So begins the second of two articles published today that are the result of months of investigation by Bloomberg’s Elliot Blair Smith into CDR Financial Products.

Confused? Wondering if I’m getting my New Mexico political scandals mixed up? I’m not. This article involves both CDR – the company at the center of the now-defunct GRIPgate scandal that cost Gov. Bill Richardson the U.S. commerce secretary post – and Gallegos – the man at the center of the state’s housing authority scandal. 

CDR, the company’s founder David Rubin and two other employees were indicted last week in an unrelated probe into bid rigging in the nation’s municipal bond market.

Gallegos and three others are currently under indictment in the housing authority case. Gallegos and two others are facing felony charges including fraud and money laundering related to the misuse of bond money. A fourth defendant is charged with tampering with evidence.

Today’s reports by Smith don’t deal directly with either New Mexico scandal. Instead, they form an in-depth look at the way CDR has done business across the nation. The second article focuses on more than $27 million in bonds the Region III Housing Authority in Albuquerque sold in 2003 “with the help of” CDR.

“At the time the authority issued the bonds, there was ample evidence that the program would not be successful,” the IRS said after investigating the deal, according to Bloomberg. “A prudent person would not have taken the same actions.”

Thinking that’s more of the same from an affordable housing agency that collapsed in 2006 after it defaulted on more than $5 million in bonds it owed the state? You’re probably not the only one.

From the Bloomberg article:

“Two months later, federal tax authorities revoked the bonds’ tax exemption. The IRS found that one of the agency’s banks, Paris-based Societe Generale SA, would earn as much as $1.5 million on a program for low-income and first-time homebuyers that lent only about $2.6 million. Tax authorities also found that CDR was collecting more than $50,000 a year from Societe Generale in fees not disclosed in public bond documents.”

And the context:

“The unraveling of Region III investments shows how municipal financing arranged in the dark costs as much as $6 billion a year through lack of disclosure, officials’ mistakes and public corruption, according to data compiled by Bloomberg. It also reveals how financial professionals may enrich themselves by taking advantage of a tax benefit worth $36 billion a year to state and local governments and non-profit agencies that borrow.”

There’s a lot of good stuff in this article, which you can read by clicking here, and the other Smith report about CDR, which you can read here.

From the story:

Another legal source familiar with the criminal investigation said the agreement to extend the statute of limitations on the allegations had expired Wednesday and Justice Department officials had not requested more time. That signaled, the source said, that indictments were no longer a possibility.

The Post also spoke with a Democratic source close to Richardson who has spoken with individuals directly involved in the investigation who said “it’s not official, but it looks good.”

“There is a sense of relief,” the source said, speaking on the condition of anonymity because of the sensitivity of the matter, “but there is a sense of vindication more importantly.”

The rest of the Post’s story covers ground that is known to New Mexicans who have followed the case closely.

Here’s an excerpt:

The FBI and a grand jury in Albuquerque had been investigating the award of a state contract to CDR Financial Products, a Beverly Hills-based company that had contributed nearly $100,000 to the governor’s political action committees. CDR was paid $1.48 million for advising the New Mexico Finance Authority on investment decisions in 2004.

Investigators have been examining whether Richardson or his deputies pressed the authority to hire CDR after receiving financial contributions from the company and its president to help register minority voters and pay for expenses at the Democratic National Convention.

Richardson, who had served as energy secretary and United Nations ambassador during the Clinton administration, had been poised to become the highest ranking Hispanic in the Obama Cabinet before the CDR probe intensified. Richardson’s second term as governor runs through 2010, and he is prohibited from running for a third term, opening questions about his political future.

The inquiry was part of a lengthy federal investigation of “pay-to-play” practices in local government bond markets. Federal investigators have been trying to build cases against financial firms and political figures who may have accepted gifts in exchange for high fees on work advising municipal and local governments on investments.

Now Bloomberg has found another link. And it relates to GRIPgate.

