Scandalpalooza

I did a little round-up  in today's New Mexican of where New Mexico's major political scandals are standing at the moment.

These included the criminal cases against former Secretary of State Rebecca Vigil-Giron, former Region 3 Housing Director Vincent "Smiley" Gallegos, the now-dismissed indictment of Judge Mike Murphy and the State Investment Council civil suits.

You can find that story  HERE.

In the original version of the story I failed to note that the two cases filed in May by the State Investment Council have been boiled down to one case, which is in the state court system. Below is the amended complaint filed in June, which explains the allegations against Gary Bland, Guy Riordan, etc.
Amended SIC Complaint

Smiley in Bloomberg

Bloomberg.com has a story this morning featuring Vincent "Smiley" Gallegos -- who currently is facing state charges alleging misuse of bond money when he was director of a state affordable housing program -- and CDR Financial Products, whose president and founder was indicted last week on unrelated charges in New York federal court.

Gallegos, then the executive director of Region III Housing Authority New Mexico Inc., sold bonds in February 2003 with the help of Los Angeles-based CDR Financial Products Inc. and its founder, David Rubin.

“At the time the authority issued the bonds, there was ample evidence that the program would not be successful,” the IRS wrote in March 2007 after investigating the transaction. “A prudent person would not have taken the same actions.”

Two months later, federal tax authorities revoked the bonds’ tax exemption. The IRS found that one of the agency’s banks, Paris-based Societe Generale SA, would earn as much as $1.5 million on a program for low-income and first-time homebuyers that lent only about $2.6 million. Tax authorities also found that CDR was collecting more than $50,000 a year from Societe Generale in fees not disclosed in public bond documents.

Gallegos, 56, and Rubin, 47, are under criminal indictments as the result of separate investigations unrelated to that debt.

Bloomberg quotes Gallegos' lawyer Paul Kennedy saying no jury will convict his client. The story also notes "Gallegos didn’t open the door of his home in Albuquerque when a reporter knocked, nor did he answer his mobile phone."

I Thought They Did All Their Talking In Court

A few weeks ago, Attorney General Gary King's press office woudn't even give reporters copies of the indictments of Vincent "Smiley" Gallegos and others charged in the Housing Authority scandal. In fact other times they've indicted politicians, i.e. Jerome Block Jr. and Sr., the AG has been virtually mum. (Reporters have commented that King's office isn't so reluctant to discuss indicted non-politicians.)

That's why this news release sent Friday seemed rather odd. Gary King actually is blowing his own horn. Here he mentions Smiley and Roberta Vigil -- but not the Blocks.

What Is the AG Doing About Public Corruption?

By Gary K. King
New Mexico Attorney General

We have come to the stage where our investigations have resulted in indictments and prosecutions. One of the challenges of the AG's job is to properly manage requests for information from the general public, legislators and the media about ongoing investigations. I have stated this many times but it is always good to repeat: For ethical and legal reasons, my office will have little to say about our investigations until and unless such information becomes public record, as in the filing of an indictment. This policy is utilized for everyone's protection and the preservation of the legal process. When it is proper to do so, I will always provide updates. Here are some things we have been doing on your behalf.

In May of this year, the Attorney General's Office successfully obtained convictions against former West Las Vegas Schools official Roberta Vigil, who was found guilty of two felonies in a fraud and conspiracy trial that involved public money. And just recently, former West Las Vegas schools superintendent Joe Baca agreed to plead No Contest to a fraud charge and pay restitution of $2,750 in the same case.

In June, an investigation by my office led to the indictment of former Region III Housing Authority Executive Director Vincent "Smiley" Gallegos and three others on fraud, embezzlement and money laundering charges. Again, public funds were involved.

Earlier, my office obtained a court determination that led to the removal of three tenants from homes owned by the Housing Authority because they did not qualify for affordable housing. Two were employees of the authority and the third was a board member. Additionally, an Albuquerque Metro Court judge was disciplined for a conflict of interest related to another aspect of the matter.

