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Indicators: Jan.20

Investment Omertà?

January 20, 2010, 12:00 am

17% is the estimated annual return for 2009 on the three so-called permanent funds managed by the New Mexico State Investment Council, according to spokesman Charles Wollman.
$2 trillion is the estimated deficit faced by public pension funds nationwide next year, according to the Financial Times.

"…Public pension shortfalls across the country—which are not all due to pay to play—are going to be pretty substantial."—Washington, DC-based public advocacy lawyer Jonathan W Cuneo, who filed a class-action suit against the New Mexico Educational Retirement Board over losses allegedly caused by a political kickback scheme

How much of the huge losses to public pension funds—the retirement savings of teachers, fire fighters and police officers—resulted from corruption? It’s impossible to know.

The most publicized case in New Mexico involved a loss of at least $90 million to the ERB, and that’s just a fraction of the billions invested by the ERB.

And while Gov. Bill Richardson has endorsed investment-related ethics reforms, his latest announcement on the subject could be seen as less than benign.

At 6:01 pm, Jan. 14—just before a four-day weekend—Richardson’s office announced “changes” at the state Board of Finance, a group of public officials and private-sector appointees headed by Richardson that provides oversight of all the state’s money. According to a press release, effective March 1, Olivia Padilla-Jackson, the Board’s director since 2005, will leave “to accept a position closer to home and family as Rio Rancho’s Director or Financial Services.”

The timing is curious. On Jan. 13, Padilla-Jackson was set to help lead a board meeting in the governor’s cabinet room to hear a presentation by Chicago consulting firm EnnisKnupp. The firm had made headlines that week with its review of the State Investment Council, which found that the governor has too much sway over state investments—a common thread in the pay-to-play cases. Richardson reportedly refuted the firm’s conclusion.

Did Padilla-Jackson’s departure prove the review’s point? She says no. “I agree that ‘closer to home and family’ might seem like a cliche, but in my case it really is true. I have two young ones, and I’ve been driving to SF from ABQ for over 5 years…I thought [the Rio Rancho job] was a no brainer for me and my family,” Padilla-Jackson writes in an email to SFR.

EnnisKnupp spokesman Hank Hakewill says the firm doesn’t comment on its work for clients.


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