Blagojevich’s top fundraiser and his lobbying firm donated $20,000 to Richardson’s 2006 re-election campaign and political action committees, according to an article the news organization published today. That lobbyist, Milan Petrovic, also represented, in Illinois, CDR Financial Products, the firm at the center of the federal pay-to-play grand jury investigation in New Mexico.

Petrovic, who raised $1.96 million for Blagojevich, arranged meetings between CDR and Illinois budget and debt officials, though, in the end, that state did no business with CDR. In Illinois, Petrovic also represented Stratton & Associates, the Denver consulting firm headed by Mike Stratton. Stratton is one of the handful of people in Richardson’s inner circle and was a senior adviser to his 2008 presidential campaign.

The contributions Petrovic made to Richardson came in 2004 and 2005. CDR was hired in New Mexico in 2004. The federal probe centers around allegations that the Richardson administration traded a lucrative state bond contract for $110,000 in contributions to Richardson’s political committees and his 2006 gubernatorial campaign.

There’s no indication in the article that the grand jury in New Mexico is looking into the contributions from Petrovic. Still, the timing of those contributions is interesting.

And, on top of the $20,000 Petrovic and his firm gave to Richardson, “Petrovic’s friends, business associates and clients donated at least $50,500 to Richardson,” the news agency reported.

Illinois residents gave $400,000 to Richardson’s 2006 gubernatorial re-election campaign, according to the article. That includes Lewis Borsellino, president of an Illinois health care group, who gave $10,000 to Richardson after Petrovic asked him to attend a fundraiser for the N.M. governor.

Borsellino told Bloomberg that Petrovic has asked him to contribute to many candidates, adding that, “He’s a lobbyist… I’m in the health-care business. Someday, I may need some direction.”

Petrovic told Bloomberg that Richardson “is a public official I admire,” but would not comment further. Richardson, according to the article, declined to comment on Petrovic’s contributions.

Photo by spiffie/Flickr

Though at least two other state agencies have publicly released similar documents, the New Mexico Finance Authority is refusing to hand over subpoenas it has been issued in the federal investigation into allegations of pay-to-play in the Richardson administration.

The finance authority also refuses to release the documents sought by such subpoenas.

NMI sought the records in two separate requests made under the state’s Inspection of Public Records Act. The first, a narrow request, sought only subpoenas that have been issued in the federal investigation. The second, broader request sought all subpoenas related to any federal investigation received by the finance authority, and all documents requested in those subpoenas.

“The New Mexico Finance Authority is denying your request, as release of the requested documents could compromise or impede an ongoing federal investigation,” Reynold Romero, general counsel for the finance authority, wrote in separate letters denying the requests.

The denials contrast with the release by the Governor’s Office last month of a Sept. 22 subpoena it was issued in the federal investigation. The  Bloomberg news agency obtained the document in response to a public records request. In addition, the University of New Mexico released to Bloomberg a subpoena it received in a separate federal investigation, also in response to a public records request.

The state’s public records act applies to all government agencies, including NMFA. It covers the vast majority of government records but allows a few exceptions, including patient medical records and certain types of law-enforcement records.

In an interview, Romero said he is “not familiar” with the release of subpoenas by the other state agencies, adding that, “We’re just dealing with ours.”

Asked to cite the exemption to the public records act that allows denial of the NMI requests, Romero didn’t name any of the specific exemptions listed in the act. He instead cited the provision that allows exemptions “as otherwise provided by law.”

“Our position has remained that we don’t want to impede or in any way compromise the investigation,” Romero said.

Similar requests NMI made to the Governor’s Office are awaiting a formal response, which, under the act, is due this week.

Newspaper’s requests also denied

Last week, the Governor’s Office refused to release documents to The Santa Fe New Mexican related to the office’s dealing with CDR Financial Products, the company at the center of the federal probe.

A grand jury is investigating whether the California company received a state investment contract that paid almost $1.5 million in exchange for $110,000 in contributions to two Richardson political action committees and his 2006 gubernatorial re-election campaign.

