Gov. Bill Richardson (Photo by Heath Haussamen)

Gov. Bill Richardson is one of the worst governors in the nation, a Washington watchdog group said today, calling him one of 11 governors who “pride their self-interests over their states’.”

The new report, from Citizens for Responsibility and Ethics in Washington (CREW), represents the second time the group has gone after New Mexico politicians. In 2007, the group listed former U.S. Sen. Pete Domenici and U.S. Reps. Steve Pearce and Heather Wilson – all Republicans – as three of the 22 most corrupt members of Congress.

The group primarily targeted GOP officials in 2007, and on its current list nine of the 11 governors are Republicans. Richardson and the scandal-plagued New York Gov. David Patterson are the two Democrats to make the list.

CREW charged that Richardson has:

• “Used state investments to benefit political allies.”

• “Allowed pay-to-play scandals to plague his administration.”

• “Rewarded close associates with state positions or benefits, including providing a longtime friend and political supporter with a costly state contract.”

• “Failed to make state government more transparent.”

You can read the full report on Richardson here.

Many of the charges center on scandals involving Marc Correra and the state investment scandal, and around the now-closed federal GRIPgate probe into allegations of pay to play involving CDR Financial products.

The governor’s spokeswoman, Alarie Ray-Garcia, was quoted by The Santa Fe New Mexican’s Steve Terrell as saying CREW’s report “is ridiculous considering Gov. Richardson has led the way for ethics reform in New Mexico. It’s also difficult to take it seriously since it relies almost exclusively on the Albuquerque Journal as its source.”

The Roundhouse in Santa Fe (Photo by Peter St. Cyr)

Public corruption took a big hit in New Mexico in 2009 with the indictments of several people in high-profile cases including the housing authority scandal. In addition, the state Legislature finally moved on some long-sought transparency issues, which proponents say will make it more difficult to engage in the sort of in-the-dark decision making that can breed corruption.

The worst economic downturn since the Great Depression also consumed many headlines and much of the public debate in New Mexico in 2009. However, the Legislature and governor have yet to take concrete steps to fully address the state’s ominous budget shortfall.

Heading into 2010, public corruption, the economy and the November election loom large. In the meantime, here are my picks for the top 10 political stories of 2009:

10. Health-care reform

The debate over health-care reform consumed a great deal of time in Washington in 2009, and U.S. Sen. Jeff Bingaman, D-N.M., was at the center of it. As one of the so-called “Gang of Six” – a bipartisan group of senators trying to negotiate a compromise – Bingaman fought hard, albeit unsuccessfully, for a public option to be included in the Senate version of the bill.

The year ends with the House and Senate passing very different reform bills and a lot of negotiating left to be done before the president has an opportunity to sign any health-care reform in to law. There are already signs that the House might abandon its approval of a public option in a compromise with the Senate.

What will the final version of the bill look like? Time will tell.

A scene from the first tea party held in Las Cruces on April 15. (Photo by Heath Haussamen)

9. Tea parties

About 400 people showed up at the first tea-party rally held in Las Cruces in April. That was part of the movement’s first nationwide rally and was a show of force from those fed up with government spending, taxation and other issues.

But across much of the nation, tea-party events on the Fourth of July and at other times appeared to shrink, and the question became whether the tea parties were a one-time event or a new movement. A week after the April rally, supporters of the tea party movement in Las Cruces failed to show up at a meeting about a proposed quality-of-life tax increase and prove that they were ready to do more than stand on street corners and wave signs.

In September, the tea party movement showed new life in Las Cruces. At least 1,200 people showed up for a protest when the Tea Party Express rolled through town. FOX News broadcast live from the event.

Similar rallies in Albuquerque and El Paso were much smaller.

With the libertarian-leaning former N.M. Gov. Gary Johnson doing nothing to quell calls for him to run for president in 2012, the support the tea party movement appears to enjoy in cities like Las Cruces keeps things interesting.

8. Death penalty repeal

It wasn’t much of a surprise when Gov. Bill Richardson signed a long-sought repeal of the death penalty into law in March, but it was a relief and an emotional moment for opponents of the death penalty who had sought the ban for a long time.

Many, including the GOP’s Darren White, aren’t ready to give up the fight yet. White started a political action committee in March with the goal of repealing the state’s death penalty repeal. The PAC’s goal may not have much momentum, at least in the short term (at least it hasn’t shown momentum yet), but look for the GOP to try to make this an election-year issue in 2010.

