This week a Los Angeles-based business partner of one of New Mexico Gov. Richardson's close associates pleaded guilty in the ever-widening pension fund investigation -- in the latest sign that the investigation, which started in New York, is closing in on New Mexico next.
It could just as easily be the other way around: last July the former chief investment officer of the state's Educational Retirement Board, Frank Foy, filed a damning whistleblower lawsuit back in July blaming shady pay-to-play practices for the state's $90 million investment in the "equity tranche" -- also known as "toxic waste tranche" -- of a subprime mortgage-backed CDO. $40 million of that investment came from the teachers' retirement funds, and it lost all but a million or so of its value. Such a whistleblower lawsuit was precisely what triggered the investigation of Chicago pay-to-play practices that ended up indicting (and impeaching) Illinois Gov. Rod Blagojevich.
But New Mexico Attorney General (and former Richardson staffer) Gary K. King declined to pursue Foy's case -- even though Richardson's office was already being probed for pay-to-pay practices for its dealings with a bond advisory firm and major Richardson donor whose offices had been raided by the FBI in 2006.
In March federal indictments in the New York scheme started pouring in; by April Cuomo had indicted one of the New Mexico's biggest investment advisers, and the state had also released records that appeared to vindicate Foy's claims -- showing that the toxic CDO, for one, had netted a Richardson ally a $2 million fee. But as of May 1, King was still thinking about whether he wanted to join the case. Why the hesitation? This much is clear: going up against Richardson's clique is not for the faint of inflammatory quote. Here's what his administration will say on the record about Frank Foy.
"This suit is baseless. It is most unfortunate that he now seeks to exploit recent headlines for his personal vendetta."--Educational Retirement Board chairman and Richardson appointee Bruce Mallott, quoted January 14.
"Mr. Foy's assertions are without merit and his motivations are questionable at best. State investment officer (Gary Bland) has not participated in any wrongdoing and he will vigorously fight the reckless allegations made today."--State Investment Council spokesman Charles Wollman, quoted January 15.
"This lawsuit, filed by a disgruntled former employee who was accused of serious misconduct during his time as a state employee, makes absurd claims against state agencies."--Richardson spokesman Gilbert Gallegos, January 14.
"This lawsuit is a big joke. Mr. Foy and his partisan lawyer are abusing the legal system by leveling blatantly false, political allegations against the governor's administration. Hopefully the court will hold them accountable for this unethical grandstanding."--
Gallegos again, in a reference to Foy's lawyer's history as a Republican state senator (he backed Obama in November), quoted February 2.
"This is a flat-out lie... this entire accusation is a total fairy tale concocted by Mr. Foy and his attorney."--Richardson presidential campaign manager and former chief of staff Dave Contarino, quoted February 2.
"Arbitrary, capricious, clearly frivolous...clearly vexatious"--Contarino
again, March 3.
"This lawsuit is a cynical attempt ... to make money out of the near collapse of worldwide financial markets and the resultant devastation that event has caused to some of the investments held on behalf of the people of New Mexico...that appears to be part of a McCarthy-style political witch hunt."--State Investment Council chief Gary Bland, whose friend Marc Correra shared in at least $16 million in finder's fees for securing state investments on behalf of various money managers during the Richardson administration, quoted March 11.
"In my view this is an overreaction."--Bland on Richardson's decision to cut state ties with Aldus Equity, a Dallas advisory firm whose owner would be charged in the New York pension scandal the next day, quoted April 29.
Gilbert Gallegos, the governor's spokesman, did not answer last week if the governor had met with Correra to discuss the proposal prior to the state's investment. Correra's attorney, contacted Friday, did not answer either.