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Pay to Play A-Z

SFR’s guide to government contracting under Governor Bill Richardson

January 27, 2009, 12:00 am

“They were going to make him secretary of commerce, and he said, ‘Yes, that’s right,’ and then he shaved his goatee and he got a little fatter, and he said, ‘Sign me up, I’m ready to go.’ And then, within the last couple of days, he announced, ‘You know what, I’ve been doin’ some stuff that may be too illegal to be in the Cabinet, but just about right to keep me as governor of New Mexico.’”
— David Letterman on Bill Richardson

Zing! Haha ha ha ha…ha…Oh. Wait. The joke’s on us, too.

It couldn’t come at a worse time, either.

Gov. Bill Richardson expected to join President Barack Obama’s Cabinet. That is, before last month, when news of a federal corruption investigation tainted the appointment. After all, Obama has repeatedly committed to cleaning up government.

 “I was hurting,” Richardson told reporters before the inauguration.

He was probably hurting more after Obama’s swearing-in. Instead of hitting the parties in Washington, DC on Jan. 20, Richardson was stuck in Santa Fe, presiding again over the relatively dull opening of the New Mexico Legislature.

Instead of posing for Esquire (again), Richardson was dodging pushy reporters from New York newspapers who wanted to know whether his staff rewarded campaign donors with state contracts.

And instead of joking around with the other Democratic Party superstars, he was taking lumps from David Letterman.

Letterman’s punch line was a dig not only at Richardson, but at New Mexico’s tolerance for corruption. Last week, the retiring agent in charge of the FBI’s Albuquerque office, Thomas McClenaghan, told KQRE that New Mexico may be the most corrupt state in the country.

It’s difficult to say whether that’s true or not.

“I don’t have any reason to believe that New Mexico is more corrupt than other states,” Common Cause State Director Steven Robert Allen says. “What I will say is I think we’ve done a lot less—and by ‘we’ I mean our elected leaders—to address the problem.”

To be clear: The feds haven’t charged Richardson with a crime, and the governor has publicly stated he has done nothing wrong. “Thousands of people give contributions; there’s hundreds of contracts in the state…the governor has never tied the two together,’ Richardson spokesman Gilbert Gallegos says. “I think it’s grossly unfair to loosely use the term ‘pay-to-play.’”

Gallegos adds: “You can point to companies that got contracts, and they may have given contributions, but the other companies that didn’t get contracts probably gave too.”

Furthermore, in his opening speech to the Legislature, Richardson backed ethics-reform laws that would, for the first time, limit campaign contributions in New Mexico. That’s to Richardson’s credit, Allen says. One could also make the case that it’s too little, too late.

Richardson raised $23 million to run for president last year, even though no one thought he stood a chance at winning the Democratic nomination.

He raised more than $13 million in his last run for governor to run against Republican John Dendahl, who only raised $316,000.

Why would so many people give Richardson large lump sums if they expected nothing in return?

At a minimum, money opens doors.

When you add up the cases in which political donors receive state deals or appointments—as we’ve attempted here—it starts to look like the whole government is for sale.

The following A-to-Z guide to pay-to-play in New Mexico is not meant to be complete. Why focus on Richardson? Simple: He is the state’s top dog. And his administration is already under investigation for possibly rewarding campaign donors.

Nor does this guide offer anything close to proof of misconduct. Use it as a catalogue of coincidences—coincidences that, if the Obama era is to be a cleaner one, at least demand a second look.

A
Appointees
This is where it begins. Richardson appoints members to nearly 300 state boards and commissions, ranging from the powerful (the Governor’s Finance Council) to the boring (the Dental Hygienists’ Committee) to the seemingly redundant (the Oral Health Council). Some positions are volunteer, others are salaried.

Interested in serving? A donation might improve your odds. We sampled a dozen state boards. Only two—the Citizen Review Board and the Mining Commission—had no members who gave to Richardson (though Mining Commission members gave, naturally, to Republican Public Lands Commissioner Pat Lyons). Of the other 10, an average of 76 percent of the board members donated to Richardson’s gubernatorial or presidential campaigns. Every member of the State Game Commission is a Richardson donor. Ironically, 14 of 22 members of the Governor’s Task Force on Ethics Reform are campaign donors.

