The campaigns of Democratic Lt. Gov. Diane Denish and Republican Susana Martinez found themselves trading accusations over the abrupt resignation of Bruce Malott as chairman of the Educational Retirement Board (ERB). Malott admitted to borrowing $350,000 from the father of a man who had shared in $22 million in so-called third-party marketing fees, the Albuquerque Journal reported Thursday.

The fees are part of an ongoing federal criminal investigation and came from dozens of investment deals involving the State Investment Council and the ERB, which Malott helped to oversee as chairman.

“It is clear that the culture of corruption is deeply rooted in the Richardson/Denish Administration and we are finding more conflicts and wrongdoing every day,” Martinez’s campaign manager, Ryan Cangliosi, said.

Cangliosi went on to accuse Martinez’s Democratic opponent of standing by Gov. Bill Richardson and of having “strong ties with almost all the individuals making headlines for their crooked deals, which have held New Mexico back.”

A spokesman for Denish responded in kind, accusing Martinez of hypocrisy.

“Susana Martinez is the last person in New Mexico who should be giving lectures on ethical conduct in government,” Denish spokesman Chris Cervini said late Thursday. “In just the past few weeks, New Mexicans learned that Martinez spent their tax dollars on big Wall Street style bonuses for her employees and gave away a $60,000 no-bid deal to her friend.”

In addition to saying she was “angry and disappointed,” Denish’s campaign said she donated $4,100 in campaign contributions from Malott to Teach scholarships, which help early-childhood educators increase their skills and training.

Since June, Martinez has repeatedly attempted to link Denish to Richardson and his administration’s numerous scandals, from pay-to-play allegations, federal criminal inquiries and charges of cronyism.

The question is, with two months to go before the November election, does another headline-grabbing scandal strengthen the Martinez campaign’s strategy?

“All of these stories that we have been seeing related to investment and state’s management of investments, they have a cumulative affect over time, but no one story does the trick,” pollster Brian Sanderoff of Research and Polling Inc. told The Independent on Thursday. “There’s this guilt by association that can be effective if people buy its veracity.”

Creating such a connection is common practice in politics, Sanderoff added, particularly “if you have a governor with low approval ratings,” such as Richardson.

The cumulative effect of the scandals can harm the Democratic gubernatorial candidate if the Republicans are successful in making sure to exploit the situation, Sanderoff said.

The role of a lieutenant governor in state government

The efforts to link Denish to Richardson exposes a central question: how close are Denish and Richardson and did Denish know the inner workings of Richardson’s administration.

The answer is unclear. The two have feuded publicly on occasion, but more often than not have worked as allies through much of the last eight years.

But just  because a person is lieutenant governor doesn’t mean they’re in the room when the important decisions are made, one former governor said.

“In terms of decision making, the day-to-day activities, I’m reminded of the old adage, that the main job of the vice president is to get up everyday to see if the president is still alive. And if he is, then go back to bed,” said former Gov. Toney Anaya, a Democrat and Richardson appointee.

The statement summarizes a lieutenant governor’s responsibilities, Anaya said.

“In my own experience, and from what I’ve seen of other governors, a lieutenant governor participates only in what activities they are invited to,” Anaya said. Anaya added that he thought laying the blame of  a governor’s record on his lieutenant governor didn’t reflect the day-to-day reality of the officials’ relationship.

But former Republican Gov. Gary Johnson said Thursday that his lieutenant governor, Walter Bradley, “was intimately involved” in his administration.

Johnson said he relied on his lieutenant governor, adding “my door” was always open to Bradley.

“When you run for lieutenant governor I think your expectations are that you are involved in everything that is happening,” Johnson said. “From my standpoint I wanted to involve him in everything.”

It remains to be seen how effective Martinez’s strategy to tie Denish to the scandals will be in the weeks leading up to the November election. One thing is certain however: her campaign has much to work with.

The poll results, released today, reveal the first comprehensive local survey of voter sentiment in New Mexico heading into the traditional election season, which begins after Labor Day. They show that Denish, the Democratic lieutenant governor, appears to have the tougher path to winning the governor’s mansion.

Martinez registered support among 45 percent of those surveyed, including among some Democrats, compared to 39 percent overall for Denish, the Journal reported. About 16 percent of the poll’s respondents remain undecided, the poll found.

The crossover appeal that Martinez, the Dona Ana district attorney, enjoys is notable because not only is she picking off one in five Democrats, but one in four Hispanic Democrats, pollster Brian Sanderoff of Research & Polling Inc. told the Journal.

