The State Investment Council filed state and federal lawsuits Friday against former investment chief Gary Bland and a number of other people involved in alleged pay-to-play schemes. The state alleges they were involved in steering investments to political supporters of former Gov. Bill Richardson.

Some of the individuals named, including Anthony Correra, were close political allies of Richardson.

Bland denied the allegations, calling them “absurd.” Correra and his son Marc Correra did not respond to requests by the Associated Press for comment.

The lawsuit targets a number of close political allies of Richardson but does not involve Richardson or any members of his staff.

The Albuquerque Journal reported Saturday that Correra is accused of being the “gatekeeper” in the pay-to-play scheme.

Richardson’s former press secretary Gilbert Gallegos told the Journal in a statement that “a federal grand jury has not found any wrongdoing by the Governor’s Office.”

Also included in the lawsuit are Saul Meyer, his company Aldus Equity Partners, the two Correras and 11 others.

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

What had appeared as lost taxpayer dollars due to an 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 (SIC) and the Educational Retirement Board (ERB). 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.

Meanwhile, the ERB already has engaged law firms to help it in its pursuit of money it lost.

The SIC’s decision to hire Day Pitney came after the agency sent out request for proposals earlier this year.

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.

“Our attorney general has done nothing. The NewYork attorney general has done more to help us than our AG,” State Land Commissioner Patrick Lyons told a meeting of the State Investment Council on Tuesday. Lyons was speaking of New York Attorney General Andrew Cuomo.

King responded Tuesday afternoon in a strongly worded statement that accused the SIC of trying to shift the “spotlight” from itself and its past investment mistakes.

“We understand that the SIC members made some monumentally poor investment decisions and that they are now looking for places to spread the blame,” King said in a statement to The Independent. “Rather than grousing about what a terrible job others have done to lose the state’s money in the first place, I am concentrating on doing my job, which is to get it back.”

King went on to say his office was “aggressively pursuing civil and criminal avenues regarding state investments.” He declined to go into specifics, adding “we can not ethically discuss our investigations with them or anyone.”

Lyons wasn’t the only one to take King on Tuesday. Peter Frank and Andrew Davis, both of whom sat on the State Investment Council until earlier this month, said they were perplexed by what they perceived as King’s inaction.

“This is remarkable. …I, for one, don’t understand it (the lack of action),” Davis said.

Added Frank: “We have seen no action by the Attorney General. We don’t know why.”

It was unclear Tuesday the amount of public money that could be subject to recovery or the specific investments to which Lyons, Davis and Frank were referring. One estimate by a whistle blower and former investment officer at the Educational Retirement Board has pegged the loss of public money lost due to potential fraud at more than $280 million.

The accusations of inaction in recovering money are just one additional angle in the growing scrutiny around the State Investment Council. The agency has attracted scrutiny from both the U.S. Attorney’s Office and the federal Securities and Exchange Commission.

The scrutiny exploded into the open last fall when the state’s former investment adviser, Saul Meyer, pleaded guilty to securities fraud in New York. He also 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 names of those 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.

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

The State Investment Council has sent letters to private equity funds that paid Marc Correra for help in getting the State Investment Council to invest in them, according to the Albuquerque Journal.

The SIC letters to the firms said that New Mexico is entitled to millions of dollars in “suspect” fees paid to third party agents who “may have attempted to corrupt the state’s investment process,” the Journal reported.

King said that Cuomo in New York had the tools and resources to aggressively go after potential financial fraud.

“For the last two years I have asked the Legislature for similar tools and resources and for two years I have been turned down,” King said in the statement. “But we are still doing our best with what we do have, and doing a pretty good job of it.”

New York also has a powerful anti-fraud weapon that New Mexico and many other states don’t have — the Martin Act. The law gives broad powers to the New York Attorney General to combat financial fraud. Former New York AG and governor Eliot Spitzer used that statute effectively to go after Enron following its collapse.

Cuomo has used the same law to win guilty pleas in his investigation of pay-to-play allegations involving that state’s Comptroller Office.

King said in his statement despite its lack of similar weapons had “recovered approximately $81 million for our New Mexico clients from corporations that fraudulently invested our money.”

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.

The new law requires multiple reforms at the SIC, including changing the makeup of the council, and was signed into law last week by Richardson. The law mandating changes at the SIC follows the agency’s emergence as a hotbed of questionable practices that led to a federal criminal probe and a federal securities inquiry.

“Catherine Allen and Doug Brown bring valuable financial and investment experience and a fresh perspective to the new State Investment Council,” Richardson said in the statement.

Brown is no stranger to Richardson. The governor appointed Brown in late 2005 to serve out the term of former state Treasurer Robert Vigil, who eventually went to federal prison on an attempted extortion conviction.

In his statement the governor went on to thank the former SIC board members whom the governor appointed but who were removed when the new law took effect last week.

“I want to thank Andrew Davis, Stephen L. Feinberg and Peter B. Frank, who served the state of New Mexico during challenging times,” Richardson said in his statement. “These men played an important role in helping us to reshape the council and provide more accountability to the state’s investment process.”

Under the new law, the State Investment Officer — the agency’s top staff member — is no longer on the SIC board and the board expands from nine to 11 members.

The removal of the State Investment Officer from the board comes after allegations that Gary Bland, the former State Investment Officer, resigned last October after several SIC members pushed for a no-confidence vote. Later, State Land Commissioner Patrick Lyons told the Associated Press that an internal inquiry had uncovered evidence that Bland had “pressured investment firms doing business with the state to hire certain third-party marketing or placement agents.”

Five of the SIC’s members under the new law serve on the board due to the offices they hold. Those include Lyons and State Treasurer James Lewis.

