The Federal Bureau of Investigation recently interviewed former campaign staffers for Republican Gov. Susana Martinez about a lucrative racino lease awarded to a politically connected company, SFR has learned. The possible investigation—which the FBI will neither confirm nor deny—marks a significant development in what has become one of the Martinez administration's biggest controversies.
SFR's sources, who request anonymity because they fear retribution, say the FBI interviewed them about key aspects of the Downs deal: the bidding process, and the relationships between Downs players and top public officials. Specifically, they say the federal agency asked about consulting payments to Jay McCleskey, Martinez' top political advisor (who is not a state employee). An attorney for one of the campaign staffers interviewed by the FBI confirms the interview occurred within the past two weeks.
Frank Fisher, a spokesman for the Albuquerque division of the FBI, writes in an email to SFR that he "cannot confirm or deny an investigation"—standard agency protocol. McCleskey declined to comment for the record. Last summer, the FBI conducted interviews with at least one other person familiar with the contract, awarded to the Downs at Albuquerque Racetrack & Casino—the management company that, for the previous two decades, has leased the racetrack and casino located on state fairgrounds in Albuquerque. But these recent developments suggest the FBI is shifting its examination of the lease to Martinez' inner circle.
The "Downs deal"—shorthand for the 25-year racino lease granted to the Downs at Albuquerque in December 2011—has endured controversy since the beginning. Although Martinez campaigned on a promise to halt corruption, critics saw it as a sweetheart deal. They decried what they saw as a rushed, flawed process that resulted in a lucrative lease for a politically connected company. Some critics perceived cozy relationships between Downs players and top public officials as further support for claims that the deal was rigged.
The process of awarding the multimillion-dollar lease to the Downs was controversial from the start.
First, there were the Downs operators themselves, who had struggled to meet the terms of their previous 25-year lease. According to a Legislative Finance Committee report, the Downs had paid less than its share of utilities, failed to provide required promotional events and advertising, and owed the State Fair $215,000 in racing revenue. The grounds were in disrepair (see above), prompting nearby residents to complain.
In awarding certain contracts, the state must follow strict guidelines to ensure taxpayer money is handed out to private companies based on merit, not political connections. One such stipulation requires that a request for proposal, or RFP—a means of alerting prospective bidders to open contracts—be advertised for at least 10 days. Although the state advertised the racino lease for 30 days, some observers had hoped for a lengthier, more widely publicized RFP to allow more competition for the privilege of operating a racetrack and casino on state land.
Others, including Martinez, argued that the state didn't need to issue an RFP at all. Rather, it could have simply renegotiated a "sole source" contract with the Downs—in essence barring any competition. In December 2011, Martinez emphasized that "legislators and this administration chose [a bid] as the best way to go."
During the RFP, only two companies submitted proposals: the Downs, and Laguna Development Co., which manages other casinos. Despite its less-than-stellar track record, the Downs won out.
For some, the deal smacked of favoritism. Not only had the lease gone to a company that largely failed to make good on its previous lease, but it was also a sweeter deal. Under the new lease, the Downs can expand gambling operations on state fairgrounds and can manage the racetrack and casino, located in the heart of Duke City, for another 25 years.
It also leaves the state on the hook for repairing and maintaining the Downs' dilapidated barnyards. (The Downs has argued that, because it gave the barnyard area back to the state, taxpayers actually benefit from the deal.) The Downs, meanwhile, could rake in more than $1 billion over the life of the lease.
Yet for some critics, that's just the beginning. They point to the company's generous political donations as further proof of a possible quid pro quo arrangement.
The Downs' tradition of political influence stretches back to the early 2000s, during the administration of former Gov. Bill Richardson, a Democrat. At the time, Paul Blanchard, a minority shareholder of the Downs, and his wife Kandace gave Richardson $25,000 in campaign money; the company itself gave him another $100,500. Soon after taking office, Richardson thwarted an RFP for a new lease, and the Richardson-appointed State Fair Commission extended the Downs' hold on the racino through 2010. (At the end of his second term, Richardson also tried to grant the Downs a 40-year, no-bid lease, but failed.)
On the campaign trail, Martinez routinely promised to end corruption—but the Downs kept the donations flowing anyway.
Between 2010 and 2011, Downs majority shareholders William Windham and John Turner—along with other players associated with the Downs—donated $80,000 to Martinez' campaign and political action committee. For good measure, they also gave $50,000 to her opponent, former Lt. Gov. Diane Denish.
