Firms with state business among AG’s biggest donors

Hector Balderas

Law firms the state Attorney General’s Office has relied on to represent New Mexico in lawsuits over defective products and deceptive marketing by private companies also are proving to be key financial backers for the attorney general as he weighs a run for governor.

Most of the more than $211,000 that Democrat Hector Balderas raised over the past six months came from donors outside New Mexico, with more than $40,000 coming from attorneys at one law firm, according to an examination by The New Mexican of his latest campaign finance report, filed last week.

The examination shows a network of contributors stretching well beyond the Land of Enchantment that could help make Balderas a force in the race for the state’s highest office. But the large donations from firms that have worked with the New Mexico government or represent it in ongoing cases also raise questions about the ties between private lawyers and the state’s top prosecutor, whose predecessor, fellow Democrat Gary King, became an example of the coziness between litigators and states’ attorneys general.

A spokesman for the Attorney General’s Office said Friday that law firms involved in fighting fraud cases on behalf of the state are selected through a committee that does not include Balderas. Those firms, which include donors to the attorney general’s campaign committee, are not paid by the state to represent it in court. Instead, the firms can seek to collect fees from other parties in a case when it is resolved. Nonetheless, those cases can be extremely lucrative for the firms.

A spokeswoman for Balderas’ campaign committee did not address questions Friday about his policies on accepting donations from firms that are also representing the state in court.

“Attorney General Balderas will make a decision about running for Governor in the coming weeks ahead,” the spokeswoman, Caroline Buerkle, wrote in an email. “If he decides to run for Governor, he is confident he will have the resources to secure the Democratic nomination. In the meantime, he remains focused on protecting the health and safety of New Mexico’s families, businesses and environment.”

Balderas indeed has a sizable early start in fundraising if he decides to run in the Democratic primary for governor in June 2018 instead of seeking another term as attorney general. His first term ends in December 2018. Balderas finished the campaign reporting period earlier this month with $682,511 in the bank. That is not too far behind the only prominent Democrat to have officially launched a run for governor, U.S. Rep. Michelle Lujan Grisham, who raised $892,744 and had $741,229 on hand by the end of the reporting period.

The contributions to Balderas included a combined total of $20,000 April 3 from the Dallas-based firm Baron & Budd P.C. and three of its top lawyers.

Those funds came about six months after the Attorney General’s Office named the firm to represent New Mexico in a class-action lawsuit against drugmakers Bristol-Myers Squibb and Sanofi-Aventis over allegations of deceptive marketing. The firm is representing Hawaii in a similar case.

The firm and one of its founding partners, Russell Budd, his wife, Dorothy Budd, and another lawyer also gave Balderas a combined $27,500 in 2013 during his successful run for attorney general.

Other private lawyers representing the state in high-profile lawsuits were major donors last year, too.

The firm Grant and Eisenhofer and two of its lawyers and their wives gave a total of $25,000 to Balderas’ campaign committee in 2016, more than 10 percent of the money raised that year. A few months before the donations, the Attorney General’s Office announced it had hired the firm for a case against automaker Volkswagen. The German manufacturer cheated on vehicle emissions tests in a scandal that proved a bonanza for litigators. This year, the company is representing the state in a lawsuit against airbag manufacturer Takata over allegations that some of its products are defective.

A news release from the Attorney General’s Office announcing the lawsuit said the Wilmington, Del.-based company was selected for its “specialty in handling major consumer protection and automotive lawsuits, and class-action securities litigation.”

Grant and Eisenhofer and lawyers from the firm also donated $27,500 to Balderas’ campaign in 2013.

Neither of the law firms provided comments for this story.

Tracking the full amount of donations associated with a law firm can be difficult because, unlike some other states, New Mexico does not require donors to list their employers. A group of lawyers from the same firm can give to one candidate without anyone noticing unless they research each individual donor.

Balderas’ biggest share of donations in the past six months came from lawyers with the firm Robbins Geller Rudman and Dowd. About a dozen lawyers from the San Diego-based firm donated a total of $41,200 to the attorney general’s campaign in that period. The firm has represented New Mexico’s Educational Retirement Board, the Public Employees Retirement Association and the State Investment Council in securities fraud cases that have yielded big payouts.

