By Steve Terrell: The Santa Fe New Mexican
A man who is at the center of an ongoing whistle-blower lawsuit involving millions of dollars in lost state investments told the Senate Judiciary Committee Thursday that the state is spending millions of dollars to cover up what he called “bribery and kickbacks.”
Frank Foy, a former investment officer for the state Education Retirement Board, told the committee he’s been frustrated because the state has “stonewalled” his efforts to get documents for his case.
Members of the committee on Thursday expressed sympathy for Foy — one senator calling him a hero — and questioned why the administration has spent hundreds of thousands to defend key players in an alleged pay to play lawsuit. Senators want to examine the legal contracts in place.
“I don’t think any more should be approved for any of these contracts until we understand what they are for,” said Sen. John Ryan, R-Albuquerque.
To Foy, Ryan said, “I don’t see the state benefitting in any way by hampering (your) efforts…I see it potentially benefiting a great deal if your lawsuit were to go through and you were to be successful,” Ryan said.
Foy’s suit, which is in state District Court in Santa Fe, alleges taxpayers were defrauded of $90 million by a host of financial companies and two officials. However, Foy’s lawyer Victor Marshall told the committee Thursday that the total amount the state lost in investments with Vanderbilt actually is about $243 million.
Among the defendants in the suit are former State Investment Officer Gary Bland and ERB chairman Bruce Malott. The suit alleges Bland and Malott were instructed by former Richardson chief of staff Dave Contarino to invest with Vanderbilt Financial and associated companies in exchange for political contributions from the firm’s employees.
To get a better handle on what the state is spending in the case, lawmakers want officials from the State Investment Council and Educational Retirement Board to appear before them, they said at a hearing Thursday.
A spokesman for the SIC told a reporter after the meeting that his agency is looking forward to the chance to “clear up a lot of misinformation.”
Charles Wollman denied the SIC was stonewalling, saying the agency has handed over 75,000 pages in documents to Foy. Marshall admitted to receiving some documents, but “none of the good stuff.” (Lawyer Marshall also represents The New Mexican)
Wollman said the agency is concentrating on providing documents to federal investigators. That’s slowed down providing documents in the Foy case, he said.
The FBI is looking into the role of third-party placement agents in state investments. One such agent, Santa Fe broker Marc Correra shared in about $22 millions in finder’s fees for helping money management firms win investments in state funds. Marshall said more than $5 million of that was from deals involving Vanderbilt. Correra is son of Anthony Correra, a political ally of Gov. Bill Richardson.
Ryan suggested calling on the officials to speak so “we ask the questions about why they are spending this money” and “we decide whether we want to continue funding that.”
Senate Judiciary Committee chairman. Cisco McSorley, D-Albuquerque, said he would have his staff look more into what is being spent on the case.
The State Investment Council has asked for $5.8 million in additional money for legal expenses that body is incurring because of federal investigations.
That money is not directly related to the Foy suit, Wollman said.
Records obtained by The New Mexican last year show that the ERB spending hundreds of thousands on the Foy suit alone. Between March and July of last year, it spent $220,123 on lawyers to defend the state in the lawsuit. That’s in addition to $119,680 spent on the case in January and February of 2009.
The members of the committee aren’t the only ones calling for accountability at the SIC in particular.
Earlier in the day on the floor of the Senate, Republican Leader Stuart Ingle of Portales introduced an amendment to the Feed Bill to appropriate $200,000 to the Attorney General’s office to investigate allegations of wrongdoing in state investments.
But right as Ingle was closing and the vote was about to be taken, Ingle paused. Then he announced that a message from the governor’s had come down asking for a bill to reform the State Investment Council. Ingle withdrew the amendment.
The message follows many recommendations recently made by Chicago consultants hired to look at the state investment process. Sen. Tim Keller, D-Albuquerque will sponsor the bill, which, among other things, decreases the power of the governor on the State Investment Council.
Also on Thursday, Lt. Gov. Diane Denish, who is running for governor, unveiled her plan to reform the investment council, saying “We must make sure the State Investment Council is compromised of non-partisan professionals who understand how to make the best investments for our state’s future.” Many of her recommendations are similar to Richardson’s
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