Denish is battling several factors in her run for governor, including the mood of the country and Martinez’s seemingly effective strategy of tying Denish to Gov. Bill Richardson, with whom Denish has served for eight years, Sanderoff  told the Journal.

“I think this race is still in the context of a state and national mood that has turned conservative,” he said. “Diane Denish is fighting the national mood.”

The inquiry in question, which reporter investigative reporter Mike Gallagher pieced together by using court documents, focused on whether President Obama’s transition team was misled as to the serious  nature of a separate federal criminal inquiry into pay-to-play allegations against the Richardson administration here in New Mexico.

That separate inquiry focused on the relationship between a New Mexico state agency and a California firm that won two state contracts and that had contributed to two nonprofits controlled by Richardson. That separate investigation was ongoing by the time Richardson was nominated and was being vetted for the federal commerce post.

A grand jury is empowered to issue indictments, but in this case the grand jury has ended its term without any indictments related to this inquiry, according to the paper.

The governor, expected back Friday, will market commodities from the state and work on potential trade partnerships that were first identified during a visit to Cuba last year, according to the release. During last year’s visit, Richardson called on the U.S. to ease travel restrictions to Cuba, which the governor’s office believes will happen under the Obama Administration. “The connections New Mexico has made with the commerce officials in Cuba during these missions will put the state in a good position to take advantage of those new opportunities,” the release says.

Currently states are allowed to sell agricultural, medical and information technology products in Cuba on a cash basis under federal regulations. During this week’s trip, the governor will meet with officials from Alimport, the Cuban Government agency responsible for agricultural commerce.

New Mexico Agriculture Department Secretary Miley Gonzalez and Cultural Affairs Secretary Stuart Ashman are on the trip with Richardson, the release said.

Richardson and Ashman will pay for all of their own expenses during the trip, according to the governor’s office.

The acequias will receive a total of $823,500 to perform dam and structural repairs and the New Mexico Land Grant Council will receive another $200,000 to help land grant associations with technical support such as mapping and legal research, according to Richardson’s office.

“Acequias and land grants are the very heart of New Mexico’s agricultural traditions,” Richardson said. “These projects are shovel ready, and will create jobs.”

Richardson did not specify how many jobs would be created.

“This funding will help rehabilitate their ditches, increase water use efficiency and help keep them viable,” said State Engineer John D’Antonio.

The data show the companies, an industry association and political action committees spread the money around, giving to several state office holders and nearly every state lawmaker in the Legislature.

Gov. Bill Richardson took in the largest haul, more than $180,000, while  Lt. Gov. Diane Denish received more than $26,000, data show. But nearly half the $428,000 — $202,000 – was divvied up in small amounts to 119 state lawmakers over the period, data shows. (There are only 112 lawmakers in the Legislature at any one time, meaning that some legislators in the Legislature during one election cycle were not there during another election cycle.)

About a third of that $202,000 — $67,500 — went to just 10 lawmakers who either were legislative leaders or chairs of powerful committees.

Donations ‘keep oversight at bay,’ critics say

One critic pointed to the showering of money on New Mexico’s decision-makers by health insurers as an example of the power the industry wields with policy makers.

The money helps to “keep oversight at bay, to get the best marketplace money can buy,” said Larry C. McNeely II, the healthcare advocate for Washington-based U.S. Public Interest Research Group.

A spokesman for one of the health insurers disputed those accusations, saying that the company was only supporting good elected officials through its campaign contributions.

“We tend to support elected officials we think are positive, helpful voices in the health care debate,” said Todd Sandman, a spokesman for Presbyterian Health Services, which contributed more than $250,000 to New Mexico elected officials over the four-year period.

As to the charge that the companies try to stave off competition by showering elected officials with campaign contributions, Sandman said, “I don’t know what evidence they would bring to that. I don’t see a lot of barriers to insurers coming in” to New Mexico.

Presbyterian insures more than 400,000 New Mexicans.

Influence of health insurers becomes an issue

The role of health insurers in policy-making decisions is coming under additional scrutiny at a time when a battle is brewing in time for the 2011 legislative session. Lawmakers and health insurers likely will face off over the question whether policy makers should re-write state laws to strengthen how New Mexico vets health insurers’ requests to raise premium rates.

The battle comes in the wake of the state Division of Insurance’s decision in April to approve a request by Blue Cross Blue Shield of New Mexico to raise by 21 percent what 40,000 New Mexicans pay in monthly premiums. Spirited protests followed that decision. Ultimately the state’s Insurance Superintendent at the time of the decision resigned and the insurance division has decided to reconsider the request, a move that was unsuccessfully challenged in court by Blue Cross Blue Shield.