Diane Denish

7. 2010 election looms

Politics never seem to stop anymore. The 2010 election got into full swing in 2009. Republicans set their sights on the Democrats’ likely nominee for governor – Lt. Gov. Diane Denish – knowing that defeating her next year is critical if the state’s minority party is to have any say in the redistricting that will take place in the next decade.

Tying Denish to scandals that have plagued the Richardson administration is the primary tactic of the state Republican Party and at least two of four Republican gubernatorial candidates.

The GOP’s other primary target appears to be U.S. Rep. Harry Teague, D-N.M. It became clear early in 2009 that the race between Teague and his predecessor, Steve Pearce, R-N.M., will be one of the hottest U.S. House contests in the nation in 2010. Anger over Teague’s support of cap-and-trade legislation earlier this year only makes this race more interesting.

In addition to the Republican primary for governor, there are hotly contested primaries for both parties’ nominations for lieutenant governor and land commissioner. 2010 promises to be a fascinating election year in New Mexico.

6. Progressives gain more ground in Las Cruces

Progressives took control of city government in Las Cruces in 2007 and 2008 with surprising election victories. They grabbed even greater influence in 2009 when progressive-backed candidates unseated two more incumbents.

Progressives now control five of six seats on the city council, and the mayor also enjoys the support of progressives. The state Democratic Party was quick to tout the November election as a sign of good things to come for Democrats in 2010.

Las Cruces appears to be bucking the national trend that is currently swinging toward the GOP in many areas. That’s especially important to consider in the context of next year’s race between Teague and Pearce. Pearce is certain to do well on the conservative east side of the district. Teague needs a significant win in Las Cruces.

Richard Berry

5. GOP takes over Albuquerque

In October, voters unseated longtime Albuquerque Mayor Martin Chávez, replacing him with Richard Berry, the city’s first Republican mayor since the 1980s. But that wasn’t the extent of the GOP gains: Republicans also took control of the Albuquerque City Council.

In a state in which Republicans have seen so few victories in recent years, and coming off the Barack Obama wave that was 2008, Republicans in New Mexico and nationally looked to their success in the Albuquerque election as a sign of good things to come in 2010. Are they right? Time will tell.

Regardless, the contrast between the GOP’s big wins in Albuquerque and progressives’ big wins in Las Cruces is stunning. The big question for 2010 is whether new voters who came out for Obama in 2008 will vote again in 2010 – and if they do, will they stick with Democrats or more around the political map?

One thing is likely: Berry won in part because the city’s public financing system leveled the playing field. Look for many Republicans in the state Legislature to express less resistance to expanding the state’s public financing system in the future. Were there money in the budget – which there isn’t – we might even see an expansion in 2010.

4. Government transparency increases

State Rep. Janice Arnold-Jones webcasting a committee meeting earlier this year. (Photo by Heath Haussamen)

New Mexico took a surprising and refreshing leap forward in the area of government transparency in 2009. It started when State Rep. Janice Arnold-Jones, R-Albuquerque, took a Web cam with her to legislative committee meetings and started webcasting, coming close to breaking House rules and daring leadership to stop her.

With the public and media watching, leadership didn’t stop her. As the New Mexico Independent, KUNM radio, two other Republican lawmakers and others joined in the webcasting, the House and Senate were quick to regulate the new fad, with the House approving official, audio-only webcasting and the Senate approving audio and video – from one camera in the back of the chamber.

Baby steps forward, to stay the least, but still steps forward.

The Legislature took other steps forward in the area of transparency. They approved a long-sought proposal to open legislative conference committees to the public, which immediately proved to be a good thing; increased the frequency that candidates must submit campaign finance reports; and changed the state’s Inspection of Public Records Act to require that government agencies respond to records requests submitted via e-mail.

In addition, there were some visible victories for transparency this year when three agencies that had previously refused to release subpoenas they’d received as part of ongoing investigations — the New Mexico Finance Authority, State Investment Council and Educational Retirement Board — reversed courses and released them (The ERB first, then the NMFA, then SIC).

The lone holdout? Richardson’s office. He played fast and loose with the public records act, blacklisted me and gave other journalists a hard time. Richardson’s refusal to be transparent leaves him with a black eye as the Legislature and even some government agencies under his control are doing the opposite.

With the scandals surrounding Richardson continuing to taint close friends of the governor, I can’t help but wonder if he’s refusing to be transparent because he has something to hide.

