The New Mexico Supreme Court on Thursday resuscitated two lawsuits based on an alleged fraudulent pay-to-play scheme against a list of money managers and high-ranking state officials, including Blackstone Group, Carlyle Group and Austin Capital Management.
The complaints concerned the management of the $11.4 billion New Mexico Educational Retirement Board and the $20.5 billion New Mexico State Investment Council, both in Santa Fe. Frank Foy, retired chief investment officer of the New Mexico Educational Retirement Board, and his wife, Suzanne Foy, brought the claims and sought treble damages for alleged misconduct dating back to 2003, which pre-dated the 2007 law allowing private citizens to sue on behalf of the state. The lower courts dismissed the lawsuits’ findings that applying the law retroactively was unconstitutional.
The state Supreme Court on Thursday ruled the law is constitutional and that treble damages provided for under that statute “may be applied retroactively” if Mr. and Ms. Foy prevail in their lawsuits.
Mr. and Ms. Foy filed whistleblower lawsuits on behalf of the state in 2008 and 2009 alleging the defendants had engaged in a pay-to-play bribery scheme in which placement agents were paid for getting the New Mexico Educational Retirement Board and/or the New Mexico State Investment Council to invest with certain managers. They claimed that the alleged fraudulent schemes cost the New Mexico Educational Retirement Board and New Mexico State Investment Council to lose hundreds of millions of dollars.
The New Mexico State Investment Council indicated in a written statement it was not a party to Mr. and Ms. Foy’s lawsuits and its own legal cases alleging a fraudulent pay-to-play scheme “are unaffected.”
“Since initiating our efforts five years ago, the council’s goals have always been to maximize recoveries to the permanent funds, and to punish those accountable at a public trial — now slated for next year,” the statement said. “Those ultimate goals are unchanged by this ruling, which will broaden the state’s rights to pursue bad actors on behalf of taxpayers.”
Bob Jacksha, CIO for the New Mexico Educational Retirement Board, declined to comment on the court’s ruling.