Past efforts to strengthen New Mexico’s rate-review process have failed. That includes one proposal that would have given authority to the Public Regulation Commission to act as an appellate body in such requests, several state officials have said.

Currently, the state Insurance Superintendent is the only decision-maker on such cases.

The PRC proposal likely will be resurrected for the upcoming legislative session. But it will compete with other proposals.

The scrutiny over how New Mexico examines health insurer’s rate-hike requests also coincides with an increasing concern from the public about the rising cost of health care.

The data The Independent analyzed came from the National Institute on Money in State Politics, a nonpartisan, nonprofit organization focused on revealing the influence of campaign money on state-level elections and public policy.  The Institute provided the data after The Independent asked for campaign contributions from health insurers to successful political candidates from 2004 through 2008. It did not ask for campaign contributions from the 2010 election cycle because the fundraising by candidates is ongoing.

The Independent then analyzed the data. The records do not include campaign contributions to successful Public Regulation Commission (PRC) candidates. The PRC includes the state Division of Insurance, which vets health insurers’ requests for premium rate increases. The PRC does not have oversight authority over health insurers’ rate requests, however.

Blue Cross Blue Shield was second-biggest donor

Second in the amount of money given by a health insurer was Blue Cross Blue Shield of New Mexico, aided by its Illinois-based parent company, Health Care Services Corp., (HCSC) and subsidiaries. The companies contributed $81,450 to New Mexico elected officials over the time period examined.

That total included two contributions to New Mexico elected officials by Blue Cross Blue Shield of Illinois, a sister company of Blue Cross Blue Shield of New Mexico owned by Health Care Services Corp.

The Illinois company gave $7,000 to Richardson during the 2006 cycle, when he was running for re-election, and $500 in the 2008 election cycle to Rep. Luciano “Lucky” Varela, D-Santa Fe, the chairman of the Legislature’s budget arm, the Legislative Finance Committee.

A spokesperson for Blue Cross Blue Shield of New Mexico told The Independent on Friday she was waiting to see if the company’s president, Liz Watrin, wanted to respond to The Independent.

Blue Cross Blue Shield of New Mexico insures about 375,000 New Mexicans, the spokesperson said.

Insurers have much to gain—and fear—from states

Health insurers “have a stake in taxation policy. They have a stake in provider rates, in a Medicaid program,” said Sen. Dede Feldman, D-Albuquerque. “They have so many stakes. It’s not only a question of oversight, but also policymaking.”

As chairwoman of the Senate Public Affairs Committee, one of the destinations for health care bills, Feldman ranked second among legislative recipients in the amount of money health insurers gave from 2004 to 2008, data show. She received $9,150.

When asked how the money might influence her, Feldman responded with an old political adage.

“If you can’t take their money, drink their wine and vote against them, you shouldn’t be in politics,” Feldman said. “If you look at my record, you’ll see I’ve done that.”

The contributions are often unsolicited, Feldman added. “They are routinely given to those that the company has decided are in key positions,” she said. It’s a situation of good people trapped in a bad system. In the best of all worlds, I’d rather not take money from anyone but my constituents.”

The data seems to bear out Feldman’s point. Among the 10 lawmakers who received the most health care industry money, five were legislative leaders and five were chairpersons of important legislative committees.

Legislative leaders have more say than rank-and-file lawmakers in determining the fate of legislation, as do lawmakers who chair powerful committees.

Data show that Sen. President Pro Tem Tim Jennings, D-Roswell, was the top legislative recipient, receiving $9,550 over the four-year period.

“I’m not going to sit here and say you never notice. That’s naïve. You do notice when someone sends you money,” Jennings said. “The money might help companies get access to lawmakers, but it isn’t the only factor in their decisions. Legislators tend to respond more to the constituents than to a business group,” he said.

Jennings added that his long-standing interest in health care might help explain the amount of money he received. Jennings’ late wife ran the state’s medical high-risk insurance pool, which is a last-resort destination for hard-to-insure individuals.

House Minority Leader Tom Taylor, R-Farmington, — the top Republican in the state House of Representatives — was the top GOP legislative recipient of health insurers’ money, according to the data. He received $5,800.

Like Feldman and Jennings, Taylor said the money doesn’t influence how he votes.

“I can honestly say I have never had an insurance company remind me of their contribution,” Taylor said. “For me, basically I try to give everyone a fair shot.”

