SANTA FE, N.M. (AP) — New Mexico officials are considering whether to accept a $24 million settlement from an investment firm in what would be the largest payment yet in a pay-to-play scandal during the administration of former Gov. Bill Richardson.
The State Investment Council and attorney general have urged approval of the deal with Chicago-based financial firm Vanderbilt Capital Investors.
The labyrinthine legal dispute is coming to a crossroads as a series of hearings start.
Here's a look at the case and what remains at stake after the scandal that put state investments in the hands of money managers in return for payments or political favors.
WHAT IS NEW MEXICO OWED AND WHY?
The State Investment Council, which oversees roughly $20 billion in funds, contends that some New Mexico investments were steered toward a broker with ties to Richardson, a Democrat.
The broker was accused of receiving millions of dollars in fees for helping companies secure business with state investment and pension funds.
About $90 million in funds that went to Vanderbilt was lost through complex securities known as collateralized debt obligations during the mortgage credit crisis and financial meltdown of 2007 and 2008.
District Court judge Louis McDonald is holding public hearings in Albuquerque next week on the proposed settlement with Vanderbilt.
The judge will first consider whether or not to dismiss competing whistleblower claims filed on behalf of the state by private citizens.
WHAT IF NEW MEXICO DOESN'T SETTLE?
Victor Marshall, an attorney for the citizens, contends that New Mexico could reclaim far more money from Vanderbilt and other investment firms that paid their way into managing state funds.
He represents Frank Foy, a retired chief investment officer of the New Mexico Educational Retirement Board, and wife Suzanne Foy. The couple filed a whistleblower lawsuit in 2008.
Their pending claims are based on the Fraud Against Taxpayers Act, a state law that effectively deputizes private citizens and attorneys to pursue fraud claims on behalf of the state and offers as much as 30 percent of the funds recovered.
The Foys' case against a long list of money managers and high-ranking state officials got a boost last year when the New Mexico Supreme Court ruled they could pursue damages dating back to 2003.
WHO SUPPORTS THE STATE-NEGOTIATED SETTLEMENT?
Supporters include Republican Gov. Susana Martinez, now head of the State Investment Council. They say the deal is reasonable and avoids major risks and delays in persisting with fraud claims.
Attorney General Hector Balderas, a Democrat, is asking the court to set aside competing claims against Vanderbilt by the Foys and other whistleblowers so the proposed settlement can move forward.
OBJECTION, YOUR HONOR?
Whistleblowers, meanwhile, say a law firm hired by the state to pursue pay-to-play settlements has a conflict of interest because it represents clients in the financial world.
New Mexico hired the Connecticut-based law firm Day Pitney on a contingency-fee basis.
A judge extended the inquiry into Day Pitney at a Friday hearing in Santa Fe District Court.
WILL OTHERS BE HELD ACCOUNTABLE?
No criminal charges have been filed.
However, Richardson's popularity plummeted after his administration was targeted in a federal investigation for its handling of investment deals and transportation contracts.
The State Investment Council still has financial claims pending against former state investment fund manager Gary Bland, as well as Richardson adviser Anthony Correra and his son Marc Correra, among others. They deny wrongdoing. A civil trial is scheduled for November.
The council says Marc Correra received more than $22 million in finder's fees from the state funds to steer investments toward political allies. Correra has filed for bankruptcy in Texas in a move that could shield assets.
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