A Bloomberg news report said the suit was filed by ex-CIO Frank Foy who claimed a Richardson appointee pushed him to buy $50 million in collateralized debt obligations (CDO) from Vanderbilt Capital Advisors LLC of Chicago. The New Mexico State Investment Council purchased $40 million of the CDOs. In both instances, according to the suit, the investments were ultimately “worthless.”
The suit said Vanderbilt had contributed at least $15,100 to Richardson’s ultimately aborted presidential campaign.
According to Bloomberg, Foy alleges in the suit that Bruce Malott, chair of the state Educational Retirement Board’s board of trustees, pressured him to make investments based on political considerations after Richardson’s election in 2003 on instructions from an unnamed official.
Malott, the treasurer during Richardson’s first gubernatorial primary campaign and principal of Albuquerque accounting firm Meyners + Co., was first appointed to the fund by Republican Governor Gary Johnson in 1999 and was named chairman in 2004.
The lawsuit alleges that in 2006, Malott insisted that the teachers’ pension fund purchase the CDOs from Vanderbilt. The board voted 4-2 in May 2006 to invest in the Vanderbilt CDOs over the objections of Foy and the funds’ staff, the suit said.
Beginning nine months later, five Vanderbilt employees and two of their spouses contributed $15,100 to Richardson’s presidential campaign, federal election commission records show, according to Bloomberg.
“The defendants sold the state of New Mexico a worthless combination of liars’ loans, lethal leverage and toxic waste,” the complaint says. “The pressure to invest in Vanderbilt was motivated by illegal and improper inducements — kickbacks or bribes in the form of campaign contributions.”
Richardson, a Democrat, withdrew from consideration as President-elect Barack Obama's commerce secretary on January 4, citing a pending investigation of a bond advisory company that won $1.5 million in state work.
Gilbert Gallegos, a Richardson spokesman, said the suit was meritless and state attorney general declined to intervene on Foy's behalf. Foy's lawyer is a "partisan Republican," he said.
"The Governor is confident that the state agencies in this lawsuit acted properly and in the best interest of New Mexicans," Gallegos said in a statement. "This lawsuit, filed by a disgruntled former employee who was accused of serious misconduct during his time as a state employee, makes absurd claims against state agencies. The state will vigorously defend those agencies."