“I’ve been on his fundraising committees several times, and it don’t get me too far,” David Smoak, an Albuquerque real estate broker and Richardson appointee to the state Judicial Standards Commission, says. “There are many people who give for the purpose of being able to say hello to Bill once in a while.”

A “hello” can be all it takes. Pay-to-play is rarely a pass-the-envelope, sign-the-contract transaction. Few understand this better than retired government fraud investigator Lorenzo Garcia, who ran as a Republican for state auditor in 2006.

“Let’s say I’m an administrator in the government, and I want to give a contract to a friend of mine. I’ll put together a committee of people who are loyal to me, and I’ll tell them I want you to give this person the contract. It happens all the time. They’ll never admit it, because they have nice-paying jobs,” Garcia says. “It’s open and everybody knows about it. But it just continues to happen.”

B
Board of Finance
The Board of Finance is like a budget committee. It keeps tabs on the state’s spending and tax collections, issues debt and hires bankers (see “Northern Trust”). As one longtime state finance employee put it to SFR, the board essentially runs the government when the New Mexico Legislature isn’t in session.

The board includes elected officials like Treasurer James Lewis and appointed ones like Finance and Administration Secretary Katherine Miller, plus private sector folks like Kim Sanchez Rael of Flywheel Ventures (a company that has given at least $7,800 to Richardson’s last two runs for office).

The board’s financial adviser is David Paul, of Fiscal Strategies Group out of Pennsylvania; the company’s employees gave $5,100 in donations to Richardson’s presidential campaign.

Its bond counsel is Robbie Heyman of the Santa Fe law firm Sutin, Thayer & Browne, which gave $36,000 to Richardson’s presidential campaign and $12,000 to his gubernatorial campaigns.

Its “board disclosure counsel”—a position that ensures legal compliance—is David Buchholtz of the Albuquerque firm Brownstein Hyatt Farber Schreck ($20,800 to Richardson’s prez run, $17,000 to the guv run).

Bruce Malott
Richardson-appointed chairman of the Educational Retirement Board, allegedly bullied employees; see “E” and “F.”

C
CDR
Beverly Hills, Calif. company at the center of the high-profile federal investigation involving Richardson. See “Rubin, David.”

Checks
The state of New Mexico contracts with two companies for “check verification and recovery.”

One, Collectrite of Albuquerque, donated $3,000 to the Bill Richardson for President Exploratory Committee in 2007. The other, CyberCheck, is run by Robert and Dominic Aragon of Albuquerque. Robert and his law firm donated $8,700 to Richardson’s gubernatorial and presidential campaigns.

Each company claims a fee—of $30 and $35, respectively—for each bad check written to the state on which it collects.

D
Dave Contarino
Richardson’s former chief of staff was reportedly involved in at least two suspected instances of pay-to-play. See “Rubin, David” and “ValueOptions.”

Dennis Langley
Energy tycoon and former Kansas Democratic Party Chairman Dennis Langley and his energy companies have donated $32,700 to Richardson’s political campaigns since 2002. During Richardson’s first term as governor, in 2004, New Mexico’s State Investment Council approved a bond investment of up to $150 million so that Langley’s company, Earth Energy & Environment, could build a natural gas pipeline near Farmington.

E
Educational Retirement Board
Every year, nearly 2,000 New Mexico public school employees—from university professors to high school bus drivers—retire. Their pension and benefit checks depend on the health of a $6.5 billion investment portfolio managed by the New Mexico Educational Retirement Board.

Polly Turner, a retired University of New Mexico professor, served on the board for 14 years. Of the seven board members, she was one of only two—elected by teachers’ associations—who are independent of the governor.

Turner says this setup had never been a problem—until Richardson became governor.

Turner calls herself a “good Democrat” who “began to have problems with the governor when he started tinkering with our board.”

Richardson made Bruce Malott, an Albuquerque accountant and Richardson’s 2006 campaign treasurer, ERB chairman. (Malott did not return SFR’s call for comment.)

Turner says Malott rushed through meetings, and the interests of retirees were rarely discussed. “It was just like he did what he needed behind the scenes,” she says. “He never called me. I was seen as the troublemaker.”

