Bill Richardson

Why Not To Get On Bill Richardson's Bad Side

Moe Tkacik | May 14, 2009, 2:14PM

The president is at a high school in New Mexico today attacking predatory financiers -- and, we imagine, silently thanking the deities his cabinet is not inhabited by a certain friend of predatory financiers accused of booking huge fees bilking the retirement funds of the state's school teachers. No, Bill Richardson is still in the governor's mansion, and he doesn't seem happy about it. On Monday we read that Richardson had actually "rolled his eyes" in response to a reporter's question about noted that he'd :

When asked recently if he had set the tone for his administration, which has been criticized for sometimes moving quickly on programs and for having a blind spot for details, Richardson rolled his eyes. The governor, who had just gotten into a black state SUV, didn't answer the question as the door closed and the vehicle drove off.

If Richardson does indeed set the tone for his administration, that tone has changed considerably of late. The expanding pension probes in New York have state officials suddenly taciturn -- after spending most of the year in hard-core attack mode.

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Topics: Bill Richardson, Frank Foy, Marc Correra, Vanderbilt Financial

Marc Correra

New Mexico: Richardson Pal Marc Correra Made $2 Million On "Toxic Waste" Teacher Pension Deal

Moe Tkacik | May 6, 2009, 2:35PM

Last week we introduced you to Marc Correra, a longtime ally of New Mexico Governor Bill Richardson, who appointed his wife Claudia Correra in 2004 to be the state's first "international protocol officer." Last month Correra's name surfaced as the most successful in a list of dozens of "placement agents" paid by hedge funds and other money managers to secure investments in the state teachers' retirement fund; he was listed as having netted at least $11.5 million in fees for channeling around a billion dollars in pension investments to various money mangers -- including a controversial $90 million investment in a near-worthless "toxic waste" tranche of a subprime mortgage-backed CDO. The CDO, Vanderbilt Financial Trust, was put together by a Chicago firm called Vanderbilt Capital Group.

At the time the state said it did not know Correra's fee for the transaction, and his attorney strenuously denied his involvement whatsoever with Vanderbilt in the Albuquerque Journal:

"That did not happen," Bregman said Friday. "Marc Correra never received a fee for that transaction. He was not involved in that transaction in any way, shape or form."

But that's not what Vanderbilt told New Mexico, according to a document the state released yesterday.

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Topics: Bill Richardson, Marc Correra

Marc Correra

Marc Correra: The Link Between New York's Pension Scandal And "Toxic Waste" In New Mexico?

Moe Tkacik | May 1, 2009, 4:59PM

Three weeks ago we told you about accusations that the New Mexico State Investment Council had been under political pressure to invest teachers' retirement funds in risky investments like a $90 million "toxic waste" CDO backed by subprime mortgages -- and wondered if any of the other intensifying corruption investigations across the country might involve some of the same pay-for-players.

Sure enough, a few names emerged last week to link the New Mexico pension fund scandal to the alleged conspiracy to defraud the New York general pension fund under investigation by the state attorney general's office. One was Obama car czar Steve Rattner, who paid alleged ringleader Hank Morris more than a million dollars for securing investments in both states' pension funds. Morris was indicted in March for collecting $30 million in fraudulent "finder's fees" as a top adviser to the former state comptroller Alan Hevesi, in collusion with the pension fund's manager David Loglisci. But the indictment didn't address Morris's "placement" services in other states; his name turned up on a list of placement agents released by the New Mexico State Investment Council as the broker of a $20 million investment in Rattner's private equity firm Quadrangle.

The other thread running through both the New York and New Mexico pension funds was the advisory firm Aldus Equity, whose founder Saul Meyer was charged yesterday with participating in the New York conspiracy and which also until this week advised similar investments in New Mexico.

The further we looked, the wider and farther-back the suspicions of public pension fund pay-to-play seemed to extend, as Cuomo noted himself at yesterday's press conference:

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Topics: Aldus Equity, Bill Richardson, Dan Weinstein, Jerry Cremins, Marc Correra, pension scandals

Andrew Cuomo

Cuomo Charges Dallas Money Manager, Says NY Pension Scammers Are Part Of A "National Network"

Moe Tkacik | April 30, 2009, 4:00PM

New York AG Andrew Cuomo added a new name to the growing list of indictments in the New York Pension Fund scandal: Saul Meyer, the (youthful-looking) 38-year-old founder of the private equity fund Aldus Equity. Meyer won't be the last, Cuomo assured reporters at a press conference announcing the charges today:

"I believe we are disclosing a national network of actors who often acted in concert and did this all across the country," Mr. Cuomo said. "They collaborated, they often partnered and victimized states and taxpayers across the country. It's also an ongoing scam."

