The New Mexico State Investment Council needs to better train its members, decrease the influence of the Governor's Office, provide more documentation, tighten ethical standards and get more engaged in the investment process.

Those are among the recommendations of a Chicago-based consulting firm hired to review state investment practices and policies. Representatives of Ennis, Krupp & Associates presented their recommendations to the SIC on Monday.

The consultants stressed that their report was not a forensic audit or an "investigation" of the SIC, which in the past year has been the subject of a federal investigation of its use of third-party placement agents.

The consultants also studied the Educational Retirement Board and the Public Employees Retirement Association.

"The first theme that we observed was that the governor's influence over the SIC is significant," said Jeanna Cullins, a principal of Ennis Krupp. "The governor sits as the chair; the governor appoints, directly or indirectly, about 80 percent of the members to the SIC; the governor appoints the (state investment officer) as well as three other members of senior management (of the state Investment Office)."

The firm recommended the board be more balanced by either letting legislators appoint members or adding more members not from the executive branch.

Last year, Gov. Bill Richardson vetoed a bill that would have added SIC members appointed by the Legislature. A legislative committee charged with overseeing investment funds in November unanimously recommended a similar bill.

The firm also recommended that the SIC hire the state investment officer — not the governor, as currently is the case. Also, the SIC should be allowed to hire and fire other Investment Office staff.

Another recommendation is to prohibit the state investment officer from sitting on the SIC. "The Council's role in governance is setting policy, while the staff's role is day-to-day management and implementation of policy" the report says. Cullins said she was not aware of any other state in which the investment officer is a voting member of the council.

Another unusual aspect of New Mexico's Investment Office is the amount of authority the state investment officer and his staff have in making large investments, Cullins said.

The consultants recommend the SIC adopt a comprehensive code of ethics, including provisions on conflicts of interest and insider trading. The Investment Office already has drafted a code of ethics, but it has not yet been adopted, the report says.

The Investment Office also needs to provide a better paper trail of its activities, Cullins said. "And that's documentation in terms of what is actually provided to the council to facilitate its oversight role as well as documentation of the process that the SIO and the staff uses in many areas, for example manager selection."

She said her company didn't uncover any "smoking guns" indicating any wrongdoing by the staff.

SIC spokesman Charles Wollmann said the report provides "positive recommendations."

"We're looking forward to having this discussion (about the recommendations) with the council," he said.

Federal investigators are looking at the role of third-party marketers in public investments. Santa Fe broker Marc Correra shared in nearly $22 million in fees for helping companies win investments with the SIC and a state educational pension fund, according to state records.

Correra's father, Anthony Correra, is a close friend of former state Investment Officer Gary Bland, who resigned in October, and also is close to Richardson. Bland was pressured out of the job by some SIC members after revelations in a securities fraud case in New York.

In that case, Saul Meyer — a co-founder of Aldus Equity Partners, a Dallas-based firm that served as an adviser to the SIC and the ERB — pleaded guilty last year. In his plea, Meyer told New York authorities that he recommended New Mexico investments from "politically connected individuals" even though he knew some of those investments weren't in New Mexico's best economic interest.

Neither Bland nor Marc Correra has been indicted on criminal charges. Bland has denied wrongdoing, as has a lawyer for Marc Correra.

Contact Steve Terrell at 986-3037 or sterrell@sfnewmexican.com. Read his political blog at roundhouseroundup.com.