A troublemaker, she says, because she asked questions.

Turner says that in May 2006, Malott called his fellow board members to a special meeting, saying they had a one-time opportunity to invest in something called a CDO, or “collateralized debt obligation.”

“At the time, I didn’t know much about CDOs. I don’t know that anybody else did—maybe Bruce,” Turner says. “It seemed to me that it was very hasty.”

As the nation has since learned, many CDOs were built on a foundation of matchsticks: mortgages aggressively marketed to people who couldn’t afford them. Those unlikely-to-be-reclaimed debts were repackaged and resold, essentially disguised as solid investments. When the CDO matchsticks crumbled, the credit markets followed, and soon thousands of Americans found themselves out of work.

Turner and the other ERB teacher rep, Delman Shirley, voted against investing in the CDO. They were outvoted by the governor’s appointees. Unfortunately, the investment Malott recommended turned out to be basically worthless. The teachers’ retiree fund lost $40 million, and the State Investment Council, which also bought into the CDO, lost $50 million.

What Turner didn’t know at the time was that the company hawking the CDO, Vanderbilt Capital Advisors, would become a major donor to Richardson. Its employees gave $9,400 to his presidential campaign. She also didn’t know how aggressively the Richardson-appointed ERB chairman, Malott, was pushing the board’s staff to invest with Vanderbilt.

The public might not know any of this if one of those employees did not come forward.

“Thank god for Frank Foy,” Turner says.

F
Frank Foy
In 2006, Foy was the ERB’s chief investment officer. It was a tough year. A longtime colleague had retired and Foy had trouble finding a qualified replacement. At Foy’s urging, the ERB hired outside contractors to help manage the portfolio. But first, Foy had to sell off $2.5 billion in assets so the new outside financiers could start from scratch.

So when Vanderbilt Capital Advisors’ then-managing director, Patrick Livney, called out of the blue, Foy was very, very busy.

“This guy calls me up and says, ‘I want to talk to you about a CDO.’ I said, ‘Call me back in a month. I don’t have time to screw with it, dude,’” Foy recalls. “He didn’t like that answer.”

Soon after, Foy says, he got a call from Malott. “He said, ‘You were very rude to Pat Livney. I think he has a good investment and you ought to talk to him.’…I’d never been called by the chairman before. I thought, ‘This stinks.’”

Even after talking to Livney, Foy says he recommended against the Vanderbilt investment. Foy was subsequently demoted following what he says is a false accusation of sexual harassment involving a young employee in the office. He declines to go into the details, beyond that the woman was inappropriately dressed.

When Foy filed a whistle-blower lawsuit this month, the daily papers piled onto the story. Richardson’s office called Foy a disgruntled employee. The story faded.
“It’s a smokescreen,” Foy tells SFR.

There was further fallout for those who resisted the Vanderbilt investment. Turner says Malott got a bill introduced into the Legislature by Sen. Stuart Ingle, R-Chaves, that would replace her independently elected seat with another gubernatorial appointee. She credits Sen. Tim Jennings, D-Chaves, with killing Ingle’s bill. “Thank god for friends,” Turner says. She left the board last year, partly for health reasons.

The ERB’s executive director, Evalynne Hunemuller, abruptly resigned in January 2007. Foy claims she was fired because she refused to fire him at Malott’s request. Hunemuller didn’t respond to SFR’s request for comment.

Foy won’t speculate on what role, if any, Richardson might have played, but says, “This is the tip of the iceberg.”

G
Gambling
GTECH, the world’s largest purveyor of gambling machines, was the New Mexico Lottery’s vendor from 1996 until last year. That’s when GTECH lost its contract to Intralot, a British company trying to snap up GTECH’s business by offering lower bids. But Intralot outbid GTECH when it came to campaign contributions in New Mexico. In 2007, Intralot gave $3,000 to Richardson and $2,000 to the New Mexico Democratic Legislative Campaign Committee. GTECH’s only New Mexico donation that year was $2,300 to Richardson’s presidential campaign. (In 2004, a year before its Lottery contract was renewed, GTECH gave $10,000 to a separate Richardson committee.)