Of course, political donations don't necessarily equal influence. But a cache of leaked emails reveals cozy ties between Downs attorneys and governor's office staffers. The emails also show Downs attorneys' desire to fast-track the deal.
Take, for instance, the relationship between Pat Rogers, at the time an attorney for the Downs, and Dan Mourning, the general manager of Expo New Mexico, which manages the state fairgrounds. In one email, Rogers suggested edits to a letter Mourning would later send to the state Board of Finance—a board, headed by the governor, with broad authority over the state's financial affairs. Mourning's letter, which advocated awarding the racino lease to the Downs, claimed that the State Fair Commission had already "executed" the lease. It was a moment of surprising foresight: The commission would not actually vote on the lease until a month later.
(Rogers is the same attorney SFR profiled last summer for his frequent use of private email to confer with top Martinez staffers [news, July 18, 2012: "A Higher Power"]. He declined to comment for this story.)
Downs lawyers also arranged a personal meeting with State Fair Commissioner Kenneth "Buster" Goff, who had publicly raised concerns about the lease. At a November 2011 meeting, Rogers told the commission that certain changes were made to the lease "in response to Commissioner Goff's concerns" [cover story, Aug. 22, 2012: "Trouble at the Ol' Racino"]. The commission approved the lease 4-3 that day, with Goff casting the deciding vote.
But the Downs still needed approval from the Board of Finance—where things would also work in the company's favor.
Around the same time, Tom Tinnin, a Republican board member and the longest-serving chairman in the State Fair Commission's history, left the board over disagreements with the Martinez administration about the Downs. Shortly before his resignation, Tinnin claimed Martinez had warned him that if he spoke publicly "in a way that would disparage her people," she would take it personally.
The next month, the board voted unanimously to give the Downs the racino lease.
In addition to the more recent interviews, at least one other person says the FBI has interviewed her about the Downs deal.
State Fair Commissioner Charlotte Rode, a vocal opponent of the racino contract, says FBI Special Agent Drew McCandless sought her out last summer. They met at a Starbucks in Albuquerque's Uptown area, Rode says, where McCandless—who investigates public corruption—asked Rode about the racino bidding process. She says the meeting was preliminary and informal—"more me telling my concerns than it was grilling me [with] questions."
"They were fact-gathering," she adds. "They were just getting the information and seeing what was out there." Rode says McCandless also had information about a hunting trip First Gentleman Charles "Chuck" Franco took to Louisiana in September 2011, shortly after the racino bidding process, but before a lease had been awarded. Windham and Turner, the Downs majority owners, both live in Louisiana, and liberal-leaning Independent Source PAC has long questioned whether Franco's trip had something to do with them. (Since last year, SFR—along with other media outlets—has unsuccessfully sought public records of expenditures related to the trip.)
Rode says her contact with the FBI never extended beyond that one summer meeting.
"I never really followed up with them because they didn't really follow up with me," Rode says.
While it remains unclear whether there is, in fact, an FBI investigation, at least one local agency is investigating the Downs deal.
"Our office reviewed certain procurement issues related to the State Fair's RFP process and directed that expanded test work be conducted during the Fair's 2012 financial audit," Evan Blackstone, chief of staff for State Auditor Hector Balderas, writes in an email to SFR. "We expect to release the final audit report very soon."
SFR also previously reported on emails showing that the state Attorney General's Office scheduled meetings with state fair commissioners last fall about the deal. AGO spokesman Phil Sisneros declined to comment, citing office policy.
Still, Michael Henningsen, the spokesman for Expo New Mexico, says he has no knowledge of an FBI investigation.
"The Fair has not been contacted by the FBI and is unaware of any investigation by any such agency into the RFP process that led to the new Downs contract," Henningsen writes in an email. "Any claims or insinuations that the Fair or its management were involved in any impropriety with regard to the RFP process have been discredited and are frivolous."
State Sen. Tim Keller, D-Bernalillo, has pushed unsuccessfully to add oversight to the State Fair and make its commission more independent from the governor's office. But he says that proposal "frankly has been blocked by the fourth floor"—a reference to the governor's office in the capitol building.
"This shows that there's a problem with sort of walking the walk and talking the talk when it comes to all the campaign rhetoric that came out of the Martinez administration," Keller says. "And this issue I don't think is going to go away, because there seems to be problems at multiple levels," including procurement practices and other issues.
"You know," he adds, "there's a rap sheet of unbecoming behavior with the Downs deal. And I think the public knows it and agrees."