By Steven Terrell: The Santa Fe New Mexican
State Land Commissioner Patrick Lyons, who also sits on the State Investment Council, on Monday defended the SIC’s request for millions of dollars in additional legal fees to a San Francisco law firm conducting an internal review of documents related to federal investigations of state investment practices.
However, some members of the Senate Judiciary Committee, which has been conducting hearings related to the controversies surrounding the SIC, said Monday that the SIC’s request for $4 million in additional funds and $1.7 million in budget readjustments are bound to provoke a fight on the Senate floor.
Lyons said when he first met lawyers from the Paul Hastings firm last year, he wanted to “run ‘em out of town.” However, Lyons said he’s since been convinced that the firm has been extremely helpful in uncovering wrongdoing in the investment process.
The land commissioner said some of the information about third-party placement agents uncovered by the Paul Hastings firm led to the resignation of former state investment officer Gary Bland last year. Lyons previously has said this information showed that Bland pressured investment firms doing business with the state to hire certain third-party marketing or placement agents.
If Paul Hastings doesn’t do the review of all the documents, who will? Lyons asked. He said if the state quit paying the firm, it would take months for another team of lawyers to get up to speed on the case.
Bryan Otero, lawyer for the SIC, said Paul Hastings is in the process of converting thousands of documents — subpoenaed by the FBI and Securities Exchange Commission — into an electronic database. Otero said the work likely will result in recovering money lost in bad investments and fees paid to third-party marketers.
Paul Hastings, Otero said, will file a report that will be turned over to the state attorney general for possible prosecutions.
But some senators weren’t convinced.
Sen. John Ryan, R-Albuquerque, pointed out that Bland is the one who originally hired the Paul Hastings firm to help out with “alternative” investments. It’s possible, Ryan said, that the firm could be investigating some deals in which it played a role.
Ryan said it would be better if the state attorney general investigated the matter.
Senate Republican Whip Bill Payne of Albuquerque argued that a whistle-blower lawsuit filed by Frank Foy, former investor for the state teachers’ pension fund, is trying to recover money for the state. Payne said that when the attorney general in 2008 decided not to take the case, the Foy suit became the proper vehicle to try to recover the money.
Last week Foy told the committee that the state was paying the Paul Hastings firm millions of dollars to help cover up the whistle-blower suit, which claims Gov. Bill Richardson’s administration pressured the Educational Retirement Board to make investments to benefit political allies. Foy said the SIC was “stonewalling” his requests for documents.
Otero denied that charge, saying the Paul Hastings firm is focusing on preparing documents under federal subpoena.
The federal government is looking into the role of third-party placement agents in state investments.
Contact Steve Terrell at 986-3037 or email@example.com