Home > News > Regulation > In Latest Pay-to-Play Investment Scandal, New Mexico Files Lawsuits
Regulation

In Latest Pay-to-Play Investment Scandal, New Mexico Files Lawsuits

After more than a year of speculation, New Mexico’s State Investment Council (SIC) has filed two lawsuits involving former Investment Officer Gary Bland and associates of then-New Mexico Gov. Bill Richardson.

(May 11, 2011) — The $15.4 billion New Mexico State Investment Council (SIC) has filed two lawsuits in federal and state courts against former investment chief Gary Bland and a number of other people involved in alleged pay-to-play schemes. 

The state claims that the individuals named in the case were involved in steering investments to political supporters of former Gov. Bill Richardson.

In the suitsfiled Friday, May 6, the fund claims breach of fiduciary duties in connection with schemes involving purported placement agents and third-party marketers, who allegedly garnered rewards from marketing investments to the council between 2003 and 2009. The suits seek compensation for millions of dollars and recovery of ill-gotten gains acquired by the defendants at the expense of the New Mexico Permanent Funds. Furthermore, the lawsuits allege that Richardson’s political fund raiser and self-appointed consultant, Anthony Correra, played the role of “de facto gatekeeper” in recommending state investments.

Bland denied the allegations, calling them “absurd,” the Associated Press reported.

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“The State Investment Council takes this action today in hopes of recovering millions of dollars improperly taken from the citizens of New Mexico by those who violated their professional duties and the public trust, and their cronies who participated in and profited from such breaches of duty,” State Investment Officer Steve Moise said in a statement. “Quite simply, this is the right thing to do.”

Governor Susana Martinez, chair of the State Investment Council, added in the release by the New Mexico fund: “As we wait for justice in the criminal courts, we must aggressively pursue legal action of our own. These efforts must continue until all responsible parties are held accountable for the abuses that occurred here in New Mexico.”

To avoid apparent conflicts of interest, the Governor asserted in a statement that investment managers who entered into payment arrangements with third party placement agents to obtain SIC investment business should approach the Attorney General’s Office voluntarily and fully disclose the details of those arrangements “before the Attorney General knocks on their doors.”



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742
Home > News > Regulation > Hedge Fund Manager Raj Rajaratnam: Guilty on All Counts of Insider Trading
Regulation

Hedge Fund Manager Raj Rajaratnam: Guilty on All Counts of Insider Trading

In a high-profile case of insider trading, hedge fund manager Raj Rajaratnam has been found guilty on all 14 counts of securities fraud and conspiracy.

(May 11, 2011) — Raj Rajaratnam, the hedge-fund tycoon and co-founder of Galleon Group LLC at the heart of a US insider-trading investigation, has been found guilty of all counts against him.

The counts against him included nine of securities fraud and five of conspiracy to commit securities fraud.

After hearing the evidence that Rajaratnam participated in a seven-year conspiracy to trade on illegal tips from corporate executives, bankers, consultants, traders and directors of public companies, the Manhattan jury issued the guilty verdict.

The investigation is the result of a strong prosecution, Reuters reported, with FBI phone taps and testimony of three former friends and associates of Rajaratnam. Manhattan US Attorney Preet Bharara has indicated effort to crack down on insider-trading scandals.

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Rajaratnam faces a prison term of up to 25 years when he is sentenced by presiding US District Judge Richard Holwell. The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York.

This and other cases of alleged insider-trading on Wall Street  have pushed institutional investors around the country to keep a closer eye on their investments while rethinking risk controls. Many analysts believe the latest string of FBI-led probes over insider-trading draws attention to the risk controls that fund managers have integrated when dealing with third-party research providers, and the investigation may encourage them to heighten their standards. “I think the most important control is for senior executives to clearly communicate to employees that 1) insider trading is not tolerated; and 2) employees have an affirmative duty to escalate their receipt of information that is even potentially material and non-public,” Joshua E. Broaded, principal consultant at ACA Compliance Group, told aiCIO in December, after three hedge funds were raided the previous month as part of a probe by the FBI, the Manhattan US Attorney’s office, and the Securities and Exchange Commission. “Advisers that use expert matching services, or that have other types of potential exposure to inside information, should think carefully about how they can demonstrate a good corporate culture and an appropriate set of proactive controls,” he said.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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