In denying two requests from The New Mexican, that office’s records custodian, Marcie Maestas, wrote that the office “is prohibited from releasing records of this nature pursuant to the federal rules governing grand juries. There are 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 the federal grand jury investigation.”

The finance authority, meanwhile, responded to a records request from The New Mexican by saying it had located “some of your requested documents” but needed more time to complete the request, according to the newspaper’s Saturday article.

Leonard DeLayo, executive director of the New Mexico Foundation for Open Government, was quoted by The New Mexican as saying he’s not sure whether the documents requested by the newspaper are exempt from the public records act. NMI has written the foundation seeking advice on whether NMFA violated the public records act in denying NMI’s request.

Oops. Albuquerque Mayor Martin Chavez’s administration apparently inked a new five-year deal with the company that runs the city’s controversial red-light camera program and some people are not happy at all, the Albuquerque Journal reports.

A state court judge decides there is enough probable cause to impose harsher charges on Robertson High football players accused of assaulting fellow team members, the Santa Fe New Mexican reports.

An Environmental Protection Agency appeals board has agreed to review the approval of an air permit issued to the proposed Desert Rock coal-fired power plant, but carbon dioxide emissions won’t be part of the process, The Associated Press reports.

Photo by Mike Schinkel/Flickr

Two of Gov. Bill Richardson’s longtime friends and advisers –- Michael Stratton and Dave Contarino -– got unwanted time in the spotlight last week.

Stratton saw his name in headlines because he received a more than a quarter-of-a-million payday from a firm involved in a deal at the center of a federal probe that reportedly also has its sights on Contarino, the governor’s former campaign manager and ex-chief of staff.

The question prosecutors want to answer is, did sizable political contributions from a California-based firm, CDR Financial Products, to two political action committees started by Richardson play a role in the state’s decision to give the firm a lucrative contract?

The answer is not only crucial for Richardson’s political future, it may also speak volumes about New Mexico politics in general. Richardson’s withdrawal from consideration as U.S. commerce secretary might have surprised many state residents, but not all. Critics say Richardson has long thrived in New Mexico’s chummy political culture in which personal relationships and doing business with the state government go hand in hand.

Besides Contarino and Stratton, at least three other close allies or confidants to Richardson have sought or received state contracts in recent years under circumstances that raised conflict-of-interest questions.

That friends and confidants of Richardson’s are involved in state business is no surprise. The capital runs on relationships as much as anything else. Access to decision makers is a tradable commodity for companies and others that lobby lawmakers, the governor and other state officials. And it can lead to a nice payday or prominent government posts for those lucky enough to have such relationships.

But such relationships can also run afoul of prohibitions against conflicts of interest, critics say

“He ran the Roundhouse like Tony Soprano ran his empire,” John Grubesic, a former Democratic state senator from Santa Fe and frequent Richardson critic, said of the governor. “All he’s done is to benefit his political cronies. Clearly, it’s a ‘You scratch my back, I’ll scratch yours.’”

Former Republican Party of New Mexico Chairman John Dendahl could not agree more.

Dendahl ran unsuccessfully against Richardson in the 2006 gubernatorial race, the Republicans’ best, last hope to slow down the Richardson juggernaut. It didn’t work. Richardson steamrolled the Republican, winning nearly 70 percent of the vote, despite Dendahl’s repeated accusations that the governor was cultivating a “pay-to-play culture” in state government.

Dendahl, now living in the suburbs of Denver, said Richardson himself may face legal charges.

“Whether he is going to be indicted and subsequently convicted … is an open question,” he said in a telephone interview with NMI. “I know what I have read in copious news stories. There’s a great deal here. Of course, knowing Richardson as I do, there’s a great deal of schadenfreude.”

A governor’s spokesman did not return a phone call seeking a response. But Richardson has vigorously defended Contarino and state officials, saying his administration will be vindicated in the end.

As for the connection between contributions and the awarding of state contracts, Richardson’s response in the past to reporters has been to tell them that he doesn’t know who contributes to him.

That answer doesn’t apply to names in today’s news stories.