More government corruption cases will follow, that is why I formed a special Government Accountability Division (GAD) in the Attorney General's Office shortly after being elected.

As I have said before, public corruption poses the greatest single threat to the credibility of government institutions at all levels. It undermines good government, fundamentally distorts public policy and perception, leads to the misallocation of resources, fosters unethical behavior and ultimately harms all New Mexicans either directly or indirectly. It is the sole job of the GAD to evaluate, investigate and prosecute cases of public corruption.

We, as a society, should not gloat over the fact that some people are being prosecuted for their alleged misdeeds. Instead, we should be thinking about more ways to make it very clear that it is not OK to steal from the public treasury.

It is not just a problem for New Mexico, we have all heard and seen similar stories elsewhere. But just because corruption can occur at any time in any place does not mean it should be tolerated. I think there is a growing mentality in New Mexico and the nation that says we can not sit on the sidelines while our pockets are picked by people we trust. And just because a certain political faction is in power does not give people the right to rob the public coffers with impunity. That kind of thinking is as outdated as it is wrong. Fortunately, more and more ethics-minded public servants are gradually replacing those who feel they have a "right" to help themselves at our expense.

During tough economic times, people are more mindful of their money and they are more closely scrutinizing how others spend their tax dollars. I believe New Mexico is part of a national groundswell of support for more honesty and transparency in government and reduced tolerance for those who use their public offices to enrich themselves and their friends and associates.

The citizens of New Mexico expect a lot from those of us in law enforcement and the judiciary, they should. Perhaps just as important, people should know that they can help us do our jobs by alerting us to corruption and other crimes. This is where I think we all can make a difference in that culture of corruption. When our society no longer tolerates it, when people act as a community against it, corruption may finally disappear from the headlines in our daily news.

Tainted Contributions for Charity

Here's my story about Lt. Gov. Diane Denish giving the campaign contributions from Smiley Gallegos and Bob Strumor to a yet-to-be-decided charity. Gallegos and Strummor were among those indicted this month in the Region III Housing Authority investigation.

This practice of politicians donating suddenly toxic contributions to charity has become so common in the state I wouldn't be surprised if there are charitable organizations that are starting to get dependant on it.

One weird thing about Denish's announcement, it actually came by way of a press release from her chief of staff Josh Rosen shortly after 10:30 p.m. Friday.

That's right -- after 10:30 p.m. Friday. I've heard of the Friday night news dump, but this is ridiculous. The Albuquerque TV stations were all done with their news programs, and newspapers were way too close to deadline to be reading press releases from the lieutenant governor's office. As for myself, I was a quarter way through my Santa Fe Opry shift on KSFR.

Denish's political director Steve Fitzer assured me today that sending the press release out so late was not part of some strategy to avoid the news cycle. Rosen, he said, was tied up with meetings all day. Still seems weird though.

Smiley Not Smiling

UPDATED

An Albuquerque grand jury has indicted former Region III Housing Authority director Vincent "Smiley" Gallegos and others stemming from a long investigation related to misuse of bond money.

The seven counts for Gallegos include charges of fraud over $20,000 or in the alternate, embezzlement, fraudulent practices, sale of securities, money laundering and conspiracy.

Others indicted are Albuquerque bond lawyer Robert Strumor, David Hernandez and Dennis Kennedy. Hernandez and Kennedy are former Region III employees.

Gallegos is a former state legislator from Clovis. In 2006 Region III defaulted on $5 million in bonds it sold to the state.

State Republicans were quick to respond:

Today, Harvey Yates Jr., chairman of the Republican Party of New Mexico released the following statement concerning the grand jury indictment of former Democratic lawmaker and Region III Housing Authority Director Vincent “Smiley” Gallegos for his involvement in a scandal related to the state’s housing authority:

“This indictment reinforces a growing sentiment that we need to reverse the path on which this state is headed. For far too long, self-serving political insiders have exploited, at taxpayers’ expense, their positions for personal or political gain.”

