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SEC seeks papers in alleged NM investment scheme

SEC seeks papers in alleged NM investment scheme

The Securities and Exchange Commission has asked for documents from a former state investment officer who claims New Mexico taxpayers lost more than $90 million in an alleged "pay-to-play" scheme involving contributors to Gov. Bill Richardson's failed presidential campaign.
The SEC regional office in Denver asked Foy on Dec. 1 for "all documents relating to investments by the state of New Mexico in or with Vanderbilt Financial and any related entities." Its interest in the case was disclosed after materials related to Frank Foy's whistleblower lawsuit were unsealed Thursday.
Foy claims the state Educational Retirement Board invested $40 million in worthless collateralized debt obligations offered by Chicago-based Vanderbilt Capital Advisors and Vanderbilt Financial and that the state Investment Council lost another $50 million in Vanderbilt investments because of political considerations.
The lawsuit alleges the investments were bad and that Vanderbilt made false claims to the state.
Kurt Florian, chief operating officer and counsel at Vanderbilt, confirmed the lawsuit had been served but said he couldn't comment. He declined to say whether the firm had been contacted by the SEC.
Charlie Wollman, spokesman for the state Investment Council, said agency officials "have not gotten any requests from the SEC regarding documents related to Vanderbilt."
Foy, a former chief investment officer at the state's Educational Retirement Board, claims the Vanderbilt investment was approved in August 2006 over his objections because of pressure by a board chairman who was appointed by the governor.
The lawsuit said several Vanderbilt executives in 2007 made $15,100 in contributions to Richardson's failed presidential campaign.
A spokesman for Richardson has said the state agencies named in the lawsuit "acted properly and in the best interest of New Mexicans" and that the state would "vigorously defend those agencies."
An SEC spokesman in Washington, D.C., declined comment.
It wasn't immediately known if Foy had met with SEC investigators and whether he had provided the requested materials. His attorney, Victor Marshall, declined to comment.
Foy's lawsuit, filed in July on behalf of the state, seeks to recover more than $90 million. A state law allows damages to be tripled and Marshall said the amount could reach $300 million.
The lawsuit was filed under a 2007 law that allows private citizens to sue on behalf of the government for claims of fraud against taxpayers. Plaintiffs can receive a share of monetary damages that might be awarded.
Such lawsuits are initially sealed after being filed, which prevents the allegations from being immediately disclosed publicly.
The timing of Foy's lawsuit has been questioned because it comes only weeks after news that a federal grand jury was investigating allegations of a "pay-to-play" scheme in which a top political donor to Richardson won lucrative state transportation contracts.
Marshall said Foy's lawsuit was sealed when it was filed last summer and that the timing with the federal case was coincidental.


Updated : 2021-03-08 15:37 GMT+08:00