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SANTA FE — The State Investment Council plans to hire an outside law firm to pursue the possible recovery of losses from failed investments and questionable fees paid to third-party marketing agents.
State Investment Officer Steve Moise said Tuesday the law firm should be hired by late September and will be done through a competitive bidding process.
The council oversees the management of New Mexico’s endowment funds valued at about $13 billion.
A council subcommittee recommended in March that the attorney general consider bringing a lawsuit to recover damages or losses from investments made because of potential pay-to-play influences. Several council members complained that Attorney General Gary King hadn’t acted quickly to bring investment lawsuits.
Moise said the decision to hire a law firm was made after consulting with King.
“It is a collaborative effort. We’re going to take the lead,” Moise said in an interview after a council meeting.
The council will work “hand in hand” with King’s office on any lawsuits, he said.
A pension scandal in New York has raised questions about New Mexico investments made by the council and a state educational pension fund. The co-founder of a firm that advised the council has pleaded guilty in the New York case and acknowledged that some investment deals in New Mexico were done because of pressure from politically connected individuals. The names of those people have not been disclosed.
Federal investigators are looking into New Mexico investments and the use of third-party marketers or placement agents that shared in millions of dollars in fees.
Moise said no decision has been made on the potential targets of any investment lawsuits and it’s uncertain how much the state might be able to recover.
A former state investment officer for the educational pension fund, Frank Foy, has filed whistleblower lawsuits alleging that political considerations in Gov. Bill Richardson’s administration influenced some investment decisions. Administration officials said there has been no wrongdoing, and last month a state district court judge in Santa Fe tossed out one lawsuit brought by Foy.
Foy’s lawyer contends the judge’s ruling doesn’t apply to some of the claims in the lawsuit, which was initially brought over $90 million in failed investments in complex mortgage securities called collateralized debt obligations. Foy’s lawsuit sought to recover damages on behalf of the state from failed investments by the pension fund and the council.
Moise said the council will not pay its law firm hourly fees. Instead, the firm will receive a contingency fee based on a share of any settlement amount or recovery of damages and losses.