ALBUQUERQUE — The news conference at a senior citizen center here was supposed to focus on a revelation: Longtime Gov. Bill Richardson political aide Dave Contarino is "John Doe No. 2" — the man accused in a lawsuit of instructing state officials to invest with a company that gave campaign money to Richardson.

Instead, it devolved into a full-on shouting match between three attorneys — two of whom showed up uninvited.

Victor Marshall represents Frank Foy, plaintiff in the lawsuit over alleged pay-to-play activity at the State Investment Council and the Educational Retirement Board.

Marshall on Tuesday recapped the allegations, saying that Contarino had told State Investment Officer Gary Bland and ERB chairman Bruce Malott to invest with Vanderbilt Financials.

"I think now you can see how David Contarino fits into this bigger picture," said Marshall, a Republican former state legislator who backed Democrat Barack Obama during the recent presidential election.

But as soon as he was done, two attorneys for defendants in the lawsuit — Marty Esquivel representing Malott, and Sam Bregman representing Meyners and Co., of which Malott is the managing principal — sought to discredit the lawsuit, which Bregman called "frivolous in every way shape and form."

Contarino, who most recently ran Richardson's bid for president, said in a statement that the accusations are "a total fairy tale."

"This is a flat-out lie. I never instructed Gary Bland or Bruce Malott to invest in anything. I wasn't even Chief of Staff at the time of this investment," stated Contarino, who in 2002 was Richardson's gubernatorial campaign manager and in 2006 served as the chairman of Richardson's re-election campaign.

"I played no role in this investment and have no recollection of ever meeting Mr. Foy or anyone involved with Vanderbilt investments. I was not aware of any contributions from any individuals from or related to Vanderbilt investments to the Governor's campaign and this entire accusation is a total fairy tale concocted by Mr. Foy and his attorney," Contarino's statement said.

When asked for evidence that Contarino instructed Malott, Marshall said that would surface as the lawsuit plays out.

"This is just a summary of what we think we can prove in court," Marshall said. "The answer is, there's a significant amount of other evidence, but we don't want to discuss it."

Foy, the former chief investment officer at the state's Education Retirement Board, alleges Bland and Malott were instructed by Contarino to invest with Vanderbilt Financial and associated companies in exchange for political contributions from the firm's employees.

According to federal campaign-finance records, Vanderbilt, its employees and their families contributed more than $15,000 to Richardson's unsuccessful presidential campaign.

Those contributions came in early 2007, after the deal in question was complete.

Foy's lawsuit was filed in July under the new state Fraud Against Taxpayers Act, which requires suits initially to be sealed.

When asked why he made Contarino's identity public now, Marshall said the case "is extremely sensitive from a political point of view."

He also said he was working to protect his client as long as he could.

"I didn't want to expose Frank to what we saw coming in reaction to this complaint when it got out," he said.

"As you have seen, the defendants have attacked Frank Foy on any number of grounds ... As his attorney, it's my job to try and protect him as long as I can from that kind of onslaught."

That onslaught has been quick, with questions being raised about Foy and a past sexual harassment case.

The governor's spokesman, Gilbert Gallegos, called the lawsuit a "big joke."

"Mr. Foy and his partisan lawyer are abusing the legal system by leveling blatantly false, political allegations against the governor's administration. Hopefully the court will hold them accountable for this unethical grandstanding."

At the heart of the complaint is an allegation that the state invested $90 million with Vanderbilt companies, $40 million from the Education Retirement Board and $50 million from State Investment Council. The state received dividends from the investment totaling about $3.7 million. But sometime since May 2007, "Vanderbilt has informed the ERB and the SIC not to expect any more from its investment," the lawsuit claims.

Foy, who worked at the ERB from 1996 until 2007, has said that taxpayers and teachers "have lost millions due to pay-to-play practices that benefited Gov. Richardson and his campaigns."

Foy has said he isn't suing the state but suing on behalf of the state. He's suing for the original $90 million invested, lost income he says is owed to the state, a civil penalty of at least $5,000 and legal fees. Marshall has said each defendant in the case could be liable for as much as $300 million.

Foy said Tuesday he has been disappointed in how the SIC and ERB have reacted to the lawsuit.