Mike Stratton: Tickets and steak

The current probe is focused on an alleged play-to-pay scheme in which contributions to two political action committees started by Richardson — Si Se Puede! and Moving America Forward — may have been rewarded with work from the New Mexico Finance Authority.

Mike Stratton, president of Denver-based Stratton & Associates and a long-time friend of Richardson’s, received $269,000 in 2003 and 2004 from JPMorgan Chase & Co. to help win public finance business relating to “state, county, and local government and corporate entities” in New Mexico, according to Bloomberg News

JPMorgan was the senior underwriter on $1 billion of the $1.6 billion of bonds sold by the New Mexico Finance Authority to pay for GRIP, short for Governor Richardson’s Investment Partnership.

And CDR, the firm at the center of the federal probe and one for whom Stratton also consulted, advised the state agency on the purchase of the particular financial instruments employed, called swaps.

By all reports Stratton remains close to the governor.

He was one of several hosts at a fundraiser in December to help Richardson retire debt from his presidential campaign. In January 2006, he arranged for tickets for the governor and three top aides to a Broncos playoff game in Denver. He also set up a private dinner afterward for Richardson and others at the swank Palm steakhouse.

Stratton, meanwhile, has appeared to benefit from his friendship with Richardson. He reportedly earned $240,000 in consulting fees from the Democratic Governors Association during the two years that Richardson led the organization.

NMI’s attempts to reach Stratton proved unsuccessful.

Dave Contarino: ‘Highest respect’

For another primer in how lobbying works in Santa Fe, consider ValueOptions, a Virginia-based company that manages the state’s behavioral health and substance abuse services for about 70,000 New Mexicans. Last year, the company sought to renew its contract, which is worth $300 million. Value Options hired Contarino, the governor’s former chief of staff and presidential campaign chairman.

Contarino and Richardson have been together at least since 2002, when Contarino ran Richardson’s gubernatorial campaign. Reportedly the two men hit it off because both love politics. According to a profile in The Albuquerque Tribune, Contarino can recite players in past political campaigns like someone else might run through old baseball players or long-forgotten Super Bowl champions.

And he’s been around politics for more than 25 of his 47 years, interning with the Democratic National Committee, putting in time on Walter Mondale’s 1984 presidential campaign and working for California Democrat and former U.S. Rep. George Brown Jr.

When Richardson won the governship, he made Contarino his chief of staff. Contarino left that job in April 2006 to work on the governor’s re-election effort. In 2007, he became chairman of Richardson’s presidential campaign. That ended in January 2008.

Meanwhile, executives at ValueOptions had made it a point to contribute to both the governor’s presidential campaign — executives, officers and state lobbyists for the company gave Richardson’s campaign nearly $25,000. In 2006, the company gave $50,000 to the governor’s re-election campaign.

Neither Contarino nor ValueOptions will disclose how much he was paid as a consultant. And the state appears to have chosen OptumHealth New Mexico, instead of renewing ValueOptions’ contract, to run the program. It announced in mid-December that it had asked Optum to enter into contract negotiations.

Richardson is standing by the man he once called his “most senior and trusted aide.”

“I have the highest respect and regard for Dave Contarino,” the governor said last week.

Guy Riordan: Not such a very good friend

“I am a very good friend of the governor’s,” Guy Riordan said back in September 2005. Riordan, a securities dealer from Albuquerque was a big-time contributor to Richardson’s campaigns, giving at least $28,000 to Richardson’s 2002 gubernatorial run. In 2003, Richardson appointed him to the state Game Commission and he reportedly was an early director of Si Se Puede, one of the two political committees at the heart of the ongoing federal inquiry.

Riordan said later that he had attended the Super Bowl and a World Series game in 2004 with Richardson and another political ally and friend of the governor’s — Paul Blanchard, a director of the other political action committee at the heart of the federal probe, Moving America Forward.

