In addition, governor orders the ERB to ban the use of third-party marketers for six months, consider making ban permanent
A day after Gov. Bill Richardson announced that the State Investment Council (SIC) would terminate its contract with a company tied to scandal in New York and New Mexico, the Educational Retirement Board (ERB) is following suit and also firing Aldus Equity.
The move, ordered by Richardson, was announced today in a news release from the governor’s office along with the ERB’s six-month ban on the use of third-party marketers by investment agencies seeking to do business with the agency. The ERB will evaluate the long-term implications of making the ban permanent, the news release states.
“I feel strongly that a ban on these agents is necessary to restore confidence in our investment practices,” Richardson said in the release. “The practice of fund managers paying huge fees to third-party agents may be legal and legitimate, but the potential for a conflict of interest is troubling. I’d rather remove that potential conflict and be confident that our investments are not tainted in any way.”
Richardson himself has come under scrutiny in the growing scandal involving third-party marketers, but he has taken several decisive steps in the last two days in response to the situation. On Wednesday, he ordered the SIC to fire Aldus and to suspend all investments in anything other than stocks and bonds.
The termination of the agencies’ contracts with Aldus follows internal probes into Aldus’ dealings in New Mexico and the FBI’s questioning of state officials about the company.
Earlier this month, the SIC and ERB suspended their contracts with Aldus, which has handled billions of dollars in investments for the state. Aldus is one of several firms that allegedly agreed to pay kickbacks in exchange for business with the state of New York’s pension fund.
Another firm under scrutiny is Quadrangle Group LLC. The head of President Barack Obama’s auto-bailout program, Steven Rattner, was a managing principle in the firm until he left to take the government job in February. Though he hasn’t been charged with any wrongdoing, Rattner has been identified by national media outlets as the unnamed person in federal documents who allegedly arranged in late 2004 for Quadrangle to pay $1.1 million in exchange for business with the state of New York.
Hank Morris is one of two men under indictment in the New York case. He’s accused of using his position in that state’s comptroller’s office to shake down companies wanting to do business with the state’s pension fund. Morris is accused of taking 95 percent of the money from Quadrangle as a kickback. He denies the allegations.
Morris served as the third-party marketer who helped Aldus and Quadrangle win the investment deals in New Mexico. Rattner gave $20,000 to Richardson’s gubernatorial campaigns.