By way of example Taylor said he doesn’t drink alcohol and generally doesn’t “accept money from the liquor folks. I don’t see any benefit to society,” he said. “But I’m not just against them. I try to keep a very open mind and try to analyze it from a business standpoint. The same goes for health insurance.”

He added, “All of us receive funding from those guys.”

Money makes an impression

The amounts given to state lawmakers appears paltry when compared to what health insurers gave Richardson. But, except in rare instances, spending in legislative contests often reaches into the tens of thousands of dollars, not into the millions, like a run for governor.

“What I’d be more wary of than these $1,000 contributions or $500 contributions, is if one organization gives one candidate $50,000 to completely finance their campaign,” Feldman said. “There is no reason for the candidate to reach out to other entities, or other individuals.”

But Feldman acknowledged that the money sprinkled around by the health insurers, their political action committees and industry associations makes an impression on decision-makers, even if doesn’t alter their final decision.

While Jennings called the giving by deep-pocketed companies and industries a necessary evil of the political system, Feldman said she knew how to reduce that influence.

“I want public financing of campaigns,” said the Albuquerque lawmaker, referring to the idea where candidates would run on public money and forego contributions from individuals, businesses and unions.

Roughly $2 million of the total will go toward helping 33,400 teachers and school employees across the state pay their insurance premiums, according to a news release issued by the governor’s office Monday. The stimulus dollars will reduce insurance premiums by an average of 2 percent for the 2010-11 school year.

The remainder of the money — $500,000 — will go toward professional development for roughly 2,000 educational assistants in Albuquerque Public Schools.

“New Mexico’s teachers and school employees are dedicated public servants and I am committed to helping them through the current recession,” Richardson is quoted as saying in the release. “Our teachers, educational assistants and support staff are on the front lines of school reform every day, and they’ve been subject to rising health care costs in recent years. I am pleased that these Recovery Act funds will help us offset some of those costs.”

The award comes from a discretionary fund made available to the governor as part of the American Recovery and Reinvestment Act, the release said.

The $2.5 million is separate from and in addition to the $65 million New Mexico is supposed to receive in additional federal education dollars after Congress passed a $26 billion bill last week to help state out during the recession.

The New Mexico Association of Food Banks will use $775,000 of the $950,000 in federal dollars to purchase fresh produce and “other staples, such as beans, peanut butter and canned products,” according to a news release issued by Richardson’s office.

The remaining $175,000 will be spent on delivering the purchased food staples to six agency food banks around New Mexico that will then distribute the food to more than 650 charitable agencies in every New Mexico county, the release said.

“New Mexicans are turning more and more to food pantries to help supplement their families’ meals,” Richardson was quoted as saying in the release. “This funding will help ensure there is fresh produce and other necessary staples at those pantries when New Mexicans need them.”

Kathy Komoll, Executive Director of the NM Association of Food Banks, welcomed the windfall.

“This generous allocation by Governor Richardson will be a welcome relief for the food banks who rely on donations and assistance from the state to help serve so many New Mexicans in need,” Komoll was quoted as saying in the release.

The $950,000 to purchase and deliver the food staples came from the governor’s discretionary stimulus fund, the news release said.

The funding contained in the $26 billion federal legislation for New Mexico’s Medicaid program is $56 million below the $160 million the state had anticipated. That means the state budget gap New Mexico is struggling to address for the fiscal year that began July 1 will grow to about $220 million.

Despite not being the amount anticipated, the federal funding comes at an opportune time for New Mexico, which had been considering drastic cuts to Medicaid, the government’s low-income health insurance program, to help balance the state’s budget.

“This money is critical to help reduce drastic cuts to the Medicaid program,” Gov. Bill Richardson was quoted as saying in a news released issued by his office Wednesday. “I especially want to acknowledge Senator Bingaman’s key role in moving this funding forward. I’m hopeful for a positive vote by the full Senate and quick action by the House so we can protect Medicaid services in New Mexico.”

New Mexico over the past year has considered making deep cuts to Medicaid, which provides health insurance for more than 400,000 New Mexicans, as state revenues have failed to keep pace with expenditures during the economic downturn.

The New Mexico Legislature approved a state budget for the year that began July 1 assuming that Congress would approve $160 million for the state in additional Medicaid funding. The failure to get the entire $160 million means that New Mexico’s state budget gap for this fiscal year will grow to around $220 million after state officials last month projected that there already was a $160 million gap between expenditures and revenues.

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.