- Associated Press - Tuesday, July 19, 2016

SANTA FE, N.M. (AP) - The New Mexico Supreme Court is being asked to intervene in competing efforts to reclaim money from investment firms that paid their way into managing state funds during the administration of former Gov. Bill Richardson.

The court was asked Tuesday to disqualify the Connecticut-based Day Pitney law firm that has helped New Mexico reach settlement agreements with the financial service industry.

The request was made by a couple behind a whistleblower lawsuit designed to claw back money from investment firms on behalf of taxpayers. Former state pension fund officer Frank Foy and wife Suzanne said that new witness testimony shows Day Pitney failed to disclose Wall Street clients that created a conflict of interest as the law firm negotiated settlements on behalf of the state of New Mexico.

The Supreme Court petition could weigh in proceedings underway in state district court, where a judge is considering whether to approve a $24 million settlement with Chicago-based financial firm Vanderbilt Capital Investors over the objections of the Foys. District court Judge Louis McDonald also is weighing whether to dismiss the Foys’ whistleblower claims.

The New Mexico attorney general’s office and State Investment Council support the Vanderbilt settlement as a reasonable outcome. They pointed out Tuesday that previous conflict allegations by the Foys against Day Pitney were dismissed from court as unfounded. The Day Pitney firm had no immediate comment.

James Hallinan, a spokesman for the state attorney general’s office, called the new allegations “frivolous and unfounded attacks that have not been credited by either of the two previous judges that have heard this same argument.”

The Foys’ petition to the Supreme Court cites recent court testimony and an affidavit by two members of the State Investment Council, which oversees $20 billion in public funds.

The Foys and their attorney Victor Marshall contend they can help New Mexico recover far more money from Vanderbilt, and other investment firms that paid their way into managing state funds. Their whistleblower lawsuit relies on the Fraud Against Taxpayer Act that effectively deputizes private citizens and attorneys to pursue fraud claims on behalf of the state and offers as much as 30 percent of the funds recovered as a reward.

About $90 million in funds that went to Vanderbilt was lost through complex securities known as collateralized debt obligations during the mortgage credit crisis and financial meltdown of 2007 and 2008.

The State Investment Council still has financial claims pending against former state investment fund manager Gary Bland, as well as Richardson adviser Anthony Correra and his son Marc Correra, among others. They deny wrongdoing. A civil trial is expected next year.


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