State land commissioner wants more investment oversight
Official says panel was in the dark about financial deals at the center of controversy
1/27/2009
Speaking at a council meeting, Lyons said he and other members were in the dark about the investments with Chicago-based Vanderbilt Capital Advisors or other collateralized debt obligation investments, known as CDOs, made between 2004 and 2006.
"I just want it on the record, for the secretary to put it in the minutes that these 25 investments ... (were) not voted on by the State Investment Council or the members of the State Investment Council," Lyons said. "We never really knew about it as a council."
The Vanderbilt investments — actually a pool of several CDOs — were among a total of about 25 such investments made by the state investment officer.
Last year Frank Foy, a former chief investment officer at the state Educational Retirement Fund, filed a civil lawsuit attempting to recover the nearly $50 million lost by the council to Vanderbilt as well as about $40 million lost by the Educational Retirement Board to the Chicago firm in 2006. Foy claims there was political pressure for the state boards to make those investments to the company, which contributed more than $15,000 to Gov. Bill Richardson's presidential campaign.
Documents in the civil suit's court file, released this month, show the federal Securities Exchange Commission also was investigating the Vanderbilt deals.
State Investment Officer Gary Bland, who is named as one of several defendants in Foy's suit, called the civil suit "malicious" and said it would slow down efforts for his office to seek remedies for the loss in the Vanderbilt investments. After the meeting, Bland declined to elaborate on why he thinks the suit is malicious. But he reiterated previous statements that the investments were not connected to campaign contributions.
Bland said the decision to invest with Vanderbilt was made in-house by the staff of the investment council. "There's complete transparency in the office," Bland told Lyons. "The Vanderbilt investment for example was done by our (fixed-income group). I sign off on it. We don't have any one person who can make one investment."
Lyons noted the council at its Tuesday meeting had heard presentations by those seeking investments — $25 million in a group called Camden Partners Strategic Fund, a national private-equity fund, and $13 million for Titan City Center, a company developing land in Rio Rancho for a planned Hewlett Packard call center.
After the meeting, Lyons says there should be some limit as to what investments can be done in-house and which should have to get approval by the SIC.
The land commissioner, while not commenting on whether there was pay for play in the Vanderbilt investments, told a reporter he disagreed with Bland that the lawsuit is malicious.
Bland told the council that the Vanderbilt investments were made "about the time the CDO market came unraveled and, as you've seen, has taken down virtually the banking system in this country. ... I think we've received something in the area of $4 million in interest payments on it over that time. Since that time, there's some residual value there, but because there's literally no market for mortgage securities today, we have no idea what the residual value of that is. We're carrying it, I think, at zero at this point, but we're still carrying it as an asset because we just don't know what it's worth."
Asked by Lyons whether the state had any recourse with the underwriters of the Vanderbilt deals, Bland said, "We don't know. We're still looking at that. ... We still haven't had time to do a full evaluation of what recovery is available because we don't know what the loss is yet."
The SIC consists of the governor, who didn't attend Tuesday's meeting, the state investment officer, the secretary of the Department of Finance and Administration, the state treasurer, the state land commissioner and four public members appointed by the governor. The council is responsible for managing the state's permanent funds.
Contact Steve Terrell at 986-3037 or sterrell@sfnewmexican.com. Read his political blog at roundhouseroundup.com.