A spokesman for Balderas said the firm is no longer on contract with the Attorney General’s Office.

And a partner at the firm said that as far as he knows, it does not have any intention of representing Balderas’ office.

“If we did, I would not have supported his campaign,” lawyer Paul Geller, of Boca Raton, Fla., wrote in an email Friday.

Geller said he donated to Balderas because he believes the Democrat has been an effective attorney general, describing him as an inspiring advocate.

“You’re talking about a guy who was raised by a single mother to become a proven public servant committed to fighting for the things I believe in and against the things most of us fight against — like corporate fraud and corruption,” he wrote.

The donations come in the wake of a controversy over the relationships between private law firms and state attorneys general who hire them to pursue cases with the prospect of big payoffs for governments and litigators alike.

Just a few weeks before Balderas took over the Attorney General’s Office in 2015, a Pulitzer Prize-winning investigation by The New York Times opened with an anecdote about his predecessor, King, and his dealings with a Washington, D.C., lawyer, who convinced him over a period of two years to file a suit against a nursing home company. The lawyer, Linda Singer, had donated relatively little to King — a $1,000 donation in 2014. Her firm, Cohen Milstein Sellers & Toll, did not contribute anything to him. About 18 lawyers from the firm, however, went on to donate more than $11,000 to Balderas’ campaign in 2014. And the case is ongoing, with Cohen Milstein Sellers & Toll still working on the lawsuit.

King defended the practice at the time, describing it as a way for the state to take on cases that might cost too much for the Attorney General’s Office to handle on its own but that private firms could afford to undertake. Under such arrangements, the state brings a lawsuit but the private firm is only paid if the case results in a settlement or cash award. Meanwhile, the firm pays all the costs of pursuing the case, from investigation through trial or settlement negotiations.

Critics have derided such arrangements as creating a “pay-to-play” system that turns state governments into ambulance chasers.

Balderas said shortly after taking office that he would tighten policies on contracting with private firms to pursue lawsuits.

A review of the office’s contracts by The New Mexican in 2015 found few companies with financial ties to Balderas’ campaign.

A range of companies donated to the attorney general’s campaign over the past six months, from the consulting firm Deloitte to the financial services corporation Citigroup and the social networking company Facebook. But the report showed a growing share of Balderas’ contributions coming from outside New Mexico, including from out-of-state plaintiffs’ law firms.

New Mexicans accounted for nearly $84,000 of the money Balderas raised in the past six months, or about 40 percent.

Over the same period ending one year ago, New Mexico donors contributed about 59 percent of the money he raised. That is in line with his fundraising for all of 2016 and 2015. In 2014, during Balderas’ first run for attorney general, 70 percent of the money he raised came from New Mexico.

When asked about this shift, Buerkle did not answer but instead asked a reporter what share of Lujan Grisham’s campaign contributions came from outside the state.

According to her campaign finance report report, 82 percent of the roughly $892,000 Lujan Grisham raised during the past six months came from donors in New Mexico.

The money going to Balderas’ campaign from law firms that have done work for the state may look bad, said Douglas Carver, executive director of New Mexico Ethics Watch, a nonprofit organization advocating for campaign finance reform and transparency, “but it’s sort of a natural pool of political contributions.”

Attorneys general are lawyers by profession and are likely to turn to colleagues for financial support, he said.

Attorneys general are not just politicians, they are also law enforcement officials, Carver added. “They shouldn’t be treated as candidates like any other.”

Carver argues the state should consider adopting rules for attorneys general similar to the rules for judges, who are supposed to place fundraising entirely in the hands of their campaign manager and are prohibited from even knowing who has donated money to their election committee. And candidates for the New Mexico Court of Appeals and Supreme Court can rely in large part on public financing to run a statewide campaign without raising the relatively large sums of cash such a campaign might ordinarily require.

“If I were a litigant involved in a case, I would very much want to know if one of the other firms involved in that case had contributed to the AG’s war chest,” Carver said.

Contact Andrew Oxford at 505-986-3093 or aoxford@sfnewmexican.com. Follow him on Twitter @andrewboxford.