Sen. Tim Keller, right, with Sen. Cisco McSorley earlier this year. (Photo by Peter St. Cyr)
‘These bills are critical to restoring the investment community’s faith in our state,’ Sen. Tim Keller says
The legislative Investment Oversight Committee will meet today for the last time before the upcoming session to consider three bills that could dramatically reform the State Investment Council (SIC) and other state investment agencies, which have been plagued by scandal in recent months.
The bills are being pushed by Sen. Tim Keller, D-Albuquerque.
“These funds — the ERB (N.M. Educational Retirement Board), PERA (Public Employees Retirement Association) and SIC — collectively manage tens of billions of dollars in tax payer money, and have been involved in federal investigations regarding third party marketers, pay to play, financial fraud and under-performance issues,” Keller said. “My intention working on many of these bills is to address the glaring structural problems relating to oversight, accountability and expertise in fund operation.”
Keller said his bills “are critical to restoring the investment community’s faith in our state, assuring them that we have reasonable controls and qualified governing bodies.”
“I’m pleased the Investment Oversight Committee will be considering several proposals to help address the lack of confidence in the governance of our state investment funds,” Keller said. “These bills basically say that if we are going to invest billions of tax money in ‘alternative investments,’ we have to have some expertise on board to oversee the transactions and third parties.”
Alternative investments are investments other than the traditional ones such as stocks and bonds. New Mexico began delving into alternative investments several years ago.
The bills
The first of Keller’s bills, which is similar to Senate Bill 460 from the regular session held earlier this year, would add seats to the SIC that would be appointed by lawmakers — not by Gov. Bill Richardson, who chairs the council. Richardson vetoed SB 460.
Keller also hopes to address structural concerns regarding alternative investments, reporting relationships inside the chief investment office (CIO), and the responsibility of hiring and firing third party marketers.
Currently in New Mexico any fund that intends to invest more than 10 percent in an alternative investment is required to create an advisory committee that reviews all fund transactions. Keller wants anyone appointed to a fund review committee to have at least 10 years of experience in that particular asset class.
Keller said that bill would dissolve a committee if a fund’s investment allocation dropped below 5 percent.
“The idea here,” Keller said, “is to ensure that there is someone in the room with relevant asset class experience to provide oversight to the hiring of third parties and investments in alternative investments.”
Keller’s third bill would authorize the state attorney general to investigate financial fraud and changes the state definition of fraud to include financial-related activities.
In June, Keller released a policy memo, comparative analysis chart and another analysis documents related to his proposals.
He told NMPolitics.net that the governor’s office has assured him it also wants to consider additional oversight of the state’s investments.
The ongoing scandal
The state investment process is under scrutiny because of a third-party marketer scandal that started in New York and has spread to at least 30 other states, most notably New Mexico. Federal investigators are probing the situation in New Mexico, subpoenas sent to the SIC and ERB show.
Former State Investment Officer Gary Bland, who recently testified before the U.S. Securities and Exchange Commission about the scandal, has been accused of pushing investment firms to hire certain placement agents. And the state’s former investment adviser, Aldus Equity’s Saul Meyer, has admitted, in pleading guilty to criminal charges in New York, to recommending that New Mexico 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.
The third-party marketer whose name comes up most often is Marc Correra, who has shared in as much as $22 million in placement fees during Gov. Bill Richardson’s tenure. Correra is the son of Anthony Correra, a prominent friend and Richardson donor who’s also been dragged into the controversy because he was involved in the hiring of Bland at the SIC.
Neither Correra has been publicly accused of wrongdoing.
St. Cyr is a contributing writer for this site and a reporter at 770KKOB.com. He can be reached at peter.stcyr@gmail.com. Heath Haussamen also contributed to this report.