Eventually, Richardson distanced himself from Riordan publicly when the securities dealer figured into the federal investigation that ended with ex-state treasurers Robert Vigil and MIchael Montoya going to federal prison. The governor’s office released a statement saying that Riordan was a friend of the governor’s, not “a very good friend.”

Montoya later testified in court that Riordan gave him gifts in return for state business, charges that Riordan and his attorneys denied. By then Riordan had quit the Game Commission and Richardson and others made a very public display of giving Riordan’s campaign contributions to charity.

Riordan testified in court more than a year ago that federal prosecutors were going after the governor.

“They asked me questions about the governor. They asked me questions about his finances. I was furious,” Riordan said during a hearing in December 2007 that was held to determine whether he could continue to work as a securities broker.

A Securities and Exchange Commission (SEC) administrative judge ruled last year that Riordan should be banned from the securities industry for life for paying bribes to Montoya. The judge’s ruling is subject to approval by the SEC before it becomes final.

Jerry Peters: Friend and state contractor

Gerald Peters, known to all as Jerry, is a friend of the governor’s who has given more than $100,000 to the governor’s campaigns, made a jet available to Richardson for political trips and held a fundraiser for Richardson’s presidential campaign.

The Santa Fe art dealer, developer and owner of the Blue Corn restaurant chain, has been around state business for years and made his presence known in 2002 politics when he gave more than $137,000 to Richardson’s gubernatorial campaign.

But in December 2006, Peters appeared to run into a speed bump when a firm associated with him was selected for a big redevelopment project at the proposed headquarters for the state Department of Transportation (DOT). It eventually blew up in the face of aggressive press coverage.

Richardson was asked more than once whether Peters’ financial help to his campaigns played any role in the firm winning the DOT project.

“Look, I’ve said it before. There’s no connection between donations and what happens in state government,” Richardson said in August 2007. “That’s always been an established principle.”

Peters, meanwhile, defended his firm, saying it was the only one to submit a bid on time.

Later, the governor asked for a review of how the Transportation Department bid and awarded the project. The review found the project “suffered from poor planning and poor decisions,” the report said, while the department lacked necessary expertise, skirted purchasing rules and made questionable use of state aircraft, the Albuquerque Journal wrote in March 2008.

The questionable use of aircraft refers to the two men indicted in a separate federal investigation — engineer Raul Parra and Toby Martinez, the DOT project manager — who flew with then-Transportation Secretary Rhonda Faught to Dallas on January 2005. The two men were involved in the DOT project.

Parra and Martinez later pleaded guilty to corruption in the Metro Courthouse scandal that netted former Senate president pro tem Manny Aragon in October 2008.

Despite the governor’s demand of an internal investigation into the DOT headquarters project, Richardson so far has refused to answer whether a similar internal inquiry has been conducted to see if there were any improprieties in how the state handled the CDR deal at the center of the federal probe.

Johnny Cope: Fishing for state financing

Johnny Cope is a prominent Richardson supporter, oilman and chairman of the the state’s Transportation Commission. He is also business partners with 2nd Congressional District U.S. Rep Harry Teague. Together they own an aircraft that Richardson used often for his presidential campaign. In fact, as of September the single largest debt still owed by Richardson’s presidential campaign –  $203,850 — was for the use of the plane owned by Cope and Teague.

Cope also spreads his money around. He and 10 companies owned by him contributed more than $170,000 to candidates for state office during the 2006 elections. Richardson received the lion’s share of Cope’s contributions — $107,000 — and his running mate, Lt. Gov. Diane Denish, took in at least $37,500.

Cope also has been involved in what he acknowledged were situations that raised questions, such as the time he registered as a lobbyist for Wexford Health Services of Pittsburgh in 2005, a year after the company won a contract potentially worth more than $100 million to provide health care for state prison inmates.

Cope told the Albuquerque Journal in 2007 the job was out of character for him.

Another time, Cope, tried to push through legislation that state lawmakers said smelled fishy. It involved legislation that would have provided a state loan guarantee for a fish farm project in southwestern New Mexico; Cope and another Transportation Commission member, David Schutz, were investors in the farm. The firm, N.M. Tilapia Corp., assembled a high-powered slate of lobbyists, including former House Speaker Raymond G. Sanchez and former Gov. Toney Anaya.