We said as much yesterday, when we showed you how a key figure in the pension scandals in New Mexico and New York was a direct descendant-in-law of a key figure in a California pension scam of the nineties. And we told you about Aldus, a key name linking the New York fraud to a suspected scheme to scam the teachers' retirement fund in New Mexico and possibly other public pension funds, last week.

Aldus's usual business was advising state pension funds on private equity investments. But it went a step further in New York, using its access to the pension's billions to arrange a $375 million investment to create its own private equity fund. The idea was hatched by Hank Morris, the top adviser to former state comptroller Alan Hevesi who is charged with defrauding the pension fund in a scheme to collect phony "finder's fees." According to the indictment, Aldus paid Morris about $320,000 to secure itself a $375 million investment from the pension fund. Not bad for a private equity firm that, according to this Dallas Business Journal puff profile that ran (all of) two months ago: "started in 2003 with no clients."

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Topics: Aldus Equity, All Muck is Local, Andrew Cuomo, Barrett Wissman, Bill Richardson, CalPERS, Calpers, Saul Meyer, Steve Rattner

CDR

The Pension Scandals: Six Degrees Of How "Toxic Waste" Lands In Teachers' Retirement Funds

Moe Tkacik | April 29, 2009, 3:31PM

LATE UPDATE: An earlier version of this post misidentified New Mexico State Investment Council portfolio manager Kay Chippeaux as being Frank Foy's replacement; Foy had held various titles including chief investment officer at the state's Education Retirement Board.

In June 1997 Tom Flanigan, the chief investment officer of the California State Teachers Retirement System, wrote a letter to his old mentor, then-SEC chief Arthur Levitt. He was under political pressure, he said, to gamble with teachers' savings. The state comptroller was demanding he allocate a bigger portion of the fund to venture capital firms and hedge funds in what he thought to be an overheated market.

Meanwhile, hedge funds and private equity firms were hiring politically connected "placement agents" to descend upon his board of directors, who had final approval over his investment decisions. He had just watched the Texas investment firm Hicks, Muse, Tate and Furst secure a $100 million investment from the state employees' general retirement fund CalPERS after paying a $750,000 "finders fee" to a former board member and longtime Los Angeles politico named Alfred Villalobos. Villalobos had a questionable history with Hicks -- as a board member he'd already approved another $100 million investment in the firm on the advice of the fund's paid adviser Chris Bower. Nine months later, Bower sold his two-year-old yacht to Hicks founder Tom Hicks for a $45,000 profit. And there was other smoke around the deal, if no clear fire: Villalobo, for one had just filed for personal bankruptcy over gambling debts. And the board had initially rejected the deal -- when another LA politico on the board, a labor leader named Jerry Cremins, changed their minds. There was something "unseemly if not unethical" going on, Flanigan wrote. The SEC proposed rules regulating the placement agencies.

A few months later, Flanigan was sacked.

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Topics: Bill Richardson, CDR, Calpers, pension scandals

Steve Rattner

If Steve Rattner's Scandal Sounds A Lot Like Bill Richardson's, There's A Reason For That

Moe Tkacik | April 21, 2009, 11:24AM

It may not be sexy like Kwame's sexting, or Larry's bathroom stall rendezvous, or Foggo's prostitutes in hot tubs, but for sheer scale of conspicuous muck, the state pension fund scandals bubbling up around the country are in a league of their own. And while it may be hard for you to get your head around as fundamentally dry a subject as state pension funds, the underlying alleged wrongdoing is same as it ever was: billions of dollars in state business steered to politically connected firms, kickbacks, and taxpayers left holding the bill.

You don't have to scratch too far beneath the surface to find the same patterns--and sometimes the same players--emerging from state to state.

Let's start with Obama car czar and billionaire money manager Steve Rattner. Last Friday the Wall Street Journal reported that Rattner was the money manager referenced in an SEC indictment in a pay-for-play scheme run by the top adviser to the former New York State Comptroller that allegedly siphoned more than $30 million off asset managers seeking investments from the state pension fund.

