New Mexico SIC files ‘pay-to-play’ lawsuits

The New Mexico State Investment Council has filed state and federal lawsuits against Saul Meyer, Gary Bland, and Daniel Hevesi, among others, for steering investments to particular managers.

The New Mexico State Investment Council, the trustee for New Mexico’s $15 billion endowment, filed lawsuits in both federal and state district courts last week in relation to kickback schemes involving the endowment from 2003 to 2009.

The lawsuits charge breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, and unjust enrichment. The filings allege that New Mexico funds were steered to particular investment managers for selfish or political reasons.

Named in the lawsuits are embattled placement agent Saul Meyer and his firm Aldus Equity Partners, former state investment officer Gary Bland and former New York state senator Daniel Hevesi (the son of former New York Comptroller Alan Hevesi).

The suits seek monetary damages and recovery of ill-gotten gains, confirmed a New Mexico SIC spokesman. It was unclear how much the lawsuits seek to recover.

The SIC has a $1.3 billion private equity portfolio, according to SIC documents.

Several individuals named in the lawsuits have already pleaded guilty to criminal charges related to pay-to-play activity in New York.

Aldus Equity, which advised on private equity investments to the SIC, had its contract terminated in 2009 following the firm’s implication in the New York pay-to-play scandal. Meyer, who has pleaded guilty to securities fraud in New York, said in a plea agreement that because of political pressure, he recommended certain favoured investments to the SIC.

“On numerous occasions, however, contrary to my fiduciary duty, I ensured that Aldus recommended certain proposed investments that were pushed on my by politically connected individuals in New Mexico. … I did this knowing that these politically connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico,” Meyer said at his plea hearing.

Last year, SIC's chief investment officer Gary Bland, who was named in the filings, resigned for undisclosed reasons.

In addition, Daniel Hevesi, a former New York state senator and son of Alan Hevesi, the imprisoned former New York comptroller, was named in the federal suit as a placement agent for one of the New Mexico’s investments.

Alan Hevesi is currently serving up to four years for his role in prison for New York’s pension fund scandal.

Henry Morris, who was just sentenced for up to four years for his role in New York’s pension fund investigation, was also named in the New Mexico SIC filings.