Gravel
At least four state contractors for gravel and landscaping services, and their officers, have given Richardson sizable donations over the years: Bartoo Sand & Gravel ($1,000), Buildology ($4,800), Eker Brothers ($5,000) and Lafarge Southwest ($5,000).

H
Hewlett-Packard
Early this month, Richardson attended the groundbreaking for a new HP facility in Rio Rancho. The company’s higher-ups gave more than $5,000 to Richardson’s presidential run. According to the Rio Rancho Observer, HP was offered $55 million in incentives from the state, plus $5.2 million in New Mexico Finance Authority bonds to build roads and sewer lines for the private facility.

I
Iceberg, tip of
See “Frank Foy” or items A-Z.

J
Justice
As SFR staff writer Dave Maass reported two years ago, 15 people applied to fill the late Pamela Minzner’s state Supreme Court seat. Four applicants gave the maximum legal amount—$2,300—to Richardson’s presidential campaign, and one of those three, Charles Daniels, became Richardson’s judicial appointee.

K
Khalsa, Gurutej S
Gurutej Khalsa founded Akal Security with other members of New Mexico’s Sikh community back in the 1980s. Early on, it landed a job guarding the state fair; now, government contracts comprise most of the company’s business. Akal has donated more than $50,000 to Richardson’s political committees, including $20,000 to Si Se Puede! Boston 2004, a committee Richardson set up for that year’s Democratic National Convention, which he chaired.

L
Lionsgate
Executives with Lionsgate Entertainment contributed $26,800 to Richardson’s presidential campaign.

The studio also has been the biggest beneficiary of the New Mexico Film Investment Program, which Richardson created. The state has loaned Lionsgate $99 million.

The loans—which provided three-quarters of the films’ overall budgets—went to produce four seasons of Wildfire on ABC Family, a forthcoming documentary about LeBron James, a horror flick called The Burrowers and the 2006 Dane Cook vehicle Employee of the Month, a movie that led the Globe and Mail’s reviewer to remark, “It’s simply too depressing that people sat in a boardroom, read this script and said, ‘We’re ready to go!’”

M
Mainline Information Systems
Mainline, based in Tallahassee, Fla., has a contract to supply New Mexico state agencies with IBM mainframe computers. The company gave $10,000 toward Richardson’s 2006 gubernatorial re-election and staff donated $1,000 to his presidential run. Andrew Baca of Albuquerque, owner of another state tech supplier, Abba Technologies, kicked $2,300 to Richardson’s run for prez.

Mesa Del Sol
Mesa Del Sol is a sprawling business and residential area near the Albuquerque airport. The developer, a company called Forest City Covington, has been one of the biggest political donors in the state and especially generous to Richardson. As The New York Times reported in a recent story about New Mexico’s “few ethics laws,” Forest City gave $290,000 to Richardson over a period of five years.

The state, as it happens, did good by Forest City, issuing up to $500 million in bonds to help the company complete the project and selling it some land owned by the University of New Mexico.

N

Northern Trust
As the custodian bank for the State Treasurer’s Office, the State Investment Council and two public-employee retirement boards, Northern Trust claims hundreds of thousands of dollars in fees every month for keeping track of billions of dollars in state assets.

As we recently reported at sfreeper.com, Northern Trust was hired by the New Mexico Board of Finance in September 2003 after Richardson took office [Jan. 15: “More Fishy Donations To Richardson From Financiers With State Contracts”]. The company and its executives gave $20,000 to Richardson’s 2006 gubernatorial campaign and $15,500 to his 2008 presidential campaign. Northern Trust also donated $10,000 to Si Se Puede! Boston 2004.

State Investment Officer Gary Bland complained in a January 2008 meeting of the State Investment Council that “Northern Trust is not doing an adequate job,” according to meeting minutes. Yet Northern Trust remains the state’s custodian bank.

Deputy State Treasurer Mark Valdes, who was Board of Finance director when Northern Trust was hired, tells SFR he had no contact with Gov. Richardson or anyone from his office regarding the contract.

Valdes says the procurement manager on the Northern Trust deal was former Finance Board Deputy Director Scott Stovall. Until resigning recently, Stovall served as chief investment officer for the New Mexico Finance Authority, which handled the scandal-plagued transportation bonds that got Richardson in so much trouble last month; see “Rubin, David.” Finance Authority attorney Rey Romero says he doesn’t know the particulars of Stovall’s departure.