Here's the indictments:

Smiley Indictment

ROUNDHOUSE ROUNDUP: WHEN THE GOING GETS TOUGH, THE TOUGH GO CAMPAIGNING

A version of this was published in The Santa Fe New Mexican
January 15, 2009

When in doubt, hit the campaign trail.

That seems to be the reflex of Gov. Bill Richardson this week as scandals mount, the state’s economic picture grows more grim, and tensions with the state Legislature — at least the chairwoman of the Senate Rules Committee — grow.

A news release from Richardson’s office earlier this week reminded me of e-mails from his presidential campaign. But instead of naming stops in towns like Cedar Rapids, Iowa City and Des Moines, the new one listed New Mexico towns and cities — and instead of selling himself as the best possible commander-in-chief, Richardson is talking about his legislative priorities and budget plan.

On Wednesday, he went to Farmington, Las Cruces and Roswell to talk about public-safety initiatives. Today, he’s scheduled for a breakfast with “local leaders” in Hobbs; a speech about education initiatives at the Lincoln Jackson Family Center Cafeteria in Clovis; and another speech and “Pre-Groundbreaking Rally” at the Tucumcari High School Auditorium.

Maybe that’s not as romantic as running for president. But the events aren’t that different from speaking to a couple of dozen people in a freezing airplane hangar in Dubuque, Iowa, or strolling bookstores and coffee shops in Portsmouth, N.H.

The audiences are bound to be friendly, and you don’t have to deal with a bunch of grumpy senators or jaded statehouse reporters asking questions about grand juries and lawyers.

Speaking of such unpleasantness: It seems that ever since Richardson announced he was withdrawing as President-elect Barack Obama’s commerce secretary nominee, there’s been a steady stream of news about state scandals popping up.

On Wednesday, two scandals duked it out for column inches and TV news airtime — allegations of pay-to-play at the Education Retirement Board and new revelations about funny expenditures by the state’s regional housing authorities.

For the benefit of those who don’t know the difference between CDR Financial Products and A. Gutierrez & Associates, here’s a pocket primer to recent New Mexico political scandals:

* Region III Housing Authority: Last week, The Associated Press reported a state grand jury is investigating the operations of an Albuquerque-based regional housing authority that defaulted on payments for $5 million in bonds it sold to New Mexico. State Attorney General Gary King has been investigating the housing agency, which the State Investment Council in 2006 concluded had misused bond proceeds to pay salaries and benefits, make loans and buy vehicles. The SIC in May 2008 filed a separate civil action against the agency’s former executive director, Vincent “Smiley” Gallegos, and an Albuquerque bond attorney, Robert Strumor, in an effort to recover the $5 million in taxpayer money. That suit is pending.

On Wednesday, State Auditor Hector Balderas released a report saying all five regional housing authorities he audited “were plagued by weak internal controls and a lack of adequate oversight,” and “the blatant disregard for proper policies and procedures created an environment ripe for waste, fraud, and abuse.” Gallegos has denied wrongdoing.

* Vanderbilt Capital Advisors: Another allegation of pay-to-play. Frank Foy, a former chief investment officer of the state Educational Retirement Board, charged in a civil lawsuit unsealed Friday that state officials pressured ERB and the State Investment Council to hire a Chicago company, Vanderbilt Capital Advisors, which had contributed more than $15,000 to Richardson’s presidential campaign. Vanderbilt lost a total of $90 million in state money.
Richardson’s office and other state officials named in the suit denied wrongdoing.

* Secretary of State expenditures: Last week, the Attorney General’s Office confirmed it’s investigating how federal election money was spent under former Secretary of State Rebecca Vigil-Giron. Actually, the investigation was confirmed earlier by a strange news release Friday from the Department of Workforce Solutions, where Vigil-Giron now works. That statement was to deny a rumor that Vigil-Giron had been fired. “Ms. Vigil-Giron informed Secretary Betty Sparrow Doris of a pending Attorney General investigation involving matters not related to her work at the NM Department of Workforce Solutions,” that statement said.