The legislation would have made the state liable for possibly millions of dollars if the company had defaulted on a loan. One senator called the proposed funding mechanism in the bill a rare, if not unprecedented, vehicle for the state to help finance a private company. Ultimately, the Senate tabled the bill, in effect killing it, during a late night session.

Cope appeared resigned to the Senate bill’s defeat at the time.

“We lost,” Cope said. “You don’t have to write another bad story. It’s over.”

The governor said he knew nothing of the bill, but many around the Roundhouse found that hard to believe. Richardson and his staff are known to keep very close tabs on the Legislature.

Time for ethics reform

The governor, meanwhile, is attempting to move on from the scandal that has enveloped two of his close advisers. Last week his office sent out a press release announcing that Richardson will “aggressively pursue ethics reforms in the upcoming legislative session.”

The governor, the release said, wants lawmakers to create an independent ethics commission and cap the amount of money an individual and others can contribute to political campaigns. New Mexico is one of a handful of states that doesn’t limit campaign contributions.

The cause of ethics reform has not fared well under Richardson. In recent years the governor has impaneled two ethics reform task forces that made a series of recommendations, most of which were ignored or were met with hostility during subsequent legislative sessions.

“I’ve proudly signed the ethics bills that have made it to my desk in recent years,” the governor said in the news release. “This year, I look forward to signing those important reforms that, in past years, have failed by only a few votes.”

At least one advocate said Sunday that the proof of Richardson’s intentions will be in what gets passed this session.

“In the past people have talked a good game,” Steven Robert Allen of Common Cause New Mexico told the hosts of a public affairs show on KOB TV yesterday. The proof of the support for such reforms is in what gets passed, he added.

The report doesn’t count the $100,000 that CDR and Rubin gave to two political action committees that Richardson started and that figure in a federal probe that cost him a Cabinet post. It only shows the $20,000 that CDR and Rubin gave to Richardson for his 2006 re-election campaign, and $10,000 that was given to Lt. Gov. Diane Denish.

That should keep readers of the report mindful of the money that’s perhaps not tallied there.

Having said that, all told, officials in Pennsylvania, California, Georgia, Tennessee, Indiana and Massachusetts also received contributions from CDR or Rubin.

Governors, and gubernatorial candidates, received most of the $121,000 the institute found, with about $100,000 of that going to four governors, including Richardson, and one gubernatorial candidate.

Of the seven states, Pennsylvania received the most money from CDR/Rubin: $42,500, with Gov. Ed Rendell easily outdistancing that state’s other recipients with $35,000 of that. California got $42,700, with former Lt. Gov. Cruz Bustamante receiving $21,200 during his unsuccessful 2003 race against Arnold Schwarzenegger for the governor’s seat.

Tennessee officials only received $20,000, but CDR and Rubin gave to 19 individuals or committees, the report shows.

How CDR came by the work it did for the state, as many know by now, is the focus of a federal investigation. Specifically, prosecutors are investigating how a lucrative state contract to the California company was awarded, and if big contributions it made to political action committees formed by Gov. Bill Richardson played a part.

It is difficult for non-experts to assess if the state overpaid for something so arcane, but here is an example of overpayment that gives one pause. It comes from Bloomberg News.

The authors report:

“Between the timing of those contributions, CDR made $951,566 advising the New Mexico Finance Authority on $420 million of interest rate swaps.

“The fees New Mexico paid CDR were more than double the $400,000 that New York City paid to its derivatives adviser, Investment Management Advisory Group Inc., in 2004. That year, New York City executed $900 million of the contracts.”

Steve Terrell of The Santa Fe New Mexican reports that the feds are “investigating a 2002 bond sale by the University of New Mexico as part of an investigation into possible violations of securities laws.”