O
Oil, bulk
Santa Fe-based Honstein Oil has the most lucrative contract to supply bulk gasoline and diesel to state agencies and local governments, furnishing an estimated 575,000 gallons of fuel every year.
The company’s markup ranges from a penny to one dime on the gallon, depending on the location.

Its president, Rod Honstein, gave $500 to Richardson in 1996 when he was a lowly congressman, and did better in 2007, with a $2,300 donation to his presidential bid.

P
Private prisons
Three of New Mexico’s top prison contractors are also backers of its top elected official.

James Parkey, president of Corplan Corrections, gave $10,000 to Richardson’s presidential run. Corplan helped design and build 13 jails around New Mexico.

Corrections Corporation of America, which runs three prisons in New Mexico, gave $25,000 to Richardson’s first run for governor, and a company vice president gave $1,000 to his presidential run.

The third contractor, GEO Group, gave $30,000 to Richardson’s second run for governor and $9,000 to his presidential run. It operates three facilities in New Mexico and one at Guantanamo Bay.

Q
Quid pro quo
“This for that.” Also, something hard to prove: for example, that a company received a government contract because it gave money to a politician.

“Even if that may be the case, you still have to prove it. The burden of proof, it’s still pretty substantial,” retired fraud investigator Lorenzo Garcia says. “The laws, the way they’re written, allow [politicians] so much leeway.”

R
Rail Runner
When Missouri-based Herzog Contracting landed a $117 million contract to extend the Rail Runner to Santa Fe in August 2007, the Albuquerque Journal noted that the company had donated a couple thousand dollars to Richardson’s presidential campaign.

The sum of Herzog’s contributions to Richardson’s campaigns, as far as SFR can tell, comes to $40,500. That includes donations from company executives and employees.

The Associated Press followed up, noting that Santa Fe art dealer, developer and Richardson buddy Gerald Peters—who has raised tens of thousands for Richardson over the years, even loaning him a private airplane for campaign trips—donated $2,300 to Richardson at a particularly opportune time: just as Peters’ development company, SCS Development, was in the midst of contract negotiations with the state Department of Transportation for a Rail Runner hub near its headquarters.

Robert Caswell Investigations
In 2007, Richardson announced that the state had hired a private investigations firm to “conduct undercover monitoring” of three Albuquerque bars owned by William E Baldwin. Baldwin’s bartenders at the Horse & Angel Tavern served a man who caused a fatal Thanksgiving Day drunk-driving crash two years prior.

Of the nearly 200 licensed PIs in Albuquerque, which gumshoe firm was chosen for the perilous job of hanging out in bars? Robert Caswell Investigations, which had kicked in $2,000 toward Richardson’s 2002 run for governor.

Rubin, David
David Rubin was born in Mexico City and attended an Orthodox Jewish high school in Los Angeles. He never graduated from college. He founded CDR, a financial advisory firm specializing in public sector deals, in 1986. His firm developed a somewhat roguish reputation—now more than ever: CDR is at the center of a scandal that destroyed Richardson’s appointment to President Obama’s Cabinet.

It’s not clear whether or how Rubin met Richardson. None of the governor’s friends with whom SFR spoke remembers meeting Rubin—which is odd, because Rubin started writing big checks to Richardson in 2003.

The circumstances are important because Rubin started donating to Richardson right around the time CDR landed a $1.5 million contract to handle a complicated bond deal for the New Mexico Finance Authority.

An ongoing federal investigation into CDR’s business practices—following years of disparate kickback allegations—drifted into New Mexico politics last year. A grand jury interviewed some of the governor’s key staff members. It, and a second, related grand jury, have not issued any indictments.

Rubin and Richardson aren’t talking. Who would know how the donations came about? Perhaps Dave Contarino, Richardson’s former chief of staff, whom Bloomberg News named as a key subject in the federal inquiry into the Finance Authority. He’s keeping quiet.

As is Amanda Cooper, a top political consultant who chaired the Richardson committees that took Rubin’s donations. “Amanda Cooper—she would be the one that would be able to provide information,” Reta Jones, an Albuquerque accountant who handled some of Richardson’s campaign accounts, says.

