Ex-Wachovia Broker Barred, Gets $2.2M Fine

WASHINGTON - Guy P. Riordan, a broker with First Union Securities and Wachovia Securities LLC in Albuquerque who retired in 2007, has been barred from the securities industry and ordered to pay or disgorge a total of $2.2 million for giving cash kickbacks to former New Mexico Treasurer Michael Montoya in return for obtaining state investment business from 1999 through 2002.

The sanctions were ordered by Brenda P. Murray, the Securities and Exchange Commission's chief administrative law judge, in a 31-page initial decision that concluded Riordan's actions violated securities fraud laws.

Riordan, who retired after 26 years in the securities industry, invoked the Fifth Amendment during the SEC's investigation and denied that he paid kickbacks for transactions in agency paper with the state treasurer's office.

But Murray said she found Riordan was "not credible."

"I find that Riordan's secret cash payments to Montoya in connection with the purchase and sale of agency securities by the treasurer's office in what Riordan knew was not a competitive bidding process was a material scheme or artifice to defraud - and a course of business that operated as a fraud on the citizens of the state of New Mexico to obtain money," she said.

Murray ordered Riordan to disgorge $1.02 million in ill-gotten gains and to pay $699,804 in prejudgement interest on that amount. The $1.7 million is to be placed in a "fair fund" to be used by the New Mexico treasurer's office. Murray also ordered Riordan to pay the federal government a civil monetary penalty of $500,000.

Montoya could appeal the ruling to the full commission. If he does not, Murray's ruling resolves in favor of the SEC the charges the commission filed against Riordan in September 2007.

The Federal Bureau of Investigation arrested Montoya in September 2005. The former treasurer cooperated with the FBI and pled guilty to one count of violating the Hobbs Act, Extortion Under Color of Official Right. In his plea agreement, Montoya estimated he received between $2.5 million and $5 million from Riordan and others. He was sentenced to a prison term of 30 months, supervised release for three years, and ordered to pay a fine of $25,000.

According to Murray's ruling, Montoya met Riordan in 1990 when Montoya made an unsuccessful run for the state treasurer's office. Riordan later supported Montoya for his 1994 and 1998 campaigns for treasurer. Riordan began giving Montoya kickbacks at Montoya's request. At first, Riordan wrote Montoya checks so the payments looked like campaign contributions. But later Riordan switched to secret cash payments because of concern the checks might look suspicious.

Montoya's office was supposed to purchase agency securities in the secondary market through a competitive bidding process. But Montoya began rigging the bids and directing the state's investment business to brokers who would pay him cash.

In 2001 and 2002, Riordan "won" 18 of 29 bids submitted for state investment business, for a 62% success rate, according to Murray. Riordan's total commissions from 1996 through 2002 on agency and corporate bond transactions, including bonuses for 2001 and 2002, totaled $1.02 million. His earnings from state investment business represented 71% of his total earnings for those two years, Murray found.

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