaker between fund managers looking for investors and the state which was looking to invest.

Marc Correra is the son of Anthony Correra, a fundraiser for and friend of Richardson’s.

Richardson’s office has shown a proclivity toward secretiveness this year surrounding the Correras. NMI repeatedly asked the governor this year if he had met with Marc Correra in the months leading up to a 2006 investment that eventually lost $90 million in taxpayer money. Correra was the third-party marketer in that deal.

The governor and his office repeatedly declined to answer the question until NMI requested to review all documents related to any meetings the governor had with Marc Correra , including calendars, datebooks and e-mails, during the months of January through August 2006.

The governor’s office finally relented, saying the governor had not met with Correra in the months leading up to the investment.

So what message does the decision by the governor’s office to not disclose whether or not it had received a subpoena? First, it signals that the governor’s office likely has been subpoenaed.

As for whether they are trying to hide something, that’s for you to decide.

Bland, who resigned last month from his $300,000 state job, was ordered to appear at the federal agency’s Denver regional office Sept. 2 to testify under oath, according to documents made public Tuesday by the New Mexico State Investment Council (SIC).

It is unclear from the seven-page document divulging Bland’s testimony whether Bland testified on that date. Also unclear is the content of Bland’s testimony. But State Investment Council (SIC) spokesman Charles Wollman confirmed for the Independent on Tuesday that Bland “did speak with regulators.”

That Bland appeared before the SEC is a small revelation in New Mexico’s ongoing role as a player in a ever-widening investment scandal with ties to New York state and California. The SEC inquiry coincides with an ongoing criminal investigation that began earlier this year in New York. Last month, New Mexico’s former investment adviser, Saul Meyer of Aldus Equity, pleaded guilty to securities violations brought by New York Attorney General Andrew Cuomo. Earlier this year a California man pleaded guilty in the same New York probe.

In a news release put out by Cuomo’s office at the time, Meyer admitted to pushing certain deals to New Mexico’s two investment agencies — the SIC and Educational Retirement Board — as the state’s investment adviser because politically connected individuals here recommended them. Meyer didn’t name names.

The State Investment Council made public several documents Tuesday, two of which have been sought for months by the media — two federal grand jury subpoenas from the U.S. Attorney’s Office in New Mexico that are related to the federal criminal investigation.

Like subpoenas released by the Educational Retirement Board earlier this year, Meyer’s Aldus Equity figures prominently in one of the two federal subpoenas the SIC released Tuesday.

They show that federal authorities demanded all agency contracts with Aldus as well as correspondence between the state agency and Aldus and any list of firms Aldus proposed that the SIC invest in.

The other subpoena the SIC released from the federal grand jury Tuesday demanded  all “e-mails, including attachments, to or from Bland from Jan. 1, 2003 to the present.

The other two documents released Tuesday by the SIC were from the Securities and Exchange Commission — a subpoena demanding a wide-ranging list of records as well as that agency’s rules of testimony that were sent to Bland prior to his appearance to testify.

Two names well known by now to those following New Mexico’s investment scandal  make an appearance in the SEC’s subpoena to the State Investment Council: Marc Correra and Anthony Correra.

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.

Marc Correra has shared in $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 money. Two of the deals he helped arrange have cost New Mexico more than $115 million.

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

The Securities and Exchange Commission subpoena demanded that the State Investment Council turn over “all documents reflecting any communication with or relating to any of the following”:

a. Marc Correra or his related parties, including without limitation Ajax Investments,
Crosscore Management, and SDN Advisers; .
b. Anthony Correra or his related parties; or
c. Any individual or entity that acted or has been identified as a third party marketer, placement agent, or finder in connection with any actual or potential investment by the SIC.

Wollman, the SIC spokesman, said Tuesday that his agency is still handing over documents to investigators from both federal agencies.

In making the documents public Tuesday the SIC shifted gears after months of denying media requests. Reasons for the shift in policy were outlined in a one-page letter from the state’s interim investment officer Bob Jacksha, which accompanied the released documents.

Jacksha wrote:

“The Investment Office initially denied those requests under New Mexico Inspection of Public Records Act … in order to refrain from interfering in any federal investigation.

“However, in the staff’s ongoing legal review, with the input of council Members, and under my own direction as Investment Officer, the Investment Office will today publicly release the subpoenas to all who have asked for them previously.”

SEC subpoena for Gary Bland’s testimony

DOJ subpoena of Gary Bland e-mails

DOJ subpoena for contracts, documents related to Aldus Equity etc.

Securities and Exchange Commission subpoena of SIC documents

SIC letter on release of subpoenas