CDR saved the state millions of dollars
Posted 1/05/2009 04:12:00 PM
But the company has been involved in several controversial situations in other states
The company at the center of the investigation into allegations of pay-to-play that derailed Bill Richardson’s commerce secretary nomination, CDR Financial, was hired to save the state money, and it did save the state millions of dollars by restructuring escrow funds.The New Mexico Finance Authority hired the company to advise the state on interest-rate swaps and restructuring escrow funds related to a $1.6 billion transportation project Richardson dubbed GRIP, or Governor Richardson’s Investment Partnership. According to documents from NMFA, CDR saved the state more than $8.8 million through its work to restructure escrow funds, and received as payment about $443,000 -- 5 percent of the money it saved the state.
In all, the state paid CDR almost $1.5 million for its work, with most of the rest of the money the company was paid coming as a result of its work on the interest-rate swaps that were intended to lower costs and make the GRIP bonds less vulnerable to shifting interest rates. The NMFA hasn’t released documents that claim the company’s work on interest-rate swaps saved the state a significant amount of money.
CDR won the NMFA contract after being one of six companies that responded to a request for proposals in 2003. The company was ranked second out of the six bidders, and NMFA opted to split the work it sought in its request for proposals between CDR and the top bidder, which is how CDR ended up with the GRIP contract. The company was already doing similar work for the University of New Mexico.
CDR is involved in controversial situations in several other states, according to Bloomberg.com, as the Justice Department conducts a national probe into bid rigging and price fixing in the municipal derivatives market.
The company advised an Alabama county on bond deals that could cause what the news service calls “the biggest municipal bankruptcy in U.S. history.” In the Alabama case, Birmingham’s mayor is under indictment in a pay-to-play scheme that involves another company. CDR has not been implicated in that scandal.
In addition, CDR’s name surfaced in a 2002 incident in North Carolina in which Bank of America fired an employee who said he paid more than $182,000 to CDR and others on transactions in which they weren’t involved. And in 2001, CDR hired a politically connected bond lawyer as a consultant in an attempt to win a contract with the city of Philadelphia. That situation involves campaign contributions and Super Bowl tickets, but CDR isn’t accused of wrongdoing.
Last year the company, according to Bloomberg.com, “settled allegations by the SEC that it committed securities fraud for failing to disclose that it received secret fees on Florida bond deals from New York-based American International Group Inc., the insurer rescued (last) year by the Federal Reserve in Washington. CDR and AIG neither admitted nor denied wrongdoing.”
CDR has repeatedly denied wrongdoing in the New Mexico situation.
“To suggest that there’s a pay for play element is just inaccurate,” CDR’s Allan Ripp told Bloomberg.com. “There was no involvement by the governor. CDR knows for certain that they were selected on the basis of their track record.”
Regardless, the campaign contributions still exist, and their timing coincides with the NMFA’s hiring of CDR in 2004. The company gave $75,000 to Richardson’s political action committee Si Se Puede!, and the company’s head, David Rubin, gave $25,000 to Moving America Forward, another Richardson PAC.
No information released publicly has directly linked Richardson to the probe, but the investigation centers around whether staffers in Richardson’s office influenced the hiring of CDR.
Labels: GRIPgate, Richardson, State government
1 Comments:
Heath:
It is a pleasure to see a journalist apply his trade in a manner consistent with ethics and taxpayer interests.
What was/is the track record of those entities (CDR competitors) that bid but did not win the so-called bidding arrangement?
It's finally coming too light that state/city municipal bonds (schools, roads, public buildings, public employee retirement & health plans) were or are highly leveraged. As I understand it -- many of these muni's were traded into and became all manner of vehicles that have or are becoming questionable.
The states and cities, like credit card junkies went on a shopping spree and the bills are past due. Obviously, the federal govt is going to have bail-out a lot of these possibly defunct or close to non-performing so-called taxpayer backed assets. If the WallStreet investment houses conducted business as usual that sent the economy into a tailspin and the regulators could not find who Mad Off with what then I can only wonder what is going on inside state govt?
Perhaps the question ought to be directed towards the public/private management personnel that originated the muni's before these muni's became too hot too handle which required spending more taxpayer dollars to fix the original deals. The whole thing stinks far worse than pay to play.
Sadly, I doubt this muni BUSINESS will become too scrutinized because the investment community has relied on these tax-free sources of revenue for a very long time and to erode confidence would spell disaster for lots of bonds, especially those that were redirected towards other projects after being refinanced. Of course the man/woman on the street has no idea how they are being fleeced and being forced into their new homes called streets and bridges.
I guess it's true -- we get the govt we deserve.
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