3. Mr. Richardson doesn’t go to Washington

Barack Obama and Bill Richardson sharing a laugh in Las Cruces in 2008. (Photo by Heath Haussamen)

We knew in August 2008 that the FBI was investigating allegations that CDR Financial Products received a state investment contract that paid almost $1.5 million in exchange for $110,000 in contributions to two Richardson political committees and his 2006 gubernatorial re-election campaign. Despite the warning signs, we knew in November 2008, or at least when it became official in December 2008, that Obama had chosen Richardson to be his commerce secretary.

Richardson’s political ambitions collided with the investigation in January when he withdrew his nomination to be commerce secretary. At the time, Richardson and Obama portrayed the move as temporary.

“I look forward to his future service to our country and in my administration,” the president said of Richardson.

That made the dramatic plunge Richardson took in the following weeks and moths even more shocking. Obama made a joke on national television at Richardson’s expense days after the governor withdrew his nomination. Richardson’s approval rating tanked. The media started more intensely scrutinizing the governor and his administration.

Two more cases – a whistleblower lawsuit filed by former ERB Investment Officer Frank Foy and the national investment scandal that’s already led to convictions in New York – further tainted the Richardson administration. When the U.S. attorney confirmed in August of this year that Richardson wouldn’t be charged in the CDR probe, political analysts were quick to point out that the governor wasn’t yet in the clear.

In making known that Richardson and others his office investigated were not exonerated, the U.S. attorney reserved the right to reopen the case at any time. CDR officials were later indicted in a separate case not related to New Mexico.

At the end of the year, the man who came back to New Mexico in 2002 with his eyes on winning the presidency in 2008 remains instead a lame-duck governor whose future is unclear.

2. Economic downturn

Bailouts in Washington appeared to begin to stabilize – at least temporarily – the nation’s economy in 2009. But the situation remained bad throughout the year, and New Mexico wasn’t immune to the greatest economic downturn since the Great Depression.

This isn’t the top New Mexico political and government story of 2009, in my opinion, because the state’s leaders haven’t yet dealt with the situation – meaning much of the hard work and much of the pain is yet to come.

Lots of pain has already been felt. For example, many newspapers made drastic cuts this year. The housing market has tanked. Oil and gas revenues are still down. But government, by far the largest employer in New Mexico, avoided making the most difficult decisions, in part because it used one-time, federal stimulus money to help prop up the state budget.

The governor started making painful moves recently with the announcements of mandatory furloughs and layoffs of 59 political appointees, but there’s more to come. Left to deal with in the upcoming session is a budget shortfall of at least several hundred million dollars. Some say the shortfall could be as much as $1 billion.

Many agree that tax increases or other revenue raisers and massive cuts will be necessary. The debate over both threatens to create gridlock in the Legislature, and the fact that 2010 is an election year introduces another dynamic — some will be thinking more about doing what’s politically wise than what’s necessary.

Regardless, lawmakers and the governor failed to make the hard choices in 2009, so, unless more federal stimulus money is approved, they’ll have to make those decisions in 2010.

1. Public corruption

Former Region III Housing Authority Director Vincent "Smiley" Gallegos

Though rumors of pending indictments of Richardson or others in the CDR case never came to fruition, several other public corruption cases led to criminal indictments in 2009:

• In April, the attorney general secured the indictments of Public Regulation Commissioner Jerome Block Jr. and his father, a former PRC member, on felony charges related to misusing the state’s public financing system.

• In June, former Region III Housing Authority Director Vincent “Smiley” Gallegos and others were indicted in the long-standing housing authority scandal. The charges against three of the four, including Gallegos, include fraud and money laundering.

• In July, former Secretary of State Rebecca Vigil-Giron and three others were indicted on 50 counts including money laundering, fraud, soliciting or receiving kickbacks and tax evasion in the alleged theft of millions of dollars.

Those three cases — plus the now-defunct probe into the Richardson administration and CDR, the investment scandal and a massive embezzlement in the Jemez Mountain School district — made corruption an even more prominent story in 2009 than the economy.

In the case of the investment scandal, here’s what we know: Former State Investment Office Gary Bland, according to SIC member and Land Commissioner Patrick Lyons, was allegedly pushing investment firms to hire certain placement agents. Aldus Equity’s Saul Meyer, when he was the state’s investment adviser, was recommending that the state make investments that were pushed on him by politically connected individuals even though, by his own admission, those investments may not have been in the best interest of the state.

And Marc Correra, a politically connected placement agent (his father is a close friend of the governor) who shared in as much as $22 million in finders’ fees for helping investment companies win business with the state, has apparently gotten out of Dodge.