Cooper also is the daughter of US Sen. Tom Udall, D-NM. She did not return messages left at her ranch house in Corrales.

S
SHARE
Despite the clumsy acronym, the Statewide Human Resources, Accounting and Management Reporting System was supposed to save taxpayers money by streamlining dozens of incompatible state accounting systems.

In 2005, the state signed a $14 million, two-year contract with MAXIMUS of Reston, Va. The cost of the project grew over two years to more than $30 million, thanks to bugs and cost overruns. Rep. Luciano “Lucky” Varela, D-Santa Fe, called SHARE a “black hole,” as Trip Jennings of the Albuquerque Journal (and now the New Mexico Independent) reported.

Those earlier reports missed a noteworthy detail: In 2006, MAXIMUS gave Richardson $5,000 to help him win a second term as governor.

T
Telecoms
The three companies with state phone-service contracts—AT&T, Verizon and Qwest—have something in common. All together, those companies, along with their executives and employees, have given nearly $50,000 to Richardson’s political committees over the years.

What about the other big telecoms? T-Mobile did not give to Richardson; it has no state contract. Sprint donated $1,000 to Richardson in 2006 and, six years prior, $3,000 to the New Mexico Republican Party. It also has no state contract.

U
UBS
Zurich-based UBS was yet another bank that donated to Richardson—$25,000—at around the time it picked up work from the state. UBS was one of the bond underwriters chosen by the New Mexico Finance Authority’s financial adviser, CDR. Other underwriters, including JP Morgan and RBC Dain Rauscher, were also big donors.

V
ValueOptions
ValueOptions, a massive, Virginia-based “behavioral health destination,” was hired in 2005 to overhaul and run New Mexico’s mental health care system.

The New Mexico Independent reported this month that ValueOptions gave $75,000 to Richardson’s last two runs for office and hired his former chief of staff, Dave Contarino, as a consultant. Its contract, which expired last year, was worth some $300 million.

Vanderbilt Capital Advisors
Chicago firm and Richardson donor that sold money-losing investments to the state. See “Educational Retirement Board.”

W
White, Mark
Years after leaving office, former Texas Gov. Mark White went into the border-security business.

White’s company, Geovox Security, sells a thingamabob called the AVIAN Heartbeat Detector, which supposedly finds people hidden in vehicles with “special sensors” that detect “the shock wave generated by the beating heart.”

The basic model starts at $50,750, plus installation.

New Mexico signed a price agreement for Geovox machines in 2006. The following year, White gave $4,600 to Richardson’s presidential campaign.

X
X PRIZE
Peter Diamandis, head of the X PRIZE Foundation—which stages competitions for private spacecraft—gave Richardson $2,300 to run for president. Not only did the governor help promote X PRIZE events, his failed presidential campaign kicked in $10,000 toward another committee to convince voters to approve a tax to help build Spaceport America near Las Cruces.

The state gave $9 million to boost the competition and help build the Spaceport. It hired two design consultants, Dekker/Perich/Sabatini and Molzen-Corbin & Associates. Dekker employees gave $13,000 to Richardson’s presidential run, and Molzen-Corbin gave $9,600. Molzen-Corbin chief Adelmo Archuleta also gave $13,000 to Richardson’s two runs for governor.

Y
Yikes!
The Associated Press reported last week that New Mexico was forced to cough up $16 million in collateral for the transportation bonds that CDR handled because the New Mexico Finance Authority didn’t have the in-house expertise to properly review the transactions. See “Rubin, David.”

Z
Zorro Ranch
Billionaire Jeffrey Epstein, who named his ginormous ranch near Santa Fe and one of his companies after the masked avenger, gave $50,000 to Richardson’s second gubernatorial run.

Richardson, like other pols who took Epstein’s money, pledged to give it all to charity after Epstein plead guilty to soliciting underage prostitutes. Subsequently, Epstein was sued for sexual abuse by a then 16-year-old model. According to the New York Post, Epstein told the girl, “You have a tight butt like a baby.”

OK, so it’s not technically a pay-to-play deal. But it is an appropriately gross closer to a long and skeezy tale.  SFR


 

 

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