New Mexico Revisits Scandal

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Investment Manager Admits Pushing Contracts Aiding 'Politically Connected'
By STEPHANIE SIMON

SANTA FE, N.M. -- Corruption allegations are again swirling around Gov. Bill Richardson's administration, after a longtime investment manager for the state admitted giving into pressure to push financial deals that would enrich political heavyweights here.
Associated Press

New Mexico Gov. Bill Richardson, pictured in September, has denied wrongdoing over the latest investigation into the state's financial dealings.

Saul Meyer, a founding partner of the Dallas-based firm Aldus Equity, made the admission in a plea agreement unsealed this week in New York, where Mr. Meyer pleaded guilty to securities fraud for a kickback scheme involving New York state's pension fund.

Mr. Meyer said he violated his fiduciary duty in New Mexico "on numerous occasions" by urging investments for two state boards that he knew would prove lucrative for unnamed "politically connected individuals."

New York Attorney General Andrew Cuomo, in a statement about the New Mexico investments, said they "were not necessarily in the best economic interest of New Mexico."

The new developments come just five weeks after federal prosecutors in a separate investigation dropped a long-running, pay-to-play probe involving Mr. Richardson, a Democrat. In that investigation, allegations that Mr. Richardson steered state bond business to a major political donor forced him to decline a nomination in January to an Obama administration cabinet post.

In late August, the U.S. attorney for New Mexico issued a scathing letter saying that "pressure from the governor's office" led directly to "corruption" in the bond deal process, but did not charge Mr. Richardson.

The governor has denied any wrongdoing in that case, as well as the probe by state and federal authorities involving Mr. Meyer. Authorities would not comment on their investigation.

Earlier this year, the U.S. Department of Justice subpoenaed documents related to Mr. Meyer's firm, as well as emails dating back to 2003 that were exchanged with a trustee of one of the state boards, Bruce Malott. Mr. Malott served as Mr. Richardson's campaign treasurer in 2006 and is a close ally. He also kept the books for Mr. Richardson's political action committee and charitable foundation.

In an email message Wednesday, Mr. Malott said he was "very disappointed to read that Saul Meyer recommended investments on any basis other than" their quality, and added that he has "a particularly strong interest in the Justice Department conducting as thorough and prompt an investigation as possible."

Mr. Malott was reappointed to one of the boards in question, the New Mexico Educational Retirement Board, by Mr. Richardson. The governor also appointed the head of the other board under scrutiny, the State Investment Council, and serves on it himself.

Both boards turned to Aldus Equity to advise them on complex investments, each worth tens of millions of dollars. State officials and political appointees would review the recommendations from Aldus, and rarely disagreed, according to a person close to the process.

Reviewing those transactions earlier this year, the boards found that the firms they invested with had paid substantial sums to third-party brokers. Prominent among the brokers: Marc Correra, a wealthy Democratic donor whose father, Anthony Correra, is a notable financial supporter of the governor.

The younger Mr. Correra and his partners received nearly $22 million in fees associated with the various investments. Both boards later said the size of the fees paid to Mr. Correra had not been fully disclosed to them.

"Certainly the depth and breadth of these fees were not disclosed -- the majority of the time we were unaware of them," said Charles Wollman, a spokesman for the State Investment Council.

Mr. Wollman said state officials still did not know whether the money for Mr. Correra's fees came directly out of public funds or were paid for by the state's investment partners. Either way, he said, the disclosure "absolutely" raised concerns.

Gov. Richardson said through his spokesman that he never discussed state investments with Mr. Correra. Mr. Correra's lawyer, Sam Bregman, said his client "has committed absolutely no crime."

Anthony Correra couldn't be reached for comment. His lawyer didn't immediately respond to requests for comment.

Earlier this year, Marc Correra was part of an investment group that won a coveted state license for a racetrack casino. He later dropped out of the project after news reports raised questions about his ties to Mr. Richardson.

Political observers here said Mr. Richardson had appeared to regain a bounce to his step after being cleared in the federal bond-deal probe in late August. He hosted a delegation of North Korean officials, flew to Cuba on a trade mission and told reporters that he was running again at full steam. Political analysts began suggesting that Mr. Richardson might yet join the Obama administration, perhaps as an international envoy.

Now, even members of the governor's party say they sense a new swirl of scandal erupting from Mr. Meyer's admissions.

Political analysts said the potential for a new scandal in Sante Fe could boost Republican chances in the 2010 governor's race. Mr. Richardson is barred by term limits from seeking re-election.
—Ana Campoy contributed to this article.

Write to Stephanie Simon at stephanie.simon@wsj.com