The Bond Buyer, a daily financial publication, reported the feds interest in a Dec. 18 story. Writers Richard Williamson and Andrew Ackerman fit the interest in the UNM bond sale into a broader context. They wrote:

In a widening look at practices in the pricing of derivatives, investigators have subpoenaed records from more than 30 banks, insurance companies, and brokers involved in interest rate swaps and contracts to invest bond-sale proceeds.

In New Mexico, officials asked for records from the 2002 sale of $96.7 million of subordinate-lien system revenue bonds issued by the UNM Regents. The bonds were sold in two tranches, $96.7 million and $37.8 million, through negotiation with JPMorgan as senior manager with RBC Capital Markets and George K. Baum & Co. as co-managers.

The university confirmed that the records were subpoenaed but said it was not a target of the investigation.

Barely 24 hours earlier Richardson had stirred up Washington’s formidable population of Blackberry users with his withdrawal as President-elect Barack Obama’s commerce secretary-designate because of a federal investigation involving state contracts. The local reporters gathered around Richardson’s favorite venue for parlaying with the press — the big table in the fourth-floor cabinet room of the State Capitol in Santa Fe – expected a revelation or, at the least, a bit of news.

The backslapping, sometimes feisty chief executive instead served up a heap of warmed-up, day-old news. Without a hint of irony, Richardson, 61, read a statement similar to the one he gave Sunday. Then he refused to answer many of the questions put to him.

Though strange to an outsider, Richardson’s performance came as no surprise to local media. Outlets that have covered this scandal since August know that the governor’s style has been to remain tight-lipped even when faced with direct questions. Richardson had managed to stay quiet and fly under the radar of the national press as news of the investigation spread. Taking a look at how Richardson handled himself throughout the months leading up to his resignation helps explain why, nationally, there was so much confusion and surprise at the news.

Many news readers in New Mexico know the story — for months federal prosecutors were looking into the awarding of a lucrative state contract to a California company, CDR Financial, that made big contributions to political action committees formed by Richardson. Specifically, prosecutors are looking for any connection between the work CDR Financial Products won in 2004 and the large political contributions that were given to two PACs started by Richardson. The investigation reportedly centers on whether staffers in Richardson’s office influenced the hiring of CDR.

One PAC, Si Se Puede! Boston 2004, was formed to pay for the governor and his staff to attend the Democratic National Convention in Boston in 2004. The other, Moving America Forward, was formed to register Latino and Native American voters in the run-up to the 2004 presidential election.

In 2003 and 2004, CDR Financial gave $75,000 to Richardson’s political action committee Si Se Puede! and the company’s head, David Rubin, gave $25,000 to Moving America Forward, another Richardson PAC.

According to numerous reports, in 2004 CDR made $1.48 million advising a small state agency on interest-rate swaps and restructuring escrow funds for the state’s special $1.6 billion transportation program known as GRIP, short for Governor Richardson’s Investment Partnership.

Richardson has rarely commented on the investigation and walked out on a news conference last month as reporters attempted to ask him questions about the inquiry. He also refused to answer NMI’s questions on the subject Dec. 15, the day he took his first ride on the Rail Runner commter train, a project Richardson has described proudly as one of his legacies in New Mexico. It’s been only now, with his withdrawal, that he has begun to speak, but then only to deny any wrongdoing on the part of the administration.

“I have always fully expected that my administration would be cleared of any wrongdoing and it would be clear that nothing improper took place,” Richardson said Monday.

Meanwhile, the president of CDR Financial Products, the company at the center of the inquiry, also defended itself in a post on its website.

At the same time Monday, Richardson refused to answer questions that did not impinge on the federal investigation, a subject he explicitly said he wouldn’t address; for example, had he hired a lawyer and had he demanded an internal investigation to ensure his administration had done nothing improper in letting a state contract to a California company that had given large contributions to two political action committees formed by him. The timing of the contract and the political contributions has sparked the federal investigation that derailed Richardson’s cabinet appointment Sunday.

