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The Fix Is In

There are so many public corruption scandals going on in New Mexico, sometimes it’s just too hard to stay on top of them all. For example, it was pointed out to me by a reader tonight that I was asleep at the wheel when the latest scandal hit. Oh sure, they were more diplomatic than that, but the fact remains it was right out there, and I didn’t catch it.

Guilty as charged. Sorry folks, I dropped the ball. So, let me bring you up to speed First, there was this story in the New Mexico Business Weekly:

Neither SIC nor Fort Washington would reveal specific reasons for the fallout last week, although state officials said they terminated the firm and Fort Washington said it resigned.

However, in further conversations with the New Mexico Business Weekly, SIC spokesman Charles Wollmann now says the state fired its advisor for refusing to render an opinion on deals that the SIC wanted it to consider.

“It wasn’t that Fort Washington was not in a position to advise us, they just didn’t want to, so we had to agree to disagree,” Wollmann says. “That’s not acceptable from our standpoint. Some of the investments we want to make are more sizable than what they were willing to advise us on, but if they’re not willing to advise us, then they’re not doing their job.”

Wollmann says the state and its advisor need to be “on the same page” about investments.

You read that correctly. An advisor to the state was terminated because, well, because they did their job. They advised the state against making an investment that would not yield the good financial returns New Mexicans should expect from an investment. If our advisors are supposed to be “on the same page” as the state, it kind of makes you wonder why we need advisors?

So, what was this unsound investment that “the state” wanted made? Well, you had to wait a few months to get the inside scoop:

Cincinnati-based Fort Washington Capital Partners resigned as the SIC’s investment advisor for the program last July, citing disagreements with the state over its role. The state had asked Fort Washington to render opinions on two large investments in space-related companies and Fort Washington refused, arguing that the proposals seemed more like economic development projects than private equity transactions.

Wait a minute… “investments in space-related companies.” Didn’t Governor Richardson already put a $100 million dollars of state money into the spaceport? Why would we be putting two more large investments into space related companies? This is starting to smell fishy. Well, wait a second. Maybe I’m just jumping to conclusions. After all, the article makes it clear that the State Investment Council is putting the fund out to bid.

Oh look, did you see the blurb in the Albuquerque Journal (subscription) a week or so after the election:

A committee has recommended that the state Investment Council hire a Santa Fe investment company to oversee $60 million in venture-capital investments in New Mexico companies.

The Private Equity Investment Advisory Committee on Wednesday recommended Sun Mountain Capital to replace Fort Washington Investment Advisors Inc. of Cincinnati, Ohio, as the fund’s manager.

Hmm, who is this Sun Mountain Capital that is more likely to be “on the same page” with the state? Luckily, the answer is in another Journal article:

Sun Mountain Capital was founded in August by Brian Birk, a former Fort Washington regional executive based in New Mexico [emphasis added]. The firm will manage a new direct investment pool, called the New Mexico State Investment Council Co-Investment Fund. The fund will be divided into two chunks— $30 million for early-stage investments of up to $5 million in startup companies, and $30 million for investments of $5 million to $20 million in larger operations.

Sun Mountain Capital was one of four respondents to a state-issued request for proposals to manage the new direct investment fund. The firm was the only respondent to a request for proposals to provide advisory services, officials said after the Council’s Private Equity Investment Advisory Committee met Wednesday.

Whoa, whoa, whoa… A company that has been in existence for, let me pull out those counting fingers, THREE MONTHS before submitting a proposal lands responsibility for a contract overseeing TENS OF MILLIONS OF DOLLARS. And the company founder’s last job was with the company that would not put aside it’s ethics to get “on the same page” as the state. Does that mean this individual does not have the same reservations?

Birk said Sun Mountain already has a few potential investments in the pipeline.

“Even though we didn’t have a fund yet, we’ve had a lot of interest from other local funds contacting us about potential deals,” he said. “We’ve been stockpiling in anticipation of being successful” at landing the state’s business.

Can you say, “The fix is in?” Anyone want to take bets whether or not Sun Mountain Capital advises to invest in the same space-related projects Fort Washington refused to endorse?