Bill Richardson Withdraws Cabinet Nomination
Ugh. More pay-to-play accusations within our government. Can't really say I'm very surprised. I never liked Bill Richardson, so I'm happy to see him step down. I would be willing to bet that a large percentage of our elected officials are guilty of something like this to some degree.
Apologies in advance for the length of the article. It seemed the best one out there that I read.
http://news.yahoo.com/s/bloomberg/20...amloqywsajju_1
Richardson Withdraws Cabinet Nomination Amid Probe
Martin Z. Braun Martin Z. Braun – Mon Jan 5, 3:01 pm ET
Jan. 5 (Bloomberg) -- New Mexico Governor Bill Richardson withdrew his name from consideration to be President-elect Barack Obama’s commerce secretary amid a federal investigation into how a political contributor won state financial business.
Richardson said he declined the post because the investigation threatened to delay his confirmation, potentially leaving the new president without a key cabinet official as he seeks to advance plans to stoke the economy. The governor declined to discuss the investigation, though he said he expects to be vindicated.
“I acted properly, and my administration acted properly,” he said at a news conference this morning in Santa Fe, the state capital. “A fair and impartial review of the facts will bear that out.”
A federal grand jury in Albuquerque met in December to look at how Beverly Hills, California-based CDR Financial Products won $1.5 million of work from the New Mexico Finance Authority in 2004, people familiar with the matter said.
CDR, which also advised Jefferson County, Alabama, on bond deals that threaten to cause the biggest municipal bankruptcy in U.S. history, donated $100,000 to Richardson’s efforts to register Hispanic and American Indian voters and pay for expenses at the 2004 Democratic National Convention. The grand jury’s investigation was reported by Bloomberg News on Dec. 15.
The Federal Bureau of Investigation asked current and former officials from the state agency whether any of the at least 30 people in the governor’s office influenced CDR’s hiring, said the people familiar with the matter, who declined to be identified because grand jury proceedings are secret.
‘Faith’ in Process
Richardson said he decided to withdraw over the weekend after it became clear that the investigation wouldn’t conclude as quickly as he had anticipated. Obama accepted the withdrawal with “deep regret” and will “move quickly” to name a replacement, according to a statement released by the transition team.
“Given the gravity of the economic situation facing the nation, I could not in good conscience ask the president-elect and his administration to delay for one day the important work that needs to be done,” Richardson said. “I underestimated how long the CDR investigation would take. But I have faith in the criminal justice process, and we must allow it to run its course. I also don’t want to jeopardize the process by commenting on it today.”
Avoiding Distraction
Transition officials didn’t give any hints as to who might replace Richardson. Richardson’s withdrawal may spare the incoming president the distraction of a contentious confirmation hearing.
“Every transition has some slip-ups. The organization of this transition gives Obama some breathing room,” said Julian Zelizer, a professor of history and public affairs at Princeton University. “What is important is to find an exciting alternative.”
The New Mexico investigation is one front in a nationwide inquiry by U.S. prosecutors into so-called pay-to-play practices in the municipal-bond market. The term refers to banks and advisers who make political contributions or personal gifts to public officials in return for fee-paying financing assignments.
Edward Romero, a former U.S. ambassador to Spain and the national finance chairman for Richardson’s 2008 presidential campaign, said he was confident that Richardson wasn’t involved in any wrongdoing.
CDR Offices Searched
“I go back with Bill Richardson many years; not one time has there ever been a hint of a quid pro quo,” he said. “You meet with people that donate money, you thank them. You listen to them. But not once has there ever been an indication of a quid pro quo.”
The FBI searched CDR’s offices two years ago as part of a nationwide investigation into whether banks and advisers conspired to overcharge local governments on financing deals. That probe by the New York office of the U.S. Department of Justice’s Antitrust Division is ongoing, and CDR has said it is cooperating.
CDR President David Rubin, in a statement today, called Richardson “an exceptionally able and dedicated public official, who was highly deserving of the opportunity to hold a cabinet- level position in the new Obama administration.”
