I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
While environmental activists played their part yesterday during demonstrations at the capitol building, going so far as to dress up as solar panels and to sing the tune of “You Are My Sunshine,” their counterparts, the anti-cap-and-trade contingency who has…
Roughly one quarter of University of New Mexico students are unimpressed with the state’s flagship public school, according to a survey that questioned college students about their higher education experiences.
Susana Martinez has made corruption a major theme of her campaign for governor, linking high-profile scandals to the “Richardson-Denish administration.” Is linking Denish to the scandals that have rocked New Mexico Democrats, and Gov. Bill Richardson’s administration, a fair reflection of the facts? Two political science professors say no. But planting seeds of doubt about an opponent is a longstanding tradition of political gamesmanship during elections, when campaigns fight over who controls the election-year narrative.
A judge has agreed to dismiss the State Investment Council’s civil case against a bond attorney involved in the housing authority scandal and that attorney’s counterclaims against the state agency.
Gov. Bill Richardson
As 2009 staggers into the history books, exhausted and a bit lighter in the pockets than when it first appeared on the scene, let’s acknowledge this: the year gave us plenty to write about.
Accusations of pay-to-play, former elected officials getting indicted, electoral surprises and an occasional David toppling a Goliath — 2009 produced it all, giving the year a healthy luster of newsworthiness despite its threadbare look.
The year showed incredible stamina, in fact, with a steady drumbeat of scoops, gotchas and revelations, exhausting many a political junkie and news professional. And 2009 didn’t take long to demonstrate its capacity to shock.
On the fourth day of 2009, an announcement in Washington landed in New Mexico with all the percussive power of a bombshell: Gov. Bill Richardson was withdrawing as President Obama’s commerce secretary, citing a federal corruption investigation into how his administration conducted business.
And the news kept coming.
Some 360 later, the year is ending the way it began — scrutiny, including from federal prosecutors, on how the state invested its money over the past half decade.
In between those two bookends, the state of New Mexico also came to the disturbing realization that it was broke, Albuquerque’s longtime mayor fell short of winning a third four-year term — knocked off by a long-shot two-term GOP state lawmaker — and two former elected officials found themselves on the business end of a criminal indictment.
It’s unclear whether what transpired this year will change the political dynamic here in New Mexico, or lead to more government transparency. But before The New Mexico Independent gets back into the daily grind, let’s take a deep breath and reflect on the busy year that was.
“Vincent ‘Smiley’ Gallegos, who ran a state housing agency out of an office next to a used-car lot in Albuquerque, New Mexico, should have known better when he borrowed $27.7 million, the Internal Revenue Service said.”
So begins the…
Lt. Gov. Diane Denish has donated $5,000 from her campaign fund to an agency that works on neighborhood revitalization — an amount equal to what she has received from the men indicted in the housing authority scandal.
Steve…
Not sure what led to last week’s indictments in the investigation into the misuse of bond money in the state’s regional housing authority system? Wondering what the housing authorities even do?
Lt. Gov. Diane Denish says she’ll donate to charity any campaign contributions she’s received from the men indicted Friday in the housing authority case. At least two of the four have contributed to her campaigns over the years.
“It’s about time,” were the words uttered by state Rep. Janice Arnold-Jones earlier today when told that four men had been indicted in the drawn-out investigation into the misuse of bond money in the state’s affordable housing system.
Former Region III Housing Authority Director Vincent “Smiley” Gallegos is facing a number of felony charges including fraud, embezzlement and money laundering, with at least some of the charges related to a $300,000 loan Region III made to Gallegos in 2005. That’s according to the indictments against the four defendants in the case that were publicly released today.
Former Region III Housing Authority Director Vincent “Smiley” Gallegos and others have been indicted by grand juries in the long-standing investigation into the misuse of bond money in the state’s affordable housing system.
Attorney General Gary King will take his investigation into the housing authority scandal before a grand jury Friday with the intent of securing indictments, a source with knowledge of the situation confirmed.
Attorney General Gary King has delayed his plan to take the drawn-out investigation of scandal in the state’s affordable housing system before a grand jury, and that has some worried.
In 2007, Lt. Gov. Diane Denish and state Sen. Mary Kay Papen accused House Speaker Ben Lujan of trying to torpedo their attempt to reform the state’s affordable housing system. But this year, he’s shepherding their housing authority reform bill through the House for them.
Photo by Heath Haussamen
The state auditor’s report on massive abuses in the state’s low-income housing projects this week was an expose two years in the making.
When the Legislature was discussing comprehensive reform of the state’s scandal-plagued regional housing authorities in 2007, Rep. Jose Campos, a leading skeptic of a State Investment Council report that found widespread misuse of bond money, said he wanted independent audits to determine whether reform was necessary.
“Before we start condemning anybody, let’s get all the information out,” he said at the time. “Let’s not commit a political hack job.”
Several lawmakers sided with Campos, and out of that was born a compromise: Some changes to the housing authority system were approved in 2007, but a bill that would have enacted comprehensive reform was gutted. Instead, the Legislature appropriated money to empower State Auditor Hector Balderas to determine the extent of the problems with the system.
Balderas released his long-awaited audit reports on Wednesday. (You can read them by clicking here.)
The result: Whether it was due to corruption, ineptitude, mismanagement or other factors, the authorities were running amok with public money, and there were inadequate controls in place to stop it. Balderas says the audits prove that the authorities had become “a colossal failure to low-income citizens and the state of New Mexico.”
The problems may be even worse than the public knows. The auditor also referred on Wednesday some findings to state and federal prosecutors in a separate report that can’t legally be made public until prosecutors are finished with it.