Meyer, who has already pleaded guilty to charges in New York, is reportedly cooperating with investigators in New Mexico. Look for something to happen with this case in 2010.

The scandals pushed the Legislature to approve campaign contribution limits earlier this year that will take effect shortly after the 2010 election. Many are laying the groundwork for another push to create a state ethics commission to educate public officials on how to behave (yes, they apparently need such education) and punish them when they don’t.

There are calls for other reforms too, including the creation of a whistleblower protection law and the banning of contributions from state lobbyists and contractors. And the AG is coming under pressure to act on almost 100 cases filed under the Fraud Against Taxpayers Act that remain sealed.

Starting with the indictments of two state treasurers in 2005, the second half of the decade has exposed deep-rooted public corruption in New Mexico. But have we started turning things around?

That may be the biggest question as we enter 2010.

Dennis Kintigh (Photo by Heath Haussamen)

I have been surprised at the minimal attention given to the recent indictment of the heads of CDR Financial Products — David Rubin, Zevi Wolmark and Evan Zarefsky, all of California.

CDR was the focus of attention when Gov. Bill Richardson’s nomination to be secretary of commerce was derailed. The governor’s name was withdrawn after it became known there was an ongoing federal probe into the relationship between CDR and the New Mexico Finance Authority (NMFA) and contributions to political action committees controlled by Gov. Richardson.

That investigation concluded in the late summer of 2009. U.S. Attorney Greg Fouratt sent a private letter to attorneys representing individuals under investigation stating no charges would be filed. The letter, which was leaked to the news media and for which Mr. Fouratt was criticized, contained the little-noted clause that stated that the decision to not file charges was “limited solely to each party’s conduct in NMFA’s award of financial work to CDR in 2004.”

In light of the indictments returned in the southern district of New York, it appears the clause was underappreciated.

The entire CDR controversy is long, complex and, for many, just too hard to understand. That is unfortunate, as I believe it is a significant issue that could have tremendous impact on New Mexico. Previous news articles have focused on the activities of NMFA, GRIP bonds, friends of the governor and contributions to political funds controlled by Gov. Richardson.

Indictment basics

At this time I would like to look closely at the actual indictment returned on Oct. 29 in the southern district of New York (SDNY). An indictment is a formal, written accusation of wrongdoing.

The SDNY is a federal court that covers a portion of the State of New York. The SDNY includes Manhattan, the Bronx and other counties near New York City. Populous states like New York often have multiple federal court districts, but here in New Mexico we have one federal district for the entire state.

The U.S. Attorney’s Office for the SDNY has long been considered a flagship office for the prosecution of federal financial crimes. This makes sense, as Manhattan is where Wall Street and many major financial corporations are located.

This CDR indictment alleges that nine specific crimes (or counts) were committed by Rubin, Wolmark and Zarefsky. The indictment is the result of an investigation by the FBI and the IRS in which evidence was presented to a federal grand jury. That grand jury concluded there is “probable cause” to believe the named defendants committed the specified crimes.

In my 24 years in the FBI, I have never seen a “ham sandwich” indicted, as is routinely alleged by those who wish to trivialize a federal grand jury indictment. This is very serious. Top officials in the Department of Justice signed off on this document.

The CDR indictment

The actual indictment is 39 pages long. The beginning has a very useful background section that explains the role of “brokers” in the issuance of municipal bonds.

Towns, school districts, housing authorities and other government agencies, referred to as “issuers,” raise money for specific projects by selling bonds. These bonds are loans the agency will pay off over time. The money raised by selling these bonds is spent over time. The “issuers” will routinely invest the unneeded proceeds to earn money.

Think of it like getting a home improvement loan to cover numerous repairs, and you put the money in a savings account until you need to move it to your checking account. These “savings account” investments are done with financial institutions like banks and insurance companies, who are called “providers.” The individuals who represent these “providers” are called “marketers.”

“Brokers” like CDR are supposed to get the best deal for the “issuers” by getting multiple offers from numerous “providers” as bids submitted by “marketers.” In a perfect world, a number of “marketers” send in sealed bids promising specific returns on investments to the “broker.” The “broker” then opens the bids and picks the “provider” offering the best deal.

The federal grand jury indictment charges that CDR (the “broker”) rigged the bids with corrupt “providers” through crooked “marketers.” “Issuers” were cheated out of a fair return on the taxpayer’s money, while CDR and their cronies got kickbacks, the indictment alleges.