"There's no question that $90 million has been lost, so why aren't these two institutions helping to get the money back instead of casting aspersions on me and my character?"

Bregman pointed to an audio recording he said showed Foy supported the Vanderbilt investment in a May 2006 Educational Retirement Board Investment Committee meeting.

"This gives a whole new meaning to the word hypocrisy," he said. Before Bregman spoke, Foy told reporters he didn't think the investment had any merit and was "suspicious."

But Foy is heard on audio recordings provided to reporters by Bregman saying that he thinks "the investment division would recommend that we invest a minimum of $20 million and a maximum of $40 million on this vehicle." Marshall pointed out later Tuesday that Foy wasn't saying he recommends the investment.

Marshall said the audio recordings don't tell the whole story and that at a meeting of the ERB right after that meeting, members of the board echoed objections to the investment that Foy had made at other meetings.

Pay-to-play allegations against the Richardson administration caused the governor to withdraw as President Obama's nominee for commerce secretary. A federal grand jury is investigating how a major Richardson political contributor, CDR Financial Products, was awarded lucrative state-transportation contracts.

The lawsuit says that, "Beginning in 2003, the ERB was pressured to award contracts and make investments with persons or entities based upon political considerations. These pressures were exerted by Bruce Malott on instructions from John Doe #2 (and perhaps others). This was a plain violation of the fiduciary duties owed by the ERB to its members."

Richardson became governor in 2003.

According to the complaint, in early 2006, Patrick Livney of Vanderbilt began to call Foy and Malott, pressuring Foy and his staff to invest with Vanderbilt. Foy said the type of investment offered by Vanderbilt "was not a good investment, and it did not fit in ERB's portfolio." Foy "vigorously resisted," as did other staffers, the suit says, but Malott insisted.

In May 2006, the board voted 4-2 to invest in Vanderbilt. "The directors selected by public-school teachers voted against the investment. The directors who voted for the investment were swayed by improper considerations," according to the suit, which claims those members "voted for the Vanderbilt investment on instructions from Malott and/or John Doe #2 (and perhaps others)."

The lawsuit says there were other instances in which Malott "pressured the ERB to hire investment managers who were not the best qualified candidates, or to make investments." The lawsuit doesn't specify these cases.

The lawsuit says that on several occasions after the state invested in Vanderbilt, "the defendants knowingly made false statements about the investment."

Foy, who eventually was demoted and, he says, forced to retire, was the subject of a sexual-harassment suit in 2007. "These accusations," the suit claims, were "clearly contrived to force Mr. Foy to retire."

Foy said last month that the state ruled against him on the sexual-harassment charges. He said the charges revolved around comments he made to an employee who wore "inappropriate clothing."

Marshall said Foy's superiors at ERB disciplined Foy, who lives in Albuquerque, by transferring him to an office in Santa Fe. After a few months of commuting, Foy resigned.

Malott, a CPA, served as chairman of a Richardson task force to look at shortfalls in the state's education retirement fund. The governor also appointed him to the Retiree Health Care Authority. The firm where he works, Meyners and Co., is also named as a defendant.

Malott's attorney, Esquivel, called the suit "absolute garbage" and a "political smear campaign."

State records show Meyners, which does audits, has done considerable business with the state in the past few years.

For the fiscal years 2001 through 2009, the company was paid more than $10 million by the state, according to records obtained by The New Mexican.

The company and its employees made multiple campaign contributions to New Mexico politicians.

According to campaign-finance records, it gave more than $27,000 to New Mexico politicians between 1998 and 2008. Its biggest contribution was in 2008: $12,500 to the state Democratic Party.

Bregman said "absolutely not" when asked whether the company's contracts had anything to do with the contributions.

The company also did the books for the Moving America Forward Foundation, a nonprofit foundation established by Richardson in 2004 with the stated goal of encouraging minority voting. It collected more than $1.7 million, but by law doesn't have to disclose details of contributions or expenditures and so far has chosen not to.

Marshall, however, has subpoenaed those documents.

Contact Kate Nash at 986-3036 or knash@sfnewmexican.com. Read her blog at www.greenchilechatter.com.