Balderas, in a news release, cited weak internal controls, a lack of adequate oversight and poor management as primary causes of a scandal that toppled most of the state’s affordable housing system when the Albuquerque-based Region III authority defaulted on $5 million in bonds it owed the state in 2006. Five of seven regional authorities collapsed under the weight of that scandal, though the other two have continued operating without problems.
The audits don’t explicitly attribute to corruption any of the problems with the five now-defunct regions, but that’s not the job of the auditor. Audits are designed to find financial irregularities and other problems. It’s up to prosecutors to decide whether there’s a public corruption case to be made, and Attorney General Gary King is already scheduled to take his criminal case before a grand jury next month.
Serious problems
The $5 million in bond money isn’t all that was misspent. One of the new revelations brought to light by the audit reports is that the Region III authority was actually taking out mortgages on homes it had already purchased with bond money — in order to increase cash on hand. On 14 homes, the authority owed both a mortgage and a bond payment, each roughly equal to the value of the home.
That increased the housing authority’s debt beyond the bond money by more than $1.3 million. It was a debt the housing authority system had no way to pay.
Also among the more troubling findings to the state auditor’s office, Balderas said in an interview, was the creation by Region III and then-Executive Director Vincent “Smiley” Gallegos of a separate company, Housing Enterprises, Inc., which ostensibly carried out some of the on-the-ground activities of housing authorities around the state. Though HEI and Region III were purported to be separate entities, Gallegos ran both, some people served on both entities’ boards, and taxpayer dollars were moved back and forth between the two entities.
Missing documents
One of the most difficult tasks investigators in the auditor’s office and elsewhere have encountered in trying to determine the scope of the scandal is overcoming the volume of documentation that the housing authorities were legally required to create and preserve, but that cannot be located.
Was it destroyed or stolen? Or were required records never kept in the first place? Those are questions Balderas said he can’t answer.
“While I can’t speculate as to the cause, I was extremely troubled at the amount of missing documentation that management had a duty to preserve and protect. It was the worst I’ve ever seen in any of the hundreds of audits that we’ve done,” Balderas said.
The missing documentation is referenced frequently throughout the audit reports.
For example, in the audit of the Region I authority, which covered the northwest corner of the state, auditors could locate no records for accounts payable or payroll, and, according to the audit, “a large percentage of the cash disbursement and expenditure documentation was missing.” The audit of the Las Cruces-based Region VII authority found that, in addition to the same documentation missing in Region I, there’s no record that the authority kept an inventory of its property and there are missing minutes of meetings of its governing board of directors.
For the Santa Fe-based Region II authority, so much documentation is missing that auditors can’t even find a record of who served on its board.
The greatest volume of missing documentation was in the Region III authority, which was ground zero for the problems experienced by the system. In that region, the audit states, the auditors’ work was “severely limited” because missing records included documentation of expenditures, personnel files, payroll records, several months of bank statements and minutes of some board meetings.
The findings
Among the more titillating findings in the audits were money spent on a private club membership, alcohol, flowers, a pricey designer briefcase and a trip to Las Vegas, Nev. In addition, according to the audit, Gallegos sought reimbursement from both Region III and HEI for per diem of $114 per day to stay in Santa Fe for 37 days straight during the 2006 legislative session. That double-dipping resulted in his being paid $4,218 from each entity for the same trip.
Beyond those more outrageous findings, however, the audits reveal a system in such disarray that there may not be any way to fully determine the level of abuse, which is why Balderas’ audits frequently decline to state opinions on the authorities’ financial statements. Findings of the Region I audit included timesheets that weren’t authorized, missing documentation for cash receipts, late audit reports and loans from Region III that were not properly authorized. Findings of the Region II audit included improper use of federal funds, multiple documents that used the same check numbers, and lack of documentation of invoices.
Findings in the audit of the Region IV authority that covered the northeast corner of the state included many of the same findings from the Region I and II audits and also a lack of proper authorization for reimbursement of travel expenses. In Region VII, the findings were similar.
As for Region III, the audit notes several eye-popping transactions that have already been revealed publicly: The region sold homes to two of its employees and one HEI board member who may not have qualified for low-income housing. In addition, Gallegos, as director of HEI, made a personal loan of $300,000 to a company he owns to purchase property in Las Cruces. That appears to have been done with bond money and, as such, the loan violated state law.
Reforming the system
The reforms proposed but never approved in 2007 are going to be pushed again this year by Lt. Gov Diane Denish, Sen. Mary Kay Papen and others in a bill that attempts to expand oversight and restructure the system to ensure such misuses of public money don’t happen again. Denish, in reacting to the release of the audits, said in a news release that she is glad Balderas “has finally completed this long-awaited audit,” and pointed out that the bill that funded Balderas’ work in 2007 also began the process of increasing oversight of the housing authorities.
“The new legislation I am pushing this year will strengthen that oversight and build a better structure to get services to the people who need them most,” Denish said. “We will not tolerate corruption, and I will continue to fight to protect New Mexicans.”
State Auditor Hector Balderas has completed and is asking prosecutors to take a look at a long-awaited special audit of the state’s scandal-plagued regional housing authority system.
Balderas is also releasing the special audit and other reports to the public today. The move follows a two-year investigation that began when the state Legislature asked him to take a look at the state’s affordable housing system in early 2007. Balderas says his work confirms previous reports detailing widespread problems with the system. More …
A state grand jury is investigating the workings of an Albuquerque-based housing district scandal that defaulted on payments on $5 million in bonds it sold to New Mexico, the Associated Press is reporting.
I was looking at a posting the other day that talked about ethics and the need for ethics reform in New Mexico. The article talked about former State Sen. Manny Aragon and the recently defeated Senate Republican Whip Lee Rawson. What I was shocked to see missing was any real discussion about the New Mexico Housing Authority and the people who are involved with it.
