Thursday, September 2, 2010

Denish to Donate Malott Money to Charity -- But Not $$ from Mallot's Company

A version of this was published in The Santa Fe New Mexican
September 3, 2010

The day after Bruce Malott, the chairman of New Mexico’s educational pension fund, resigned over a questionable $350,000 loan, Democratic gubernatorial candidate Diane Denish’s campaign announced it was donating to a charity more than $4,000 in campaign contributions from Malott — whose company once kept the books for the Denish campaign.
Bruce Malott
“In light of today’s revelation, the campaign immediately donated donations from Mr. Malott to a New Mexico nonprofit that supports our early-childhood education professionals,” Denish spokesman Chris Cervini said in an e-mail Thursday. “It was the right thing to do.”

However, records kept by the Institute on Money in State Government show that in addition to Malott’s personal donations, his company, the accounting firm of Meyners & Co., gave Denish $8,750 since 2007.

Malott and his business also have contributed $4,500 to the campaign of Denish’s running mate, Brian Colón.

Asked about the extra thousands from Meyners, Cervini said, “We saw it more of an issue with Mr. Malott than with his company.”

Cervini acknowledged that Malott’s firm served as treasurer of the Denish campaign until this spring.

“The campaign switched treasurers several months ago for a number of considerations, including our concerns about the use (of) state funds for Mr. Malott’s legal defense,” Cervini said in his e-mail. Malott’s firm was listed as campaign treasurer on Denish’s October campaign finance report. But the next report, filed in April, indicated another company was doing the books.

The state paid at least $300,000 in legal bills for a private lawyer Malott hired to represent him in lawsuits over failed investments and a pending federal investigation into public investments. A state-appointed attorney also is defending Malott in the lawsuits. Several legislators have criticized the plan for state money to be used to pay private lawyers in the investment scandals.

Malott’s resignation from the Educational Retirement Board was reported Thursday in a copyrighted story by the Albuquerque Journal. The report said he stepped down after an interview concerning the loan from Anthony Correra, a friend and financial backer of Gov. Bill Richardson. Correra’s son, Marc Correra, shared in millions of dollars in finder’s fees from investments by the ERB and the State Investment Council.
Diane Denish
Malott, an Albuquerque accountant, told the Journal he borrowed the money in August 2006 to pay federal and state taxes owed because of a tax-shelter dispute with the Internal Revenue Service.

Malott said that at the time of the loan he was unaware that Marc Correra had been receiving fees for helping money-management firms win investments from the pension fund and the SIC, which oversees state endowment funds.

Marc Correra shared in nearly $22 million in fees as a third-party placement agent, according to records of the state investment agencies. His lawyer, Sam Bregman — who also has represented Malott’s company — has said there was no wrongdoing on Marc Correra’s part.

Among the lawsuits in which Malott is involved is one by former Education Retirement Board director Frank Foy, who claims Malott pressured him into approving investments with the Chicago-based Vanderbilt Financial and related companies.

Denish’s opponent, Susana Martinez, was quick to jump on the connection between Denish and Malott.

“… It is clear that the culture of corruption is deeply rooted in the Richardson/Denish Administration and we are finding more conflicts and wrongdoing every day,” Martinez campaign manager Ryan Cangiolosi said in a news release Thursday. “Denish stood by Gov. Richardson’s side and has strong ties with almost all the individuals making headlines for their crooked deals, which have held New Mexico back. New Mexicans have a right to know who else in the Richardson/Denish Administration and their boards had financial interests in these taxpayer-funded deals.”

State records show Malott’s company was paid more than $10 million by the state for auditing services between the fiscal years of 2001 and 2006, according to records obtained last year by The New Mexican.

Meyners currently has 21 auditing contracts with various state agencies, Antonio Corrales, chief of staff for the state Auditor’s Office, said Thursday. The contracts total more than $2.1 million, Corrales said.

Gilbert Gallegos, a spokesman for Richardson, said Thursday that “the governor was not aware of the loan and he has accepted Mr. Malott’s resignation.”

Malott was initially appointed to the pension fund’s governing board by former Gov. Gary Johnson, a Republican, and he was reappointed by Richardson, a Democrat. Malott and his accounting firm had served as treasurer of Richardson campaign committees.

Malott submitted a terse resignation letter to the governor, saying he was stepping down immediately and he enjoyed being a board member for the past 11 years and appreciated the opportunity to have served during Richardson’s administration.

Anthony Correra served as a director of a nonprofit foundation that Richardson formed to do voter registration ahead of the 2004 presidential election. Malott’s company did the books for that foundation as well.

The elder Correra is a close friend of former state investment officer Gary Bland, who was appointed by Richardson but resigned last year amid a federal grand jury and Securities and Exchange Commission investigation into state investments.

Correra served on a committee that recommended Bland for the investment officer position after Richardson was elected in 2002. Anthony Correra and his investment management firm contributed $27,800 to Richardson’s 2002 campaign for governor.

The Associated Press contributed to this report.