It is claimed in the indictment that this scheme started back in 1998 and was ongoing until at least November 2006. The first count listed in the indictment is “restraint of interstate trade and commerce,” which addresses the bid-rigging allegation.

Counts 2 and 3 are conspiracy. “Conspiracy” is an agreement to commit an illegal act. Such an agreement is a crime in itself if some action occurred to fulfill the agreement, an “overt act.” Because it is an ongoing criminal enterprise, events that occur outside the statute of limitations can be presented at trial. The government must prove the agreement existed and that an “overt act” was committed (unless it’s a drug crime).

Count 2 alleges an agreement between CDR and a company only identified as “Provider A.” The overt acts allegedly involve CDR executives and “Marketer A,” the indictment says. Phone calls and events that occurred in late October 2003 are listed in the indictment.

Count 3 alleges a similar scheme involving “Provider B,” Marketers B-1 and B-2 and a “state housing agency.” This count identifies a phone call from New Mexico on May 20, 2004, as an overt act. Although reference is made to a “state housing agency” together with a call from New Mexico, there is nothing in the indictment that links this call to the ongoing Region III Housing Authority investigation and the indictment of former State Rep. Vincent “Smiley” Gallegos.

Marketer A, B-1 and B-2 are not identified, and this is usual because they are probably cooperators who have cut a deal. The identity of Marketer A, B-1, B-2 and Provider A and B will be known prior to trial. The identities of the victim “issuers” also are not revealed because that could lead to figuring out who is cooperating.

Counts 4, 5 and 6 are “Wire Fraud,” which means money allegedly was transferred electronically across state lines to further this criminal plan.

Count 7 alleges “false statements” by Zarefsky to the FBI in November 2006. Two points here are:

• Never lie to the FBI. It’s a crime, even if you’re not under oath.

• This alleged criminal act was committed in late November 2006, which places the conspiracy well within the five-year statute of limitations and allows the prosecutors to bring in all of the alleged criminal acts that occurred six, seven or more years ago.

Count 8 alleges interfering with administration of internal revenue laws. One of the acts presented in this count refers to a “state housing agency” and a phone call on May 19, 2004.

Finally, Count 9 alleges “Fraudulent Bank Transactions” in which the kickbacks to the CDR executives were concealed.

Conclusion

This criminal indictment paints a picture of a sophisticated criminal enterprise which operated in many states, including New Mexico.

While CDR’s involvement with NMFA was not addressed, these charges from New York suggest the existence of a pattern of criminal activity that was occurring at the same time as CDR involvement in New Mexico. So what did happen in New Mexico? Perhaps we will learn much about the inner workings of CDR as the New York case unfolds.

Significantly, in the case in which Richardson and his office were under investigation, Mr. Fouratt’s letter also did not “preclude the United States or the grand jury from reinstituting such an investigation without notification.”

Rubin, Wolmark and Zarefsky will be under tremendous pressure to reach a deal with federal prosecutors. As is always the case, the individuals who come forward first with the most useful testimony will get the best deal. Their attorneys know this.

These charges, together with the recent guilty plea by Saul Meyer in a case by the New York attorney general’s office, plus the Region III Housing Authority case by the New Mexico attorney general, promise to keep allegations of corruption in the forefront of the news.

The next year could be very interesting for New Mexico politicians.

Kintigh is a Republican state representative from Roswell and a retired FBI agent.

Former Region III Housing Authority Director Vincent "Smiley" Gallegos

Bloomberg reporter delves deep into a bond deal involving players under indictment in separate scandals 

“Vincent ‘Smiley’ Gallegos, who ran a state housing agency out of an office next to a used-car lot in Albuquerque, New Mexico, should have known better when he borrowed $27.7 million, the Internal Revenue Service said.” 

So begins the second of two articles published today that are the result of months of investigation by Bloomberg’s Elliot Blair Smith into CDR Financial Products.

Confused? Wondering if I’m getting my New Mexico political scandals mixed up? I’m not. This article involves both CDR – the company at the center of the now-defunct GRIPgate scandal that cost Gov. Bill Richardson the U.S. commerce secretary post – and Gallegos – the man at the center of the state’s housing authority scandal. 

CDR, the company’s founder David Rubin and two other employees were indicted last week in an unrelated probe into bid rigging in the nation’s municipal bond market. 

Gallegos and three others are currently under indictment in the housing authority case. Gallegos and two others are facing felony charges including fraud and money laundering related to the misuse of bond money. A fourth defendant is charged with tampering with evidence. 