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Topics: Bill Richardson, Municipal finance, Steve Rattner

CDR

The New Mexico Corruption Probe: CDOs, Swaps And "Inappropriate Clothing"

Moe Tkacik | April 10, 2009, 12:27PM

The SEC has stepped into the corruption probe in New Mexico that saved Gov. Bill Richardson the hassle of amending years of tax returns. The new angle involves one of those enticing "toxic derivatives" deals we can't stop reading about, although there's a sexual harassment component, too.

Frank Foy used to manage the state teachers' pension fund, and in 2007 he says he got a call from a guy from a Chicago investment adviser -- and soon-to-be Richardson donor -- named Vanderbilt Capital Advisors. He told the Santa Fe Reporter he was too swamped to meet with him:

"This guy calls me up and says, 'I want to talk to you about a CDO.' I said, 'Call me back in a month. I don't have time to screw with it, dude,'" Foy recalls. "He didn't like that answer."

Soon after, Foy told the Reporter, he got a call from [Foy's Richardson-appointed boss Bruce] Malott. "He said, 'You were very rude to Pat Livney. I think he has a good investment and you ought to talk to him.'...I'd never been called by the chairman before. I thought, 'This stinks.'"

The investment was the lowest-rated slice of a collateralized debt obligation -- called the "equity tranche", presumably because like a stock its value can go all the way to zero. (Which it -- surprise! -- essentially did, after paying out about $4 million in interest payments to the fund, according to State Investment Officer Gary Bland.) Vanderbilt's CDO was the most toxic brand of the sort of "toxic" securities dragging down bank balance sheets right now; most banks, according to this handy primer on CDOs, didn't attempt to sell them to investors. But Livney, a former head trader of asset-backed securities at JP Morgan, nabbed a $90 million investment from the teachers' pension fund, despite what Foy claims were his strenuous objections. Malott, Foy says, told him the investment had been ordered by Bill Richardson's chief of staff. Shortly thereafter, a female employee accused Foy of sexually harassing her, and he was demoted.

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Topics: Bill Richardson, CDR, Rod Blagojevich

CDR

Blago's Risky Bet On Derivatives

Moe Tkacik | April 6, 2009, 2:51PM

The Rod Blagojevich pay-to-play scandal may seem like an anachronistically simple big city machine politics scandal next to the ever-widening web of inscrutably interrelated financial scams comprising the on-going financial crisis. But in brokering deals with public coffers, at least, Blago liked "exotic" derivatives as much as the next hedge fund guy.

In January 2004, the Illinois pension obligation program was $36 billion in the hole, the most indebted state pension program in the country. So Blago decided to refinance, taking advantage of the era's superlow interest rates to float $10 billion in "exotic" new bonds in the country's biggest pension bond offering on record. Bond Buyer named it the Midwest Deal of the Year at the time -- not just for its "complex" pricing but its use of derivatives, which had just been legalized by the state legislature the year earlier. It was the start of a new trend, the trade publication noted:

Since Gov. Rod Blagojevich took office in January 2003 faced with a nearly $5 billion budget deficit, his finance team - which includes former financial advisory professional John Filan and quantitative analyst and investment banker David Abel - has turned to more sophisticated techniques to manage state finances. Supporters have called them creative, while critics have labeled them dangerous.

The deal alone netted investment banks $35 million in fees, including $8 million for the lead underwriter Bear Stearns, which in turn delivered a $809,000 consulting fee to a firm called Springfield Consultants run by lobbyist Robert Kjellander. The fee caused much furor in the Illinois statehouse when Bear Stearns disclosed it in an SEC filing, especially after initial probes launched by the state Inspector General revealed the firm could not produce any evidence that Kjellander, a prominent GOP lobbyist and friend of Karl Rove, had done anything to earn the fee.

The investigation swung into high gear when a hospital president named Pamela Davis got an unsettling phone call at her house from a Bear Stearns executive:

Back in 2003, Davis was trying to get approval for a new medical office building from the Illinois Health Facilities Planning Board. A night or two before a hearing was to be held, Davis recalled, something strange happened. A business acquaintance of hers, Nicholas Hurtgen, then a managing director of the Chicago office of Bear Stearns, called her at home and told her that unless she agreed to use a certain contractor she should pull her building request, because it wasn't going to be approved.

She ignored the warning and went off to the board hearing, where she was surprised to find that her request was denied. "I was humiliated," she said. "They were mean. So I walk off, and then a different guy comes up to me and he says, 'We told you to pull your project. Call me.' And right then I decided to call the F.B.I."

