Haven't read all of the case, but a couple of observations:

If Malott is certified in forensic accounting, he knows how to look for fraud.  He was deceived, didn't do his job.  Oopsie.

Correra, Sr. "took advantage" of Malott due to the illness of Malott's father, and Malott found out Correra was not his "friend".   How are the affairs of ERB and Malott's father related?  Malott was acting in a fiduciary role to ERB and there is no relationship between his personal life and his acts with ERB.  Whether Carrera, Sr. and Malott are "friends" is completely irrelevant to the affairs of ERB and their duty thereto.  You do your job first, and if personal events overwhelm your ability to act in good faith as a fiduciary, you resign as a fiduciary.  That is part of being a CPA.   

A basic failure was the widening of investment opportunities which Malott proposed for ERB.  The fallacy that because a "strategically invested" pension fund has billions and therefore should play in real estate and hedge fund bets has bit a number of pension funds who saw huge gains in the real estate bubble and wanted a piece of them to make themselves look good and savvy.   They got into limited partnerships with no control, and investment deals they had at best a hazy understanding of. 

Part of the drive to show great returns on investment is how GASB permits far greater rate of return assumptions than were permitted for private sector pension plans (which led to the overall demise of defined benefit retirement plans in the private sector).

The assumption of 8% or higher investment returns meant current funding contributions and the impact of salary increases were minimized in the current budgeting cycle. 

 This fallacy is coming home now in lots of places.  It is no wonder why public sector salaries are higher, for equivalent jobs, than private sector.  A private sector company on the same curve of salary increase would not have survived.  Governments, however, have taxpayers, who can be relieved of their money or lose their house, their business, whatever the government wants.  It isn't theft, it's taxation.      

Pension funds are supposed to be there for the beneficiaries, not be investment gurus.  The restrictions on ERB investments was there for a real, fiduciary purpose, to protect retirees. 

As was the case for a lot of funds, the ERB wanted to look good instead of fulfill the basic mission, to play the big game...they got billions and need to be "strategic".  and the taxpayer can make up the difference if things turn to poo. 

Malott wants credit for the benefits of the financial bubble and falsehood, but no blame for sticking ERB's nose into terrain it shouldn't have explored. 

Clearly, to the extent schemes for fraud and unjust enrichment that have led to convictions in other states should be evaluated as they relate to NM.