A 2008 federal audit questioned whether Vigil-Giron had properly spent millions of dollars on a voter-education project that included television ads. An Albuquerque advertising company, A. Gutierrez & Associates, received more than $6 million to produce ads, many of them prominently featuring Vigil-Giron, who unsuccessfully ran for Congress last year. State records could substantiate only about $2.6 million of Gutierrez’s costs, the audit determined. Payments by the state to the company exceeded a contracted ceiling by more than $300,000. Vigil-Giron has denied wrongdoing.

* CDR: This is the grand jury investigation that cost Richardson a cabinet position. The federal grand jury in Albuquerque is looking at whether CDR Financial Products was awarded bond work for the state transportation construction projects because of campaign contributions totaling more than $100,000 from CDR and its chief executive officer.

Richardson has denied wrongdoing, and some of his supporters privately say the whole case is a political witch hunt by Republican prosecutors — remember the Justice Department scandals of 2007, some Richardson supporters say — who are out to make the governor look bad.

GOT SCANDAL FATIGUE YET?

The Associated Press just broke this story. (I added a little background)

A state grand jury is investigating the operations of an Albuquerque-based regional housing authority that defaulted on payments for $5 million in bonds it sold to New Mexico.

Witnesses have been subpoenaed to appear in early February, according to a person familiar with the criminal investigation who asked not to be named because of the confidential nature of the proceedings.Attorney General Gary King’s office has been investigating the Region III Housing Authority, which the State Investment Council concluded in a 2006 report had misused bond proceeds to pay salaries and benefits, make loans and buy vehicles.

The investment council in May filed a separate civil action against the agency’s former executive director, Vincent “Smiley” Gallegos, and an Albuquerque bond attorney, Robert Strumor, in an effort to recover the $5 million in taxpayer money. That lawsuit is pending.

Gallegos, a former legislator and lobbyist is a longtime friend of House Speaker Ben Lujan, D-Nambe. For years he was known to frequent the speaker's office when the Legislature was in session.The authority is one of seven in New Mexico created to provide affordable housing.A spokesman for King, Phil Sisneros, would say only that the investigation is “ongoing.”

He said he had no information about a grand jury.Albuquerque lawyer Paul Kennedy confirmed he is representing Gallegos, but declined on Thursday to comment further.

Staff in the State Investment Council office have “spoken at length many times in the past year” with representatives of the attorney general’s civil and criminal divisions, as well as with the state auditor’s office, according to spokesman Charles Wollmann.Wollmann said because of the pending civil lawsuit it would be inappropriate to comment further.

State Auditor Hector Balderas said that his office — which has been cooperating with the investigation — is preparing to release a report next week on the state’s troubled regional housing authorities, including Region III.

“I’m hopeful that this report will provide a clear financial view of what happened to these regions,” Balderas said.The auditor wouldn’t comment in advance of the report’s release on what his office had learned about Region III.

“I’ve directed my auditors to cooperate and provide any documentation that might be helpful to the attorney general’s office,” Balderas said.

Gallegos, a former state legislator from Clovis, resigned in 2006 as the executive director of the agency, which covers Bernalillo, Sandoval, Torrance and Valencia counties.According to a 2006 State Investment Council report, about $870,000 in bond money went to Gallegos as salary, benefits and a loan.

That report also said the housing authority sold homes to people who were not qualified because they had a relationship to the authority or were not low-income.

The civil lawsuit alleges that Gallegos defrauded and deceived the State Investment Council and misused bond proceeds to benefit himself and other employees.With Region III mired in scandal two years ago, the administration of Gov. Bill Richardson said only two of the state’s seven regional housing authorities were doing the job they were created to do, and an overhaul was needed.

The Legislature passed a bill that severely restricted their autonomy, removing their ability to issue bonds and providing closer scrutiny by the Mortgage Finance Authority and the state Department of Finance and Administration.

In 2006, Gallegos made the news when it was revealed that Bernalillo County Metro Judge Theresa Gomez and Speaker Lujan’s secretary were allowed to live rent-free for several months in homes owned by Region III. Both were told by Lawrence Rael, who at that time was in charge of Region III, to pay back rent.