NM investment lawsuit names former governor aide

ALBUQUERQUE — A former state investment officer claims Gov. Bill Richardson’s former chief of staff pressured board members to support $90 million in failed investments because of political considerations.

Frank Foy on Tuesday identified David Contarino as the previously undisclosed “John Doe 2” in his lawsuit. Contarino later issued a statement disputing the allegation, calling it “a flat-out lie” and “a total fairy tale.”

“This entire lawsuit, by a former employee, is irresponsible and the claims are ridiculous and untrue,” Contarino said. “People are tired of political witch hunts. Enough is enough.”

A Richardson spokesman, Gilbert Gallegos, dismissed the lawsuit as “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,” he said. “Hopefully, the court will hold them accountable for this unethical grandstanding.”

The lawsuit alleges Contarino directed Educational Retirement Board chairman Bruce Malott and state investment officer Gary Bland to support investments that later proved to be worthless. They were offered by a Chicago firm, Vanderbilt Capital.

“This is a flat-out lie,” Contarino said. “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. I played no role in this investment and have no recollection of ever meeting Mr. Foy or anyone involved with Vanderbilt investments.”

The lawsuit characterizes the investments as part of an alleged “pay-to-play” scheme because Vanderbilt executives later contributed $15,100 to Richardson’s failed Democratic presidential campaign.

“I was not aware of any contributions from any individuals from or related to Vanderbilt investments to the governor’s campaign,” Contarino said. “This entire accusation is a total fairy tale concocted by Mr. Foy and his attorney.”

Foy, a former investment officer for the Educational Retirement Board, filed suit in July but the lawsuit was sealed until last month. He claims political contributions to Richardson influenced the awarding of investment business in New Mexico.

Malott’s lawyers attended Foy’s news conference and sat quietly while plaintiff’s attorney Victor Marshall presented his claims.

After the two men later moved in front of the cameras to offer a response, the event quickly degenerated into a lengthy shouting match between the sides.

Sam Bregman, an attorney for Malott’s company, opened by asking why Foy expressed support for a $40 million investment during a May 12, 2006, ERB meeting.

Moments earlier when he was sitting with Marshall, Foy had told reporters the investment “was suspicious in nature” and he never felt it had any merit.

With Bregman on the attack, Marshall interrupted.

“This is a diversion,” Marshall protested.

“It’s not a diversion,” Bregman said. “Look at the facts, Mr. Marshall.”

“David Contarino,” Marshall replied. “You’ve already put this out. If you don’t have something to say about David Contarino ...”

“Back off. You had your chance,” Bregman said.

“Just a minute,” Marshall said. “This is about David Contarino.”

“No, it’s not,” Bregman said. “It’s about your client, who is a boldface liar.”

Malott’s personal attorney, Marty Esquivel, jumped in and said: “It’s about Frank Foy, sitting over there with zero credibility. None.”

Foy sat silently during the exchange and the continued back-and-forth between the opposing attorneys. Marshall maintained he hasn’t presented all the evidence to support his claims but will do so when the lawsuit goes to trial.

Foy’s lawsuit claims the ERB invested in $40 million in collateralized debt obligations offered by Vanderbilt and the state Investment Council invested in another $50 million in worthless CDOs.

In both instances, the lawsuit claims the investments were made under pressure by Malott and Bland, who supposedly were acting on orders by Contarino and other unnamed John Does.

Both Malott and Bland have denied the allegations.

The lawsuit seeks damages that Marshall, a former Republican state lawmaker, said could total more than $300 million.