Judge OKs $24M accord in NM pay-to-play scandal

SIC, ERB settle with Chicago firm for losses of $90M in ’08

A state district judge on Tuesday approved a $24 million settlement reached by the State Investment Council and the Educational Retirement Board with a Chicago investment firm in a historical pay-to-play investment case that rocked the oversight of the state permanent fund and teachers’ pension fund.

The ruling also dismissed most of the defendants in two Fraud Against Taxpayers Act cases filed by former retirement board Chief Investment Officer Frank Foy that brought some of the pay-to-play allegations to light when they were unsealed in 2009.

There are other cases involving other defendants still pending.

District Judge Louis P. McDonald, appointed by the state Supreme Court to hear the cases, filed two rulings upholding the State Investment Council settlements reached in separate civil lawsuits filed by the council and dismisses Foy’s lawsuits against the financial firms that received state investments after paying millions of dollars in finder’s fees to the son of a close associate of then-Gov. Bill Richardson.

McDonald also approved other settlements reached by the SIC and investment firms in other cases.

The judge cited several days of hearings he held last year as the basis for his decision that the settlement with Vanderbilt is “fair, adequate and reasonable under the circumstances.”

Foy had challenged the State Investment Council’s plan to pursue its own lawsuits and settlement plan, calling them “sweetheart deals,” but McDonald ruled that Foy’s claims had little chance of success.

“For years, (Victor) Marshall and Foy have argued endlessly in their effort to hijack the state’s recovery litigation, attempting to intercept millions of dollars in settlements to the permanent funds, while alleging conflicts of interest in the state’s case,” SIC spokesman Charles Wollmann said. “Judge McDonald’s ruling thoroughly rejects those false claims and helps clear the path for putting those millions back to work to benefit all New Mexicans.”

Marshall, Foy’s attorney, was out of town and unavailable for comment.

Vanderbilt Capital Advisors paid Marc Correra, the son of Richardson’s unofficial adviser, Anthony Correra, more than $5 million when it received a $50 million investment from the State Investment Council and a $40 million investment from the Educational Retirement Board.

The entire $90 million was written off by both agencies after the economic downturn of 2007-2008.

The State Investment Council made investments in other Vanderbilt-collateralized debt obligations and lost money on some of those investments.

Foy filed a Fraud Against Taxpayers Act lawsuit against Vanderbilt under seal in 2008.

Attorney General Hector Balderas’s office supported the SIC settlements and sought to dismiss Foy’s claims.

The $90 million was part of more than $200 million that New Mexico lost in what has been described as a pay-to-play investment scandal.