Today’s reports by Smith don’t deal directly with either scandal. Instead, they’re an in-depth look at the way CDR has done business across the nation for some time. The second article focuses on more than $27 million in bonds the Region III Housing Authority in Albuquerque sold in 2003 “with the help of” CDR. 

“At the time the authority issued the bonds, there was ample evidence that the program would not be successful,” the IRS said after investigating the deal, according to Bloomberg. “A prudent person would not have taken the same actions.” 

Thinking that’s more of the same from an affordable housing agency that collapsed in 2006 after it defaulted on more than $5 million in bonds it owed the state? You’re probably not the only one. 

From the Bloomberg article:

“Two months later, federal tax authorities revoked the bonds’ tax exemption. The IRS found that one of the agency’s banks, Paris-based Societe Generale SA, would earn as much as $1.5 million on a program for low-income and first-time homebuyers that lent only about $2.6 million. Tax authorities also found that CDR was collecting more than $50,000 a year from Societe Generale in fees not disclosed in public bond documents.” 

And the context: 

“The unraveling of Region III investments shows how municipal financing arranged in the dark costs as much as $6 billion a year through lack of disclosure, officials’ mistakes and public corruption, according to data compiled by Bloomberg. It also reveals how financial professionals may enrich themselves by taking advantage of a tax benefit worth $36 billion a year to state and local governments and non-profit agencies that borrow.” 

There’s a lot of good stuff in this article, which you can read by clicking here, and the other Smith report about CDR, which you can read here.

A screen shot from CDR’s Web site.

Indictment details a phone call ‘between New Mexico and New York’ that involved alleged bid-rigging related to ‘the award and performance of an investment agreement for a state housing agency’

CDR Financial Products, the company that was at the center of the scandal that cost Gov. Bill Richardson the U.S. commerce secretary post, was indicted along with its founder and two other employees today as part of a national probe into bid rigging in the municipal bond market.

The 39-page, nine-count indictment charges the company, founder David Rubin and two other CDR employees with “conspiring to rig bidding on investment contracts sold to local governments” in several states, Bloomberg is reporting.

The indictment raises more questions than it answers in New Mexico, considering that it comes two months after Richardson and former staff members were told they wouldn’t be charged in a separate probe into CDR’s dealings with the Richardson administration.

One of the allegations in the indictment mentions New Mexico, stating that, “on or about May 20, 2004, the day of the bid, during an interstate telephone call between New Mexico and New York,” an unidentified person “checked with a co-conspirator at CDR to make sure that a bid rate suggested by Rubin would be a winning bid and then submitted a bid in accordance with Rubin’s suggestion.”

That’s in relation to “the award and performance of an investment agreement for a state housing agency,” the indictment states, but it doesn’t name the housing agency or even the state in which it’s located.

Though it may not be related to today’s indictments, it’s noteworthy that the date of that New Mexico-New York phone call roughly coincides with CDR’s attempt to win a contract from the New Mexico Finance Authority (NMFA) related to the GRIPgate scandal.

On June 18, 2004, Rubin gave $75,000 to a political action committee started by Richardson, according to the Albuquerque Journal. Five days later, staff recommended that CDR be given a sole-source escrow services contract. The NMFA awarded the contract on June 30 of that year.

A month later, CDR was paid $443,265 for handling that escrow account.

CDR had at least one other contract in New Mexico. It underwrote $27 million in bonds the scandal-plagued Region III Housing Authority sold to a French bank in 2003.

The governor’s office did not immediately respond to a request for comment on today’s indictments.

More details

Here are more details from Bloomberg:

“The indictment in U.S. District Court in New York alleges that CDR and its employees conspired to fix prices on investment contracts that local governments buy with the proceeds of municipal bonds. CDR managed the bidding process for the investments on behalf of local governments.

“The indictment is the first to result from a more than three-year investigation of the U.S. municipal bond market. A conspiracy to fix prices on the investments would have cost taxpayers by giving them lower returns than they would receive in a competitive auction. More than a dozen banks, brokers and insurers have been subpoenaed under the investigation.”

And this from The Associated Press:

“Prosecutors said the company secretly manipulated the bidding process to enrich themselves and the bidding companies at the expense of the municipalities, the IRS or both.

“Under the scheme, CDR would arrange in advance which company would win a particular bid for bond business and arrange kickbacks to CDR in the form of inflated fees, authorities said. If convicted of the most serious charge against them, the three men face a maximum prison sentence of 20 years.

“The company could face a maximum fine of $100 million for the bid-rigging charge.”

