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Courts deal blow to N.M. ‘pay-to-play’ plaintiffs

The Associated Press

ALBUQUERQUE – Appeals courts this week dealt blows in two cases to plaintiffs seeking to recover millions of dollars in failed state investments from an alleged “pay-to-play” scheme involving supporters of former Gov. Bill Richardson.

The state Court of Appeals on Wednesday upheld a ruling that invalidated portions of two lawsuits brought by whistleblower Frank Foy, the former chief investment officer for the Education Retirement Board. Separately, the 10th U.S. Circuit Court of Appeals in Denver declined a request to move from state to federal court a separate suit brought on behalf of retirees.

In the whistleblower case, the state court upheld a ruling by District Judge Stephen Pfeffer regarding a 2007 law that allows citizens to bring lawsuits on behalf of the state and recover triple damages. The judge said it’s unconstitutional to apply the law and its sanctions to activities that took place before the statute went into effect.

Foy’s lawsuits alleged a scheme in which Richardson appointees steered investment business to political supporters. Richardson has denied any wrongdoing and was never named as a defendant.

The retirees’ lawsuit, brought by a beneficiary of the state’s education pension plan, made similar claims.

Foy’s attorney, Victor Marshall, told the Albuquerque Journal he will ask the Supreme Court to review the case.

“The court struck down an extremely important statute that could cost taxpayers millions of dollars,” he told the newspaper. He said both of Foy’s lawsuits also alleged misconduct after 2007.

Foy initially filed a lawsuit in 2008 against Chicago-based Vanderbilt Financial Trust and its related companies over $90 million in failed investments by the Educational Retirement Board and the State Investment Office.

The investments in complex mortgage securities called collateralized debt obligations were approved in 2006. Vanderbilt executives later contributed at least $15,100 to Richardson’s failed campaign for the 2008 Democratic presidential nomination.

Foy’s lawsuit was revised to add alleged fraud involving $153 million in other Vanderbilt investments by the state in 2004 and 2005.

A second lawsuit by Foy involved states investments in hedge funds and private equity funds.

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