SANTA FE, N.M. (AP) — A group advocating for open government is asking a state agency to prohibit confidentiality provisions that restrict public disclosure of settlements with investment firms, such as those under investigation in an alleged pay-to-play scheme.
The New Mexico Foundation for Open Government is upset because the State Investment Council reached a $250,000 settlement that wasn’t made public for more than a year because the agency agreed not to issue a press release or voluntarily announce the deal with a California-based investment firm.
The council oversees state endowment funds worth about $15 billion, and on Tuesday is considering proposed guidelines for handling settlements as it tries to recover money for investments allegedly influenced by a pay-to-pay scheme during former Gov. Bill Richardson’s administration.
A draft of the proposed policy says the council “strongly disfavors” settlements with confidentiality provisions. However, the foundation wants tougher language to make it clear there can be no restrictions on public disclosure of settlements.
“We understand that the state has a financial interest in reaching settlements such as this one, but that interest cannot trump the state’s duty to act transparently on behalf of the public,” Gwyneth Doland, the foundation’s executive director, said in a letter to Gov. Susana Martinez, who leads the council.
Martinez expressed support Monday for investment settlement disclosures.
“I definitely agree that if you are settling with taxpayer dollars and that is part of the settlement that the taxpayer deserves to know what the settlement is,” Martinez said after a speech in Albuquerque.
The council has filed lawsuits against its former top manager and others alleging that they improperly steered state investments to the governor’s political supporters, some of whom received millions of dollars in fees for serving as third-party placement agents on deals to have private investment firms manage state money. A former public pension fund official also has brought whistleblower lawsuits that make similar allegations.
State officials have said they were mostly unaware that money management firms paid fees to politically-connected individuals and brokers for allegedly helping market investment deals to the state. The agency has tried to recover money from some firms by negotiating settlements to avoid the expense of a lawsuit and potential court fight.
Under a settlement reached by the council last year with Rustic Canyon/Fontis Partners, which is based in Pasadena, Calif., the two sides agreed to “use their best efforts to keep this agreement … strictly confidential.”
The state collected $250,000 from the firm, but officials agreed not to issue a press release or voluntarily announce the settlement. However, the settlement could be released in response to questions from the Legislature or a request under New Mexico’s Inspection of Public Records Act, which is what happened a year later when the Albuquerque Journal first reported about the settlement.
The council approved a $20 million private equity investment with the California firm in 2005 and that investment remains in place. The firm admitted no wrongdoing as part of the settlement but agreed to cooperate with the council’s investigation of pay-to-play allegations.
Council spokesman Charles Wollmann said the agency’s “overriding charge is to optimize returns, or in this case, recoveries to the fund — which benefits all New Mexicans. At the same time, the council also recognizes the critical importance of adhering to the letter and spirit of the Inspection of Public Records Act, which is why we fought to include the reporting stipulations in this agreement.”
Without the disclosure restrictions in the settlement, Wollmann said, “the other party made it very clear there would have been no agreement.”
Dolan said in an interview, “I am not convinced that we would recover more money necessarily if we signed agreements like that.”
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