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Ten members of the 11-member New Mexico Finance Authority board are appointed by the governor. Four of them are members of Gov. Susana Martinez’s own cabinet. The Authority’s CEO, Rick May, served in her cabinet until assuming his NMFA post nearly a year ago.
So you might think the Martinez administration would have had its ducks in a row last week, when NMFA board members met, not once but twice, to deal with evidence that a former agency controller had fraudulently concocted the 2011 financial reports of the Finance Authority, which loans millions of dollars to state entities and schools for capital equipment and infrastructure.
Those meetings came in the wake of news reports that Moody’s Investor Service and Standard & Poor’s were conducting reviews of NMFA, citing “weak internal controls” at NMFA.
Reviews of this sort have been known to increase a state’s interest rates when it borrows.
In short, the stakes are high. Yet the ducks were in disarray last week as the governor’s NMFA board members were seen quite publicly to be bumping into themselves like Keystone Cops of yore.
Martinez, herself, seemed at a loss. “We don’t want to lose our rating,” she said, before twice restating her thoughts on the matter in different words: “We don’t want it reduced. We want it to be stable.”
Finance Authority CEO May wanted to hire a top D.C. legal firm to investigate how the fraud had been engineered, a proposal that sent a majority of the governor’s appointees on the board into a tailspin.
Ultimately they rejected the idea altogether.
Meanwhile, let it be noted that no one at the NMFA — neither CEO nor board members — can claim credit for discovering that the agency’s so-called financial report was, in fact, phony-baloney.
It was Hector Balderas, the state auditor, who unearthed the skullduggery after the NMFA was late in submitting the report to him as required by state law.
What’s more, Balderas has confirmed that the independent firm allegedly credited by the former NMFA controller with having reviewed and certified the 2011 financial statement has told the state auditor’s office that they did no such thing.
“I am moving aggressively to determine the full extent of this fraud perpetrated against New Mexico taxpayers,” Balderas has said. “I’m extremely concerned that a report was fraudulently created in order to misrepresent the authority’s financial condition to agencies, investors and the public.”
Balderas has also notified law enforcement authorities, presumably including the FBI, of the funny business at the NMFA.
Additionally, state Securities Division Director Daniel Tanaka will also be looking into the wrongdoing at the Finance Authority. According to Tanaka his preliminary findings suggest that the fake financial report may not be the only thing amiss at NMFA.
What makes this affair so mind-boggling is the fact that the bogus 2011 financial statement is reportedly a verbatim reissue of the 2010 report previously submitted to the state auditor several months late.
There’s no escaping it: Moody’s understated when it cited “weak internal controls” as the reason for putting the New Mexico Finance Authority on the to-be-reviewed list.
There are no controls at the Finance Authority.
Did CEO Rick May not notice that his agency’s proposed 2011 report on financial transactions bore a striking resemblance to the report it belatedly sent the state auditor in 2010?
And when he sent the 2011 statement to the NMFA board for approval, wouldn’t you think at least one of the eleven members might have had a moment’s déjà vu?
“A lot of people read it, a lot of people saw it, but nobody caught it,” said May.