US - A New Mexico judge has tossed out a former public pension manager's lawsuit to recoup at least US$90m in state funds lost through investments in mortgage- backed securities sold by a firm whose executives donated to Governor Bill Richardson's presidential campaign.
District Judge Stephen Pfeffer in Santa Fe dismissed the case brought by Frank Foy, a former chief investment officer for the state's Educational Retirement Board, saying in an April 28 decision that the actions at issue preceded the law under which the case was filed, the Fraud Against Taxpayers Act. The law took effect in 2007. The money-losing investments began in 2004.
Foy claimed that as much as $243m in state funds were used to buy "worthless" collateralized debt obligations, or CDOs, sold by Chicago-based Vanderbilt Capital Advisors. Vanderbilt was acquired in 2006 by UniCredit SpA, based in Milan, Italy. Foy began the lawsuit in 2008, claiming that as much as $22m in finder's fees were shared by the son of a political ally of Richardson, a Democrat.
"We're very pleased with the decision," said Peter Simmons, a partner at Fried, Frank, Harris, Shriver & Jacobson who represents the Vanderbilt units named as defendants. He is based in New York.
State records show Vanderbilt paid $5.6m in fees to Marc Correra or his associates. Correra's father, Anthony, is a friend and political supporter of Richardson. The elder Correra couldn't be reached for comment. Ronald Rubin, a lawyer in New York for Marc Correra, had no comment.
Starting in February 2007, at least four Vanderbilt employees contributed as much as $8,400 to Richardson for President Inc., Federal Election Commission records show.
Alarie Ray-Garcia, a Richardson spokeswoman, didn't respond to a request for comment yesterday. Gilbert Gallegos, Richardson's deputy chief of staff, earlier described the case as without merit.
Victor Marshall, Foy's lawyer, said Pfeffer overlooked fraud and misrepresentation laws that predate the investments.
"The judge's analysis does not dispose of the entire case," Marshall said. He said he is consulting with New Mexico Attorney General Gary King, who filed a friend-of-the-court brief defending the 2007 fraud law, before taking further steps.
The State Investment Council also invested with Vanderbilt, Foy said in the lawsuit, claiming that the $90m commitment made by the council and his pension fund led to a $2m payment to Marc Correra. He said the state should be awarded as much as three times its investment in the mortgage- backed CDOs, saying that most of that money has been lost.
- See related story: New Mexico ERB rejects Foy application
An innovative funding structure has been agreed for Croydon Pension Fund. However, there are some concerns about the arrangement. Stephanie Baxter reports
Some 52% of red flags raised by schemes on suspected scam pension transfers involve advisers or unregulated introducers, a report by the Pension Scams Industry Group (PSIG) has claimed.
The Norfolk Pension Fund has been successful as the lead plaintiff in a class action case that went to jury trial in California involving securities fraud.
In this week's Pensions Buzz, we want to know whether bosses should have to pay into the same staff DB scheme as their workers rather than their own executive pension fund.