A spokesman for CDR told Bloomberg his firm hadn’t fully reviewed the complaint but rejected the allegations.

“The government is alleging a certain kind of conspiracy that is just baseless,” Allan Ripp was quoted as saying. “CDR sternly asserts these charges are wholly without merit.”

The GRIPgate scandal

In August, the U.S. attorney for New Mexico confirmed that Richardson and others wouldn’t face charges following a yearlong investigation into allegations of pay to play related to a lucrative state contract given to CDR.

CDR was paid to advise the NMFA on interest-rate swaps and restructuring escrow funds for $1.6 billion in bonds related to the transportation project dubbed GRIP, or Governor Richardson’s Investment Partnership. The allegation was that CDR received the state contract – which paid the company almost $1.5 million – in exchange for $110,000 in contributions to two Richardson political committees and his 2006 gubernatorial re-election campaign. That included the June 2004 contribution of $75,000.

That probe led to political hard times for Richardson, who withdrew his nomination to be President Barack Obama’s commerce secretary on Jan. 4.

In confirming in a letter to attorneys for Richardson and others who were under investigation that the probe was being closed, U.S. Attorney Greg Fouratt wrote that his office’s investigation found that “pressure from the governor’s office resulted in the corruption of the procurement process” and said that the letter “should not be interpreted as exoneration of any party’s conduct in that matter.”

Fouratt’s letter also stated that the decision to drop the case in August “shall not preclude the United States or the grand jury from reinstituting such an investigation without notification if… circumstances warrant …”

The indictment

Here’s the indictment. You’ll find the mention of New Mexico on Page 27.

Rubin Indictment

Update, 7:15 p.m.

State GOP Chairman Harvey Yates Jr. said in a prepared statement that it’s “disturbing that the same firm which was at the center of a federal probe here in New Mexico is again facing such serious charges.”

“It is also unfortunate that these developments seem to substantiate the sentiment that U.S. Attorney General Eric Holder decided prematurely to quash the investigation concerning alleged pay-to-play activities involving the Richardson administration and CDR,” Yates said. “The question as to whether this was done as a matter of justice or whether this decision was politically motivated remains unresolved in the minds of many New Mexicans.”

“And we renew our call for Mr. Holder to provide transparent and honest answers concerning this matter,” Yates said. “He should start by releasing the FBI file covering the FBI’s investigation into CDR’s activities in New Mexico.”

The New Mexico Independent’s Trip Jennings contributed to this report. This article has been updated for clarity.

Photo courtesy lotyloty/flickr.com

You may recall that my business, Haussamen Publications, filed a lawsuit in April seeking the release of subpoenas received by the New Mexico Finance Authority (NMFA) during the investigation into allegations of pay to play in the Richardson administration involving CDR Financial Products.

The lawsuit came after the NMFA refused to release copies of the subpoenas in February in response to a records request.

Well, after the probe ended last month without charges being filed, I decided to re-request copies of the subpoenas to see if the agency’s position on whether they were public records had changed.

It had. On Friday, the NMFA provided me with copies of two subpoenas it had received. You can read them by clicking here and here. You can also click here to read the letter that accompanied the subpoenas.

There’s nothing all that earth-shattering in the subpoenas, especially now that the probe has ended. Most of the names are familiar. Among the records the grand jury sought: anything related to the selection of CDR for the lucrative state bond contract, documents related to a finance council set up by the governor and correspondence with a reporter at Bloomberg who first wrote about the CDR deal in late 2006.

The lawsuit filed by my business had contended that any subpoenas NMFA received in the federal probe should be public — regardless of whether there was an ongoing investigation — and noted that the governor’s office released such a document in response to an identical request while the probe was ongoing.

In denying my original request, Reynold Romero, the NMFA’s general counsel, had written that “release of the requested documents could compromise or impede an ongoing federal investigation.” In an interview before the lawsuit was filed, Romero told me his denial wasn’t based on any of the specific exemptions to the state’s Inspection of Public Records Act. He instead cited the provision that allows exemptions “as otherwise provided by law.”

I still contend that NMFA should have released the subpoenas months ago. But at least the public can see them now.

Heath Haussamen

“Hi. I’m not going to file criminal charges against your clients at this time, even though my investigation revealed wrongdoing. Know that I’m watching your clients. There are other investigations pending, and if circumstances warrant, I might restart this one as well.”