The FBI wouldn't confirm or deny Davis' story to the New Yorker, but she says she spent seven months secretly recording conversations with Hurtgen and his cronies, eventually filing a sealed federal whistleblower lawsuit alleging that Hurtgen, a former protege of former Wisconsin governor and Bush cabinet member Tommy Thompson, was part of a massive pay-to-play scheme that somehow linked the bond offering to the hospital.

The details are still unclear, but some of that $809,000 allegedly made its way back to Tony Rezko, who in turn split the bounty with three friends -- one of whom was Blago, according to last week's indictment, which refers to Kjellander as a "lobbyist" according to the Chicago Tribune:

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Topics: Bill Richardson, CDR, Rod Blagojevich

CDR

Regulator Who Regrets "Silence" About Derivatives Told To Shut Up

Moe Tkacik | March 26, 2009, 2:55PM

Yesterday Christopher "Kit" Taylor, the former executive director of the Municipal Securities Rulemaking Board, became one of the few regulators to publicly apologize for his role in the crisis. Like many public officials, he worried for years about the explosion in the unregulated derivatives market, which he was in the unique position of seeing bankers pawn off on slightly less sophisticated investors than the usual hedge fund guys: school districts, park authorities, power companies and other local government entities. Today Detroit, Jefferson County, Alabama and various towns in California alone are out more than a billion dollars after investing in interest rate "swaptions" and other financial "products" that left them on the hook in a national conspiracy through which banks, lawyers, consultants and corrupt politicos bilked as much as $4 billion a year from state and local government coffers. But "the big firms, he told Bloomberg yesterday, "didn't want us touching derivatives...they said, 'Don't talk about it, Kit.'"

"Every time I talked to the board about swaps, I made it clear that the MSRB had no authority to take action," said Taylor, in an e-mail. "My 'regret' is that MSRB would not speak out loudly that swaps were going to cost taxpayers a bundle if issuers did not clearly understand what they were doing."

Perhaps as penance, Taylor has been a main source for most of the media coverage of municipal finance corruption, currently the subject of a federal probe, and his candor has been hailed by his former colleagues in financial regulation, oh wait not really.

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Topics: Bill Richardson, CDR, Christopher "Kit" Taylor, Muncipal bonds, Tim Geithner

Bill Richardson

Must See TV!

Zachary Roth | February 3, 2009, 5:59PM

Check out the latest episode of TPMtv, on the investigation into possible pay to play in New Mexico, which last month forced Bill Richardson to withdraw his bid to be Commerce Secretary, and has now seemingly ensnared the Democratic Governors Association.

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Topics: Barack Obama, Bill Richardson, CDR

Bill Richardson

Dem Gov Assoc Mum On Possible Subpoena In Richardson-Linked Probe

Zachary Roth | February 3, 2009, 12:53PM

The Democratic Governors Association is refusing to say whether it has been subpoenaed in connection to the federal probe of pay-to-play allegations in New Mexico which derailed Bill Richardson's bid to be Commerce Secretary.

Asked whether the DGA had received a subpoena, spokesman Brian Namey responded in an email:

The DGA fully cooperates with any state or federal agency that makes legitimate requests for information. The DGA does not make statements concerning any particular investigation.

Four investment firms contributed to the DGA in 2004, around the same time those firms won lucrative contracts to manage the state's bonds, according to a report in the Albuquerque Journal today. Richardson at the time served as vice chair of the DGA, and would become chair the following year.

Last month, Bloomberg reported that investigators had subpoenaed Richardson's office for its correspondence with the DGA, in connection with the probe*.

The DGA, which has served as a key stepping-stone to national prominence for some Democrats, is currently chaired by Montana governor Brian Schweitzer. His office did not immediately respond to a request for comment.

Richardson's office has largely declined to comment on the investigation. According to reports, a former aide to Richardson, as well as a Richardson political adviser, have received subpoenas in connection with the probe.

* This sentence has been edited from an earlier version.

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Topics: Bill Richardson, Brian Schweitzer, CDR, Wall Street

CDR

Richardson-Linked Probe Eyeing Governors Association

Zachary Roth | February 3, 2009, 10:42AM

Could the federal investigation of possible pay-to-play in New Mexico be turning its focus to a crucial Democratic political organization?

The probe, which derailed Bill Richardson's bid to be Commerce Secretary, has largely focused on one investment firm, CDR Financial Products. That company won a contract from Governor Richardson's administration to help manage the state's bonds, around the same time that it contributed to two Richardson political committees, as well as to the Democratic Governors Association (DGA), of which Richardson was vice chair at the time. (He would become chair in 2005).

And now the Albuquerque Journal reports that three other firms that won contracts to manage the state's bonds also contributed to the DGA, giving almost $500,000 around the time the transportation financing plan was being developed and finalized. Those firms are J.P. Morgan Securities, UBS Bank and RBC Dain Rauscher.

The paper adds:

Some of the donations were in cash, others were "in kind" services, such as catering.

The DGA describes itself on its website as a "political organization organized to support the candidacies of Democratic gubernatorial nominees and incumbents across the nation" and as "the united voice for America's Democratic governors." It has been a key stepping-stone to national prominence for some Dems, and its current chair, Governor Brian Schweitzer of Montana, is seen as a rising star in the party.

Bloomberg recently reported that federal investigators, in addition to subpoenaing aides to Richardson and a banker with JP Morgan Chase, also asked for DGA correspondence records in connection with the probe.

The bond contract program, known as GRIP, appears to have quarterbacked by David Harris, the led the state's financing authority at the time and had previously served as Richardson's deputy chief of staff.

Reports the paper:

Harris organized the team of GRIP bond underwriters and advisers after the Legislature approved GRIP at a special session in November 2003, according to NMFA board meeting minutes.

Harris also helped plan the financing for GRIP and shepherded the transportation package through the Legislature.

Harris, who left the NMFA after the GRIP financing details were approved to become a University of New Mexico vice president, has declined comment. His lawyer says his client denies any wrongdoing.

Something tells us we haven't heard the last of this.

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Topics: Bill Richardson, CDR, Wall Street

Bill Richardson

New Mexico Probe Just the Tip Of the Iceberg On Municipal Bond Scams?

Zachary Roth | January 9, 2009, 11:45AM

Ever since New Mexico governor Bill Richardson withdrew his nomination for Commerce Secretary citing an investigation into the company that obtained a contract to advise the state on bond deals, news reports have been making reference to a broader nationwide probe of alleged price-fixing and corruption in the municipal bond industry, which the New Mexico investigation grew out of.

Here at Muckraker, we've started looking into that larger ongoing story, and today the New York Times delivers a helpful takeout on the subject -- though many of the details still remain murky.

As the paper explains, federal and state investigators have over the last few years gathered evidence of what looks like a collusion scheme by financial firms that work with state and local governments on municipal bond deals worth around $400 billion each year.

Explains the paper:

E-mail messages, taped phone conversations and other court documents suggest that companies did not engage in open competition for this lucrative business, but secretly divided it among themselves, imposing layers of excess cost on local governments, violating the federal rules for tax-exempt bonds and making questionable payments and campaign contributions to local officials who could steer them business. In some cases, they created exotic financial structures that blew up.

And crucially, the paper makes clear that this isn't just an isolated case, but rather goes to the very heart of the municipal bond system.

People with knowledge of the evidence say investigators are not just looking at a few bad apples, but also at the way an entire market has operated for years.

A former IRS investigator estimated to the Times that as much as $4 billion has vanished into the system as a result of the schemes.

A source tells the paper about evidence that sheds light on one way in which the scam works. People from firms that have contracted with local governments to help them pick their bankers were taped telling the bankers: "We want you to bid on this deal, but you're not going to get it -- you're going to get the next one. We want you to submit a sloppy bid." Then, in some cases, banks would be paid in cities where they did not work, to reward them for throwing the other contract to a competitor.

Part of the problem appears to be the lack of regulation, especially of companies that have emerged in recent years to advise governments on complex derivatives deals like swaps and options.

The Times explains:

The packages are presented as money-savers to the municipalities, which may want to protect themselves against interest rate changes. But over the last year, as turmoil spread through the credit markets, some of the derivatives have blown up, leaving local governments stuck with unexpected costs.

CDR, the firm that's being investigated in New Mexico, leading to Richardson's withdrawal, is one such company that handles derivatives.

That firm and two that do similar work -- Investment Management Advisory Group, (known as "Image"), and Sound Capital Management -- had their offices raided by the FBI in 2006 as part of the investigation.

The former Treasurer of the city of Phladelphia is currently in jail for accepting illegal payments in exchange for giving city bond business and other contracts to selected companies. CDR and Image appeared frequently in the indictments, and CDR was found to have paid for the Treasurer's trip to the Super Bowl, but neither firm was formally charged.

Financial services companies including JP Morgan Chase, AIG, and Merrill Lynch have been subpoenaed as part of the investigation.

The exact mechanism or mechanisms by which these scams works remains a bit obscure, and may vary from case to case. But the broad picture is clear: financial firms, including some Wall Street powerhouses (at least until recently) are suspected of colluding to rip off state and local governments -- that is, taxpayers -- for billions.

We'll be staying on top of this...

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Topics: AIG, Bill Richardson, FBI, Wall Street

Bill Richardson

NM Investigation Focusing On Richardson's Former Chief of Staff?

Zachary Roth | January 7, 2009, 9:01AM

Bloomberg advances the ball a bit on the progress of the federal investigation in New Mexico into CDR Financial Products, which derailed Bill Richardson's bid to be Commerce Secretary.

It sounds like the probe is focusing on Richardson's former top aide. Reports Bloomberg:

A witness who testified before a federal grand jury in Albuquerque last month said he was asked if David Contarino, the former chief of staff, ordered New Mexico Finance Authority officials to hire Beverly Hills, California-based CDR Financial Products Inc. Another person familiar with the investigation said Contarino, 47, is a subject of the inquiry and that prosecutors are looking at whether he solicited contributions from firms that worked on finance authority bond deals.

Contarino, who managed Richardson's presidential run last year, released the following statement:

As chief of staff and co-chairman of the Governor's Finance Council, it was my job to be involved in GRIP and many of the administration's economic and financial initiatives," Contarino said in an e-mail statement. "In all of my actions, I acted appropriately and I am confident that the investigation will bear out that fact.

Bloomberg also raises preliminary questions about another Richardson aide:

Michael Stratton, a senior political adviser to Richardson, lobbied the authority on CDR's behalf, [Finance Authority CEO Bill] Sisneros said.

Stratton 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 served as lead underwriter on about $1 billion of transportation bond deals for Richardson's transportation program.

And Bloomberg adds additional detail about how CDR got one of the contracts under issue in the first place. In a nutshell, after CDR's 2003 bid received the second top score, the then-chief financial officer of the finance agency recommended splitting the job between the top two candidates.

Six companies answered the request, which contained two questions out of 39 items related to experience with interest- rate swaps and guaranteed investment contracts. A joint venture of the New York companies Salomon Smith Barney Inc., a unit of Citigroup Inc., and Ryan Labs Inc. received the top score of 99 percent. CDR had the second-highest score of 97 percent, authority records show.

Rather than select the Smith Barney/Ryan Labs team as both investment and swap adviser, the authority's then-Chief Financial Officer, Keith Mellor, recommended splitting the job. The agency gave the swap adviser assignment to CDR, which received the same score as the Smith Barney/Ryan Labs team on the swap section of the proposals, authority records show.

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Topics: Bill Richardson, CDR

Bill Richardson

PA Agency Chief: I Alone Chose CDR

Zachary Roth | January 6, 2009, 4:18PM

Brian Hudson, the executive director of the Pennsylvania Housing Finance Agency was not contacted by anyone in the office of governor Ed Rendell in regard to the 2003 no-bid contract awarded by the agency to CDR Financial Products, Hudson told TPMmuckraker moments ago.

Hudson said that at that time, only two firms had the technical expertise to do the bond-swap advisory work the agency sought, and that CDR Financial was selected over a rival, Swap Advisors, simply because its appeared to "bring more to the table."

Hudson added he had been pleased with the company's work, saying that CDR had saved the PHFA $2-3 million, and that the agency had renewed its contract with the firm each year, and continues to employ it.

But he allowed that he was troubled by the allegations against CDR, and would reconsider the agency's ongoing relationship with the firm when its contract came up for renewal in March.

Hudson added that he had never heard of Alan Kessler, the Rendell fundraiser who records show, has lobbied for CDR.

As we noted earlier, Pennsylvania governor Ed Rendell has received at least $35,000 in contributions from CDR founder David Rubin. New Mexico governor Bill Richardson, who also received money from Rubin, this weekend withdrew his nomination to be Commerce Secretary citing a federal probe into the company's contracts with his state.

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Topics: Bill Richardson, CDR, Ed Rendell

CDR

CDR Lobbyist Is Major Rendell Fundraiser

Zachary Roth | January 6, 2009, 3:28PM

Earlier today we noted Pennsylvania governor Ed Rendell's ties to CDR Financial Products, the firm that derailed Bill Richardson's bid to be Commerce Secretary. Now we've found another Rendell-CDR link.

State lobbying disclosure records from 2006 show that CDR was represented by Alan Kessler of the Philadelphia law firm Wolf, Block, Schorr and Solis-Cohen. Kessler is also the chair of the USPS board of governors.

Philadelphia magazine describes Kessler as a "big fundraiser" for Rendell. And his Wolf Block bio shows he's held a string of prime patronage posts in government and Democratic politics.

From the bio:

Kessler was appointed by Governor Rendell as Finance Chair of the Pennsylvania Democratic Party.

Kessler also served, according to the site, as co-chair of Rendell's two transitions, the first after Rendell was elected mayor of Philadelphia in 1992, and the second after he was elected Pennsylvania governor in 2002.

And Kessler is said to have served as finance vice chair of the Democratic National Committee (DNC), which Rendell chaired from 1999 to 2001.

Kessler did not immediately respond to a phone call and email from TPMmuckraker requesting comment.

As we noted earlier, CDR obtained a no-bid financial contract from a state agency, the Pennsylvania Housing Finance Agency (PHFA), in 2003. And its founder David Rubin has contributed $35,000 to Rendell.

Chuck Ardo, a spokesman for Rendell told TPMmuckraker: "The governor took no action on behalf of CDR."

Ardo added that the 2003 contract was given by PHFA, and that the governor had no role in selecting CDR -- the same thing he told the Pittsburgh Tribune-Review which first reported the existence of the contract this morning.

Brian Hudson, the PHFA's executive director, told the Tribune-Review that he made the decision to select CDR, and that he wasn't contacted by anyone from the governor's office.

Hudson did not immediately respond to a phone call from TPMmuckraker.

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Topics: Bill Richardson, CDR, Ed Rendell

Ed Rendell

Rendell, Too, Has Ties To Firm That Derailed Richardson Pick

Zachary Roth | January 6, 2009, 12:55PM

Since Bill Richardson withdrew as Commerce Secretary nominee, citing the investigation into CDR Financial Products, there's been speculation (I know, I know, it's the Spectator) that he might not be the only prominent elected official who received political contributions from the company, and also contracted with it for government business.

And it looks like he isn't.

Recent reports have noted that Pennsylvania governor Ed Rendell received significant contributions from CDR founder David Rubin -- whose company's various run-ins with the law are beginning to attract scrutiny.

Today the Pittsburgh Tribune Review puts those contributions at $35,000. But it also reveals that CDR does indeed have a contract - a no-bid contract, to be precise -- with a state agency, which appears to be similar to the one it has with a New Mexico government agency.

The paper reports:

Gov. Ed Rendell was not aware that the Pennsylvania Housing Finance Agency awarded a $160,000 no-bid contract in 2003 to a California company headed by a member of his transition team for the state Department of Revenue, his spokesman said today.

Since then, CDR Financial Products has collected an estimated $770,000 as financial advisor to the housing agency, said Brian Hudson, the agency's executive director. Its contract is for $45,000, Hudson said.

A story (via nexis) that appeared in The Bond Buyer, a trade publication, in May of 2006 sheds a bit more light on that contract. The story reports that:

The Pennsylvania Housing Finance Agency [will issue] $150 million in single-family mortgage debt starting Wednesday to help fund home loans for residents with low to moderate incomes.

...

CDR Financial Products is the agency's swap adviser.

An earlier statement given to the paper by Rendell's office also described the governor's relationship with Rubin as "tangential". But it did not mention that, as the Tribune-Review noted, Rubin served on Rendell's 2003 transition team when Rendell was preparing to become governor. Rubin is still touting the appointment on his company's website.

As we noted yesteday, CDR was also found to have paid for the then-Treasurer of the city of Philadelphia, Corey Kemp, to attend the 2003 Super Bowl. Kemp is currently serving a jail sentence on a corruption conviction, though CDR was not charged with wrong-doing.

CDR won its contract with the city without a competitive bidding process.

Rendell was mayor of Philadelphia until 2000, though no evidence has yet emerged that the city's contract with CDR dates to his tenure as mayor.

Late update: Hudson tells TPMmuckraker he wasn't contacted by the governor's office in regard to CDR.

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Topics: Bill Richardson, CDR, Ed Rendell

Bill Richardson

FBI Agents Probing Richardson Bumping Into Each Other?

Zachary Roth | January 6, 2009, 10:05AM

Buried in a Washington Post story on the incipient infighting between the Obama and Richardson camps about who's to blame for the aborted Commerce Secretary nomination, there's an interesting advance on the deeper story itself.

The Post reports:

The seriousness of the matter became apparent after the FBI began its own background check on Dec. 2.

And a little further down:

FBI agents assigned to comb his background learned independently that an inquiry was underway in New Mexico, the [Justice Department] source said.

In other words, it looks like FBI agents conducting a background check on Richardson for the Commerce job started bumping into their colleagues, who were looking into how CDR, a financial products company with a sketchy past that's donated over $100,000 to Richardson, obtained lucrative contracts advising the state finance authority on bond issues.

That suggests -- though of course, doesn't prove -- that the federal probe of CDR could be looking more directly at the governor himself.

And in that same vein, it was reported yesterday that Richardson had hired a top Albuquerque white-collar lawyer, Peter Schoenburg, in connection with the investigation.

More to come...

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Topics: Barack Obama, Bill Richardson, FBI

Bill Richardson

Firm Behind Richardson Withdrawal No Stranger To Controversy

Zachary Roth | January 5, 2009, 3:06PM

It's too soon to say where the federal investigation into CDR Financial Products -- which led to Bill Richardson's withdrawal this weekend as Barack Obama's nominee for Commerce Secretary -- might be heading.

The probe is focused on how the company -- whose founder gave at least $100,000 in political contributions to the New Mexico governor's political action committees -- won two 2004 financial consulting contracts with the state, worth about $1.4 million. No real evidence has yet emerged that Richardson himself is currently a target of the investigation, but his abrupt decision to take himself out of the running for the Commerce post -- and his refusal to say, at a press conference this afternoon, whether he had hired a lawyer in connection with the investigation -- suggest the story won't soon go away.

So it's worth noting that CDR and its founder David Rubin don't exactly have a squeaky clean record.

Even the firm's name isn't what it seems. A 2006 Bloomberg report notes:

David Rubin, whose firm, CDR Financial Products, is entangled in investigations by the Internal Revenue Service, used to call his company Chambers, Dunhill, Rubin & Co. He says he picked those names because he liked the sound of them together. Chambers and Dunhill didn't exist.

More seriously, that same story reported:

CDR, which has advised local governments on more than $17 billion of derivatives since 2003, is being investigated by the IRS for possibly profiting from deals at the expense of U.S. taxpayers. According to IRS letters obtained from the cities of Atlanta and Fargo, North Dakota, and an internal memo from the state of Wisconsin, CDR may have colluded with Bank of America Corp., Bear Stearns Cos. and other companies to make improper fees by selling municipalities unneeded contracts or mispricing investment deals.

The company's offices were searched as part of that investigation, which is ongoing, Bloomberg reports today. The probe is looking at whether banks and advisers conspired to overcharge local governments on financing deals.

The firm was also a player in a federal corruption probe focused on the administration of then-Philadelphia mayor John Street.

Bloomberg provides the details:

In April 2001, CDR hired Ron White, a bond lawyer and chief fundraiser for Philadelphia Mayor John Street, as a consultant, paying him a $5,000 retainer to help the company win business with the city. Rubin donated $15,000 to Street between December 2000 and June 2003, according to Pennsylvania state filings.

In addition, CDR gave White three tickets to the 2003 Super Bowl in San Diego and provided a limo ride to the game. White brought along Philadelphia treasurer Corey Kemp, according to a federal criminal indictment brought against White and Kemp in 2004.

On Feb. 11, 16 days after the game, Kemp told White that city Finance Director Janice Davis agreed to "move fast forward" on a $150,000 swap advisory contract for CDR, according to transcripts of FBI wiretaps.

Banks paid CDR, which wasn't accused of wrongdoing, at least $515,000 from profits they earned on transactions with the city, documents show.

CDR won its contract with the city without a competitive bidding process.

None of this, of course, means that either CDR or Richardson are guilty of any wrong-doing here. But at a minimum, we don't figure to have heard the last of this...

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Topics: Barack Obama, Bill Richardson, CDR, FBI