The remaining six SIC members are appointed by the governor and legislative leaders.

Richardson gets two appointments, which went to Allen and Brown. Legislative leaders get the remaining four appointments. They haven’t been announced yet.

“We’re waiting to get hearings,” Victor Marshall said, referring to a legal complaint his client has filed in the 1st Judicial District Court in Santa Fe.

The state is defending former State Investment Officer Gary Bland against Foy’s complaint that he participated in fraud against the state that resulted in the loss of taxpayer money.

The state also is defending Educational Retirement Board (ERB) chairman Bruce Malott in a separate suit brought against the ERB for refusing to turn over what Foy and Marshall say are public records, according to an amended version of Foy’s complaint filed last week in a state court in Santa Fe.

Marshall said the state should stop footing the bill for those officials.

So far the state has spent hundreds of thousands of dollars defending itself against the Foy complaint.

That led state Sen. John Ryan, R-Albuquerque, to introduce legislation during the 30-day regular session that would have prevented the state from defending an employee if the state is also the one bringing the charges. That legislation died during the session.

Opponents of Ryan’s bill said public officials, including board members, need to be protected from paying legal costs resulting from actions taken in their roles as public officials. Otherwise it would be difficult to recruit people to serve on boards and commissions, they said.

But Marshall said Tuesday the state shouldn’t defend those who helped “steal” from the state. No one has been criminally charged or convicted from the actions Foy’s suit scrutinizes, although some of the allegations appear to have interested federal authorities.

The State Investment Council, which Bland led when he was the State Investment Officer, is at the center of a federal criminal probe and a federal securities investigation.

Foy is suing on behalf of the state by using a 2007 state law to sue several financial firms, public officials and others to try to recover taxpayer money that the former ERB investment officer says was lost because of fraud.

The state could potentially recover hundreds of millions of dollars under a provision in the 2007 that allows for the collection of up to triple the amount of money lost because of fraud.

Foy and Marshall estimated Tuesday that the state has lost $288 million due to fraud, up from the initial $90 million Foy alleged in his original complaint filed in July 2008.

That means if Foy proves his case a court could award more than $800 million. Foy and Marshall would collect a portion of that award.

Frank Foy, left, and his attorney, Victor Marshall. Photo by Trip Jennings.

The Richardson administration, including Gov. Bill Richardson‘s budget secretary, Katherine Miller, threatened members of the State Investment Council last October in an attempt to save Gary Bland‘s job as State Investment Officer,  an attorney for whistleblower Frank Foy alleged Tuesday.

“The Richardson administration pulled out all the stops to keep Gary Bland on the SIC,” Foy’s attorney, Victor Marshall said at a small news conference.

But four SIC members said Tuesday they never felt pressure from the Richardson administration in the days before Bland resigned, and the Department of Finance and Administration released a statement Tuesday afternoon brimming with umbrage at the accusation.

“The statements made about Secretary Miller are grossly untrue and defamatory,” said the statement. “It would be inappropriate to comment further due to pending litigation.”

State Land Commissioner Pat Lyons, who sits on the SIC board and helped lead the charge against Bland, was one of the members saying he felt no pressure.

“We had our votes lined up – you had five votes and that’s all it took and that’s why Gary resigned,” Lyons told The Independent. “I don’t know who else they would have called. They never talked to me once.”

Mark Valdes, deputy state treasurer, told The Independent that State Treasurer James Lewis never perceived threats coming from the Richardson administration either. Lewis also sits on the SIC board.

“Not on James’ part,” Valdes said of Marshall’s accusation. “No one contacted him.”

The state land commissioner and state treasurer serve on the State Investment Council by statute.

Two of three SIC members appointed by Richardson also said Tuesday that Marshall’s accusations were off base.

Stephen Feinberg, Peter Frank and Andrew Davis were removed from the State Investment Council last week when Richardson signed a law that reforms the agency, including changing the membership of the SIC board.

“The allegation against Katherine is absolutely false and nothing like that ever occurred,” Feinberg said through an SIC spokesman.

Frank, also speaking through an SIC spokesman, labeled the accusations “outrageous” and said “The allegation made by Marshall is just not true. Nothing like that ever happened.”

Attempts to reach Davis via phone and e-mail were unsuccessful Tuesday.

Marshall declined to describe the nature of the threats and coercion coming from the Richardson, administration despite being asked three times by reporters attending the news conference. Asked how he had come to such information, Marshall would only say, “We have sources.”

“We will be able to establish this at a trial,” Marshall added.

Bland resigned in October as several members of the SIC planned a no-confidence vote in Bland’s leadership following the guilty plea of the state’s former investment adviser, Saul Meyer of Aldus Equity.

Meyer pleaded guilty to securities fraud in New York and said in a news release around the same time 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.”

The State Investment Council is at the center of an ongoing investment scandal in New Mexico and has attracted the attention of federal authorities. The U.S. Attorney’s Office has subpoenaed records as part of a federal criminal probe while the federal Securities and Exchange Commission also is conducting its own inquiry.

Meyer did not name names in his statement. But two names are well known by now to those following New Mexico’s investment scandal: Marc Correra and Anthony Correra.

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.

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 shared in $22 million in fees over half a dozen years, according to information 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.

UPDATE 7:20 p.m.: Former SIC member Andrew Davis just told the Independent a version of what every other SIC member has said today about allegations that the Richardson administration attempted to coerce and threaten SIC members in the days leading up to Gary Bland’s resignation. “I don’t know where that comes from,” he said.

As for Katherine Miller, she “was not part of the process” that involved several members pushing for a no-confidence vote against Bland. “She was the conduit to the governor,” Davis said. “I don’t know where the allegations come from.”

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.