Though that’s not a direct quote, that’s essentially what U.S. Attorney Greg Fouratt wrote on Thursday in a letter to lawyers representing Gov. Bill Richardson and other potential defendants in the investigation into allegations of pay to play involving CDR Financial Products.

It was a highly combative letter that was inappropriate. Let me explain.

Whatever the reason charges weren’t filed, we live in a system in which people are innocent until proven guilty. The United States opted to not file charges against Richardson and others in this case and closed it. So, from a legal standpoint, Richardson and others are innocent, regardless of what Fouratt says.

That should be the end of the story, unless Fouratt wants to allege something about the motives behind the decision by his bosses in Washington to put an end to the case (if the decision was made in Washington, which is a lingering question), or unless he comes across new evidence in the future that leads to the reopening of the case.

Instead, we have the top federal law enforcement officer in New Mexico publicly alleging wrongdoing in this case while simultaneously informing those under investigation that he has no intention, at least at this time, of trying to prove in a court of law that such wrongdoing occurred.

Joseph diGenova, a former U.S. attorney, called Fouratt’s letter “stupid” in an interview with The Associated Press. That’s because, according to the article, “it makes allegations of corruption after the case is over.”

“That letter is an outrage and the U.S. attorney who wrote it should be fired. The case is closed. If he had charges, bring them. Otherwise, he should shut up. He’s being a politician now, not a prosecutor,” the news service quoted diGenova as saying.

The court of law versus the court of public opinion

Some will balk at me accusing someone else of not being fair to Richardson. I spend a great deal of time heavily scrutinizing the actions of the governor and his associates. I call him out when his actions create the appearance of impropriety, and I plan to continue doing that. I’m currently blacklisted by the governor’s office.

But I’ve been careful in the past to not accuse Richardson of actual wrongdoing. When asked during interviews with other media outlets, I’ve always said I don’t know if a crime was committed.

I think Richardson and his staffers have tried to toe the line — and sometimes leaned so far over it they almost fell over — in their efforts to raise money. Richardson was launching a presidential bid from a small state. He worked hard to raise every dollar possible.

CDR is one of the best examples of how those efforts have created an appearance of impropriety. The company gave $110,000 to two Richardson political action committees and his 2006 re-election campaign and won a state contract that paid almost $1.5 million — and the actual contract has vanished, if it ever physically existed in the first place.

But an appearance of impropriety doesn’t mean actual impropriety existed. Was there a handshake, a head nod, a handwritten note on a napkin through which Richardson or someone close to him agreed to give CDR the contract in exchange for contributions? I’ve never seen proof that there was. And the U.S. attorney doesn’t plan to try to prove that there was such an agreement in this case.

Fouratt’s job is to prove guilt in a court of law, not in the court of public opinion. Apparently, he needs to be reminded of that.

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Greg Fouratt

Lots has been written about the letter U.S. Attorney Greg Fouratt sent to the lawyers for people under investigation in the GRIPgate probe that ended last week.

In the letter, Fouratt said he would not charge anyone under investigation in the case, but that the letter “should not be interpreted as exoneration of any party’s conduct in that matter.”

The New Mexico Independent has obtained the full letter and published it online. You can read it by clicking here.

A former aide to Gov. Bill Richardson who was once at the center of the GRIPgate probe reiterated on Friday — as the probe came to an end without charges being filed — what he’s said before: that he and the governor acted “appropriately and ethically at all times.”

Federal prosecutors had been investigating whether Dave Contarino, who Richardson once described as his “most senior and trusted aide,” was involved in the alleged pay-to-play scheme that derailed the governor’s nomination to be commerce secretary. The investigation was formally dropped last week.

Here’s Contarino’s statement:

“As the Governor and I have said from the beginning, we acted appropriately and ethically at all times and a fair and impartial investigation would bear out those facts.

“This investigation has gone on for over a year. I want to acknowledge and thank the literally hundreds of friends in NM and across the country who have supported me through this ordeal. Their faith and belief in me — and in Governor Richardson — were a source of great strength through the long months of headlines, rumors, baseless accusations and efforts by some to exploit this investigation for personal and political gain.

“I worked tirelessly as a public servant and have given my time and energy to help improve the lives of New Mexicans. I hope that my year-long ordeal does not deter others from dedicating themselves to public service.

“I am happiest for Governor Richardson who, in the face of all this, continued to make a positive difference — every day — in the lives of New Mexican citizens.”

It was my first national TV interview. It was quite interesting to have to repeatedly resist the hosts’ open bias as I sought to analyze the major news story that was developing in New Mexico.

You can watch the segment right here: