As federal agents look into the New Mexico activity of a Dallas-based investment adviser already under investigation in New York, Gov. Bill Richardson on Wednesday said he wants the company's contract with the state terminated and called for a number of changes in state investment policies.

The company is Aldus Equity Partners L.P., which has advised state officials on private equity investments for billions of dollars in New Mexico's permanent funds and an educational retirement fund. Aldus is in the center of a pay-for-play investigation involving a New York state pension fund. The company has not been charged with any crimes in that investigation.

"In the past few weeks, several serious questions have been raised regarding the arrangements between the state's external investment managers and the marketers those investment funds pay to represent them," Richardson said in a news release. "While this practice has been fairly common in the investment industry, the added potential for conflict of interests concerns me. For this reason, today I am ordering broad policy and procedural changes be implemented by the State Investment Office, pending review and approval by the full (State Investment) Council next month."

Until a new policy is in place, Richardson has ordered a suspension of "alternative" investments by the SIC. The Legislative Finance Committee plans a May 12 hearing on the SIC and the role of third-party marketers in the public investment process.

Earlier this month the SIC and the state Educational Retirement Board voted to suspend contracts with Aldus, although state Investment Officer Gary Bland called the move an overreaction and said the company has performed well for the state in the past four years.

But in the news release from the Governor's Office, Bland is quoted as saying, "At this time, we believe it is the most practical step for the Investment Office to take, given the realities of the current environment. Private equity is a critical asset class, and under existing circumstances, we feel it appropriate to forge ahead."

The SIC last year paid Aldus more than $900,000. The Educational Retirement Board paid it $600,000.

Among the changes Richardson is calling for are requiring investment managers to disclose any and all placement fees, marketing arrangements and other payments these managers make, in relation to investments for the state's permanent funds.

Richardson noted he signed House Bill 876, which will require disclosure of third-party marketing agents who are hired by outside money managers to market their funds to state investment agencies.

Legal documents included Aldus and other firms that paid what the Securities and Exchange Commission called "thinly disguised kickbacks" to New York political adviser Henry "Hank" Morris, who was indicted in New York in March on corruption and bribery charges. The SEC accused him of using "classic pay-to-play tactics" to get payments from financial firms.

In regard to the New Mexico investigation, Aldus last week issued a statement that said, "While we are not going to discuss ongoing investigations, we can assure you that every investment Aldus has recommended to New Mexico's SIC and ERB was based solely on the merits of the funds, after they were examined through its thorough due diligence process."

Morris served as a placement agent in two New Mexico investment deals. He potentially shared in a $150,000 fee for a $20 million investment by the council with the Carlyle Group in 2004. The council says its records do not clearly indicate whether placement agents may have split their fees with brokers.

Morris also was a placement agent for the Quadrangle Group, a private equity firm founded by Steve Rattner, who is the Obama administration's top adviser on the auto industry. However, the company says it did not pay Morris in connection with the $20 million investment the council made with Quadrangle in 2005.

Rattner has contributed $20,000 to Gov. Bill Richardson's gubernatorial campaigns.