Process vs. punishment

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Struggling to gain public trust in State Investment Council

By Sherry Robinson

Corruption has two costs — the loss itself and the clean-up.
And the latter isn’t small potatoes, as State Investment Officer Steve Moise made clear during a talk last week at UNM’s Anderson School of Business. Moise (pronounced mo-EESE) became the Marshal Dillon of state investment when his predecessor, Gary Bland, left in a tailwind of allegations.
Moise spoke frankly about the politically connected operatives and gatekeepers advising the State Investment Council, the self-interest that replaced fiduciary duty, and the arrest in New York that broke open what that state’s attorney general has called a “matrix of corruption.”
The cascading revelations took the SIC by surprise and triggered an internal review and investigations by the FBI and Securities and Exchange Commission.
“We’re cooperating fully,” he said.
The office has turned over, at great expense, 13 terabytes of data – millions of pages.
SIC staff also generated a spreadsheet detailing agents, deals, and sums paid, which is posted on the agency Web site.
Other large expenses include a swarm of out-of-state consultants, experts and law firms hired to review and analyze agency structure, staffing, practices, procedures, investment performance, asset allocation – you name it – and go after everybody who profited inappropriately – third-party agents, firms that paid finder’s fees to those agents and others “motivated by anything other than their fiduciary duty to the state.”
Clean-up, we learn, is expensive; mismanagement and poor oversight are cheap.     
“The cost of running the office has been low, and this is not necessarily good,” Moise said.
The two largest of four permanent funds are an endowment for the state; income flows into the general fund to support expenses and services.
We can be proud that ours is the nation’s second largest such endowment, after Alaska’s, and 30th in the world.
They’re not “rainy day funds,” as some lawmakers like to call them, and any attempt to make them into bank accounts or mad money should be vigorously discouraged, Moise declared. Other states have had such funds and spent them.
The clean-up began on April 1, when Moise told his staff to think of the New Mexicans who were counting on them to generate revenues in a prudent, ethical way.
Since then, Moise and his clean-up crew have restructured the office, prompting seven staff members to exit.
Those remaining signed a code of ethics. The SIC has established new audit, governance, and investment committees – all familiar entities in private industry.
It terminated seven underperforming fund managers, changed asset allocation, hired a new deputy investment officer and will soon approve a code of conduct.
Moise asks, “How do we prevent future corruption? How do we gain public trust?
“We start by making offenders face meaningful consequences for abusing the system,” he said, to a round of applause. “We do thorough reference checks,” which go beyond the perfunctory call to human resources and include using personal networks to get at the truth about an individual.
Other measures: Avoid concentration of authority without adequate checks and balances and improve policies and processes.
This follows legislative action, which shifted a great deal of authority from the State Investment Officer to the council.
Candidates for governor and state auditor have debated the importance of process vs. punishment, the Democrats favoring process and the Republicans favoring punishment. (Incumbent State Auditor Hector Balderas has crusaded for greater vigilance at all levels; his opponent, Errol Chavez, would involve law enforcement.) Moise sees a need for both.
This public servant reminds us that we have “many, many excellent public servants in the state, both elected and appointed.”
It’s a lesson he learned from his mentor, the late Franklin Jones, former taxation czar.
Moise is often asked why he’d want this job. Says the descendent of a pioneer family from Santa Rosa, “I love this state.”

Sherry Robinson
NM News Services