{"id":41460,"date":"2012-07-13T07:15:43","date_gmt":"2012-07-13T13:15:43","guid":{"rendered":"http:\/\/www.nmpolitics.net\/index\/?p=41460"},"modified":"2012-07-13T12:20:17","modified_gmt":"2012-07-13T18:20:17","slug":"nmfas-fraudulent-audit-is-a-big-deal","status":"publish","type":"post","link":"https:\/\/nmpolitics.net\/index\/2012\/07\/nmfas-fraudulent-audit-is-a-big-deal\/","title":{"rendered":"NMFA\u2019s fraudulent audit is a big deal"},"content":{"rendered":"
\"State<\/a>

State Auditor Hector Balderas<\/p><\/div>\n

The New Mexico Finance Authority, which acts as a bank for government agencies, is at risk because it hasn\u2019t been audited for fiscal year 2011. In addition, a former employee is alleged to have fraudulently made claims about the agency\u2019s financial health. The question is, why?<\/h4>\n

There are more questions than answers right now about why the New Mexico Finance Authority\u2019s<\/a> controller allegedly created a fraudulent audit of the agency\u2019s finances, but what\u2019s clear is that it\u2019s a big deal.<\/p>\n

State Auditor Hector Balderas<\/a> announced Thursday that his agency had uncovered the fraudulent audit. In a news release, his office announced that a special audit of NMFA\u2019s books would be conducted.<\/p>\n

NMFA quickly announced<\/a> that it had retained a law firm \u201cto conduct a thorough investigation to determine how the misrepresentation occurred and to recommend steps for strengthening financial reporting procedures,\u201d and had hired an accounting firm to complete the agency\u2019s fiscal year 2011 audit.<\/p>\n

Balderas also turned the matter over to law enforcement.<\/p>\n

\u201cI am moving aggressively to determine the full extent of this fraud perpetrated against New Mexico\u2019s taxpayers,\u201d Balderas said.\u00a0\u201cI\u2019m extremely concerned that a report was fraudulently created in order to misrepresent the authority\u2019s financial condition to agencies, investors and the public.\u201d<\/p>\n

The public confirmation of the situation by the state auditor and NMFA came as KOB-TV\u2019s Gadi Schwartz was preparing an investigative report on the matter. You can watch Schwartz explain why the matter is important here<\/a>.<\/p>\n

In short, Schwartz reported<\/a>, the situation has the potential to affect the agency\u2019s credit rating and its interest rates when it issues bonds to fund projects. That could cost taxpayers additional money.<\/p>\n

In a news release, NMFA\u2019s chief executive officer, Richard E. May, called the situation \u201cdeeply concerning,\u201d but said it would \u201chave no effect on NMFA\u2019s ability to meet its financial obligations.\u201d<\/p>\n

\u201cNMFA remains financially strong and has ample resources to meet all scheduled bond payments and other expenses,\u201d he said.<\/p>\n

Still, \u201cunder the circumstances,\u201d the NMFA news release states that the agency has \u201cdelayed the planned offering of Series 2012B Senior Lien Public Project Revolving Fund Revenue Bonds until after the audit of its financial results has been completed.\u201d<\/p>\n

Agency points finger at former controller<\/h3>\n

The fraudulent audit means NMFA, which acts as a bank for government agencies in New Mexico and issued bonds that helped fund projects such as Spaceport America and the Rail Runner, hasn\u2019t been audited for fiscal year 2011. That fiscal year covered the final six months of Bill Richardson\u2019s<\/a> tenure as governor and Susana Martinez\u2019s<\/a> first six months.<\/p>\n

So it\u2019s possible that not even NMFA officials have a full picture of the agency\u2019s current financial standing. In fiscal year 2010, NMFA\u2019s total operating expenses were almost $128 million, and its total liabilities and net assets were more than $1.8 billion.<\/p>\n

The fraudulent fiscal year 2011 audit was never submitted to Balderas\u2019 office, which identified NMFA as being at risk for fraud, waste and abuse in May because the agency was so late in filing its required annual audit. That red flag ultimately led to the discovery of the fraudulent audit, which had apparently been released to Wall Street.<\/p>\n

NMFA pointed the finger at its former controller. The agency\u2019s news release said the former employee, who left in early June \u201cbefore the issue was discovered,\u201d had \u201cprovided financial statements for use with third parties that he falsely represented as \u2018audited\u2019 by NMFA\u2019s outside auditing firm Clifton Gunderson LLP.\u201d<\/p>\n

The Maryland firm confirmed to Balderas\u2019 office that the audit the controller was circulating is not its work. The NMFA did not name the controller in question, but NMPolitics.net has learned that his name is Greg Campbell.<\/p>\n

In his news release, Balderas didn\u2019t point the finger at any specific current or former NMFA official.<\/p>\n

NMFA is familiar with scandal<\/h3>\n

This isn\u2019t the first time NMFA has been at the center of scandal in recent years. The agency was caught up in the transportation-bond scandal that dogged Richardson\u2019s tenure. Federal investigators were ultimately unsuccessful<\/a> in efforts to bring a pay-to-play case against Richardson and others in that case, but the U.S. attorney said in 2009 that they should not consider themselves exonerated<\/a>.<\/p>\n

Here\u2019s a reminder of NMFA\u2019s role in that scandal from Bloomberg News<\/a>:<\/p>\n

\u201cDavid Rubin, president and chief executive officer of Beverly Hills, California-based CDR Financial Products, one of the brokers raided by federal investigators, contributed a combined $100,000 to political action committees formed by New Mexico Governor\u00a0Bill Richardson\u00a0in 2003 and 2004. CDR made $951,566 advising the New Mexico Finance Authority on $420 million of interest-rate swaps in 2004.\u201d<\/p><\/blockquote>\n

Though charges have never been brought against Richardson or others in that case \u2013 and he and others have always maintained that they did nothing illegal \u2013 recent testimony in a separate case involving CDR implicated Richardson<\/a> in a pay-to-play scheme involving CDR and the NMFA contract.<\/p>\n

The governor essentially controls NMFA. Its 12-member board includes four cabinet secretaries and six others the governor appoints.<\/p>\n

At this point officials don\u2019t know why the fraudulent audit was created or circulated on Wall Street and whether it was to cover up a crime. But the fact that the fraudulent audit covered the last six months of Richardson\u2019s tenure \u2013 while the former governor and many others close to him prepared to vacate government jobs \u2013 is raising some eyebrows.<\/p>\n

Another question: How did the fraudulent audit get all the way to Wall Street? Audits are required to be reviewed at an exit conference by multiple NMFA officials and a representative of the auditing firm. Was such an exit conference held?<\/p>\n

Balderas hopes to learn the answers to these questions now that a special audit will be conducted.<\/p>\n","protected":false},"excerpt":{"rendered":"

There are more questions than answers right now about why the New Mexico Finance Authority\u2019s controller allegedly created a fraudulent audit of the agency\u2019s finances, but what\u2019s clear is that it\u2019s a big deal.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[142,122,107],"class_list":["post-41460","post","type-post","status-publish","format-standard","hentry","category-news-and-analysis","tag-crime","tag-gripgate","tag-roundhouse"],"_links":{"self":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts\/41460","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/comments?post=41460"}],"version-history":[{"count":0,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts\/41460\/revisions"}],"wp:attachment":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/media?parent=41460"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/categories?post=41460"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/tags?post=41460"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}