New Mexico SIC targets firms, advisors for recovery

The $14bn oil and gas endowment has hired Day Pitney to pursue fee and investment loss recovery from private equity firms to which SIC committed capital based on reasons ‘other than great returns’.

The $14 billion New Mexico State Investment Council has hired law firm Day Pitney to help recover fees and “investment losses” from private equity firms and others connected to a wide-ranging pay-to-play scandal.

The State Investment Council, which manages proceeds from New Mexico’s oil and gas funds, approved the hiring of the law firm earlier this week.

SIC will look to recover fees or losses from “funds or advisors” to which it committed capital based on material misrepresentations and experienced losses, according to a spokesperson for the endowment.

SIC had put out an RFP in June for a firm to assist in “the recovery of damages and other losses suffered as a result of inappropriate placement fees, investment losses, possible securities law violations, interference with the investment process, fraud, unjust enrichment and other claims”.

New Mexico’s former private equity advisor, Saul Meyer, head of Aldus Equity, pleaded guilty last fall to charges related to a pay-to-play scandal that spread from New York to New Mexico.

Meyer was alleged to have “ensured that Aldus recommended proposed investments that were pushed on him by politically connected individuals in New Mexico”, according to the complaint filed by New York Attorney General Andrew Cuomo.

SIC already has a list of entities it may target based on internal investigations of “how certain deals were made and brokered, and whether those investments were proper”, the spokesperson said.

Firms that paid a third-party marketer who did no work for the fee would be one target of the recovery effort, according to a source with knowledge of the situation.

Some of the effort to identify who SIC should target for recovery gets complicated because in some cases “certain things were shared with the state investor officer, but not with the council, or not with the staff”, the source said.

SIC’s chief investment officer, Gary Bland, resigned last fall for undisclosed reasons. Pat Lyons, a member of the council, told the AP at the time that council was getting ready to oust Bland because he was pressuring investment firms doing business with the state to hire certain placement agents.

Last year, SIC was one of the first public pensions to publish a list of placement agents hired by private equity managers. While many of SIC’s private equity managers cooperated and disclosed the placement agents they worked with, some firms have not cooperated, the spokesperson said.