GRIP Probe Turns to Richardson Advisers

DALLAS - Two former operatives for New Mexico Gov. Bill Richardson are under scrutiny in a federal investigation into the hiring of a swap adviser for a $1.5 billion bond program that served as the governor's signature economic development program.

Former Richardson chief of staff Dave Contarino and Michael Stratton, president of Denver-based political consulting firm Stratton & Associates, played key roles in Richardson's fundraising and campaign efforts.

Stratton also lobbied for CDR Financial Products to become swap adviser on the GRIP - Governor Richardson's Investment Partnership - bond program designed to build roads and rail networks in the state. Stratton could not be reached for comment yesterday.

Contarino, who led Richardson's campaigns for governor and president, is facing questions into whether he helped steer business to CDR, according to Bloomberg News.

Contarino, who shares ownership in a Santa Fe title company with his wife, has denied any wrongdoing. Richardson has also come to Contarino's defense through his spokesman, Gilbert Gallegos.

"The governor is fully supportive of Dave Contarino and is confident that he always acted ethically and appropriately during his time as chief of staff," Gallegos wrote in a statement. "Dave was a key part of the progress in New Mexico under Governor Richardson's leadership."

At the heart of the federal grand jury investigation is whether CDR and its founder, David Rubin, won the contract as swap adviser on the bond deals as a result of contributions to Richardson's political action committees, a process known as "pay-to-play."

CDR advised the New Mexico Finance Authority on the purchase of interest rate swaps from New York-based Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., JPMorgan, UBS AG of Zurich, and Royal Bank of Canada in Toronto.

Rubin this week said in a prepared statement that his company received "a rigorous vetting process" and "has never practiced pay-for-play on any playing field where we do business."

CDR earned nearly $1.5 million in 2004 for advising the NMFA on interest rate swaps and restructuring escrow funds for $1.6 billion in bonds for GRIP, which some Richardson detractors joked stood for "Get Richardson Into the Presidency."

In 2003 and 2004, CDR gave $75,000 to Richardson's political action committee Si Se Puede!, and Rubin gave $25,000 to Moving America Forward, another Richardson PAC. The firm earned the nearly $1.5 million in fees for its roles as swaps adviser and investment adviser on the GRIP escrow fund.

Stratton, meanwhile, was also paid $269,000 by JPMorgan Chase & Co. in 2003 and 2004 to help win public finance business in New Mexico, according to Municipal Securities Rulemaking Board records. JPMorgan was lead underwriter on about $1.1 billion of bond deals for Richardson's transportation program.

The large debt issuance, which won The Bond Buyer's honorable mention for Southwest Regional Deal of the Year, included refunding debt, new money, and New Mexico's first swap. It took out much of the state's previously-issued transportation debt and provided present-value savings and premium proceeds worth about $170 million over the lifetime of the deal.

JPMorgan's lead banker on the deals was Chris Romer, whose father Roy Romer was Democratic governor of Colorado from 1987 until 1999 and later superintendent of the Los Angeles Unified School District. Chris Romer is now a state senator in the Colorado General Assembly.

JPMorgan in August 2008 told regulators about an investigation being conducted by the U.S. attorney for New Mexico involving the municipal securities business, according Romer's brokerage records with the Financial Industry Regulatory Authority.

While no one has been charged with any wrongdoing in the bond deals, Richardson said he withdrew his name from consideration as President-elect Barack Obama's secretary of commerce because the investigation had not been resolved.

"The deal handled by the New Mexico Finance Authority with CDR was thoroughly scrutinized through a rigorous procurement process," Richardson said this week. "I have always fully expected that my administration would be cleared of any wrongdoing and it would be clear that nothing improper took place."

 

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