Richardson did explain Monday that he had held on to the hope of winning a cabinet post until Sunday in the misplaced hope that his administration would be cleared in time for the confirmation process before the U.S. Senate and that he had “underestimated” how long the federal inquiry would take.

That plan appears to make some sense because federal grand juries in New Mexico are usually impaneled for a year, meaning a new grand jury impaneled this year may have to take up the case all over again, including witness testimony, although the term for a grand jury can be extended.

And for the record, Richardson has hired Peter Schoenburg, a prominent white-collar crime attorney in New Mexico.

Questions About Vetting

The citing of the federal investigation for Richardson’s withdrawal raises questions about the vetting done by the Obama transition team, and whether indeed Richardson pulled the plug as he has said.

Obama’s people have said Richardson told them about the investigation before his nomination last month and gave them assurances that he would come out fine. The scandal received little attention nationally and Richardson was surviving a potentially embarrassing situation just fine.

But as the investigation progressed, and no resolution occurred, it became clear that the clean bill of health that Richardson wanted wouldn’t come in time for the confirmation process. According to some reports, that made Obama’s team nervous and concerned that the investigation was a bigger problem than indicated.

University of New Mexico political scientist Lonna Atkeson, who has followed Richardson’s career for years, told the New Mexico Independent on Sunday that it didn’t sound like Richardson’s style to bow out.

“Richardson’s the type to say, let’s let things run their course,” Atkeson said. “So I think there had to be pressure from the Obama team.”

In light of the scandal involving Gov. Rod Blagojevich in Illinois, the federal investigation in New Mexico would not be a welcome headline.

Richardson’s Reputation

While the governor expects his administration to pass prosecutorial muster, Richardson’s withdrawal from the Commerce Dept. post has once again raised questions about how business is done in the state.

New Mexico, in fact, has endured a series of scandals involving public officials. Over the past three years, two former state treasurers, a state deputy insurance superintendent and a former president of the state senate all have pleaded guilty to or been convicted on corruption charges.

Meanwhile, people have whispered about pay-to-play as a way of doing business in New Mexico. And steadily those whisperings have included the Richardson administration.

Not unlike the current scandal plaguing Richardson, at the time the governor and his spokespeople said he had done nothing wrong and flew under the radar of the national press.

There have been stories about how executives for companies with state business, including the Rail Runner commuter train, have given large sums to his state and federal campaigns. Then there have been the questions of Richardson’s use of corporate jets while he was a candidate. In some cases, the jets used by Richardson came from companies that do business with the state — a practice that is legal but that raised eyebrows.

And there was the case of the California developers who own land near the town of Belen, south of Albuquerque.

Jim Foster of then RS Investments, now Coast Range, contributed $75,000 to Richardson’s re-election campaign in 2005. The firm’s officials met with administration officials in early 2005 to talk about an exchange on Interstate 25, which runs north-south through New Mexico. And the $75,000 contribution came about a month later.

Foster donated use of his personal jet to the governor for two campaign trips to California that same year.

Since then the governor has been helpful in setting aside money for it. The administration earmarked $4 million in state money for the highway interchange in 2007.

What’s Next for New Mexico

The news of Richardson’s diminished status, and the shadow hanging over his administration, has taken some of the shine off the governor’s reputation while also costing New Mexico a bit of self-respect.

“It really is quite a disappointment,” said University of New Mexico political scientist Christine Sierra in an interview with the New Mexico Independent. “Richardson has been the leading political figure in New Mexico to vault onto the national stage. And he has brought a lot of attention to our state.”

“Regardless whether the allegations or the concerns are valid or not, this is damaging enough to really show poorly on the state,” Sierra added.

It is unclear what effects the inquiry and the perception of taint, fair or unfair, combined with Richardson’s rather exit off the main stage, will have on his future.

As prominent New Mexico pollster Brian Sanderoff said, “It’s really depends on whether the grand jury takes any action against any member of his administration,’ Sanderoff said. “We’ll have to wait and see” — a sentiment Richardson seemed to express Monday when he said “I have faith in the criminal justice process, and we must allow it to run its course.”