Rubin said his company underwent “a rigorous vetting process” and “has never practiced pay-for-play on any playing field where we do business.”
Richardson, 61, had been working on the transition of power in New Mexico with Lieutenant Governor Diane Denish, a Democrat, who had pledged a “smooth and seamless” exchange on her Web site. He was elected New Mexico’s governor in 2002 and re-elected in 2006.
Richardson’s Career
A former U.S. energy secretary, Richardson was among Democrats who sought the presidency last year. He served 15 years in Congress and was the U.S. ambassador to the United Nations in 1997-98. He was a consultant to Salomon Smith Barney Inc., a unit of New York-based Citigroup Inc., from July 2001 to January 2003.
Richardson appoints five directors to the New Mexico Finance Authority’s 12-member board, including the chairman. Five other directors are members of his cabinet.
CDR made $1.48 million advising the authority on interest- rate swaps and restructuring escrow funds for $1.6 billion of transportation bonds issued by the agency, according to state records.
Political Donations
Interest-rate swaps are derivatives, or contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as changes in interest rates or the weather. Borrowers use them to lower costs and reduce their exposure to swings in interest rates.
In October 2003, CDR’s Rubin gave $25,000 to Moving America Forward Inc., a political action committee formed by Richardson, disclosure forms show. Seven months later, CDR, known then as Chambers, Dunhill, Rubin & Co., gave $75,000 to ¡Si Se Puede! Boston 2004 Inc., formed to help pay expenses at the 2004 Democratic National Convention in Boston, where Richardson was chairman.
Federal agents asked about CDR’s hiring and whether donations had any role, Craig Reeves, a member of the finance authority’s board, has said.
“That was one of many things we discussed,” Reeves said.
Rubin said he has “maintained a lifelong closeness to the Hispanic community.”
Campaign contributions were given “with full compliance of state and federal laws,” Rubin said.
Advice on Swaps
One of the people called to testify before the Albuquerque grand jury said federal investigators asked whether Richardson’s office directed the state agency to select CDR. Investigators also asked about how responses to a request for investment advisory services were scored.
CDR advised the New Mexico Finance Authority on the purchase of swaps from New York-based Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., JPMorgan Chase & Co., UBS AG of Zurich and Royal Bank of Canada in Toronto as part of Richardson’s $1.6 billion transportation proposal in 2003.
Richardson’s plan -- known as GRIP, Governor Richardson’s Investment Partnership -- called for refinancing more than $400 million of the state’s existing transportation debt and selling new bonds through the finance agency to pay for improvement projects. CDR earned $951,566 for advising on derivatives tied to the bond issues and $443,265 for restructuring the escrow funds of the refunded bonds, agency documents show.
CDR Recommended
David Harris, the executive director of the state finance agency when the interest-rate swaps were done, was Richardson’s deputy chief of staff before he was appointed to the agency. He was interviewed by the FBI, Paul Kennedy, his lawyer, has said.
CDR was hired after responding to a Dec. 30, 2003, request for proposals from the New Mexico Finance Authority for investment advisory services.
Rick Homans, chairman of the committee that recommended CDR’s selection, declined to comment. At the time, Homans was the Secretary of New Mexico’s Economic Development Department. He now serves as the secretary of the Taxation and Revenue Department.
CDR, which Rubin founded in 1986, has been involved in investigations elsewhere by the Internal Revenue Service, the Securities and Exchange Commission and the Department of Justice into whether banks and brokers conspired to rig bids on municipal derivatives and profit from deals at the expense of taxpayers.
IRS Investigation
The IRS probed whether CDR and banks including Charlotte, North Carolina-based Bank of America Corp. and the former Bear Stearns Cos. of New York conspired to overcharge municipalities such as Atlanta; Fargo, North Dakota; and Johnson City, Tennessee, for contracts to invest bond proceeds and then split the profits.
In New Mexico, the finance agency was first contacted by the FBI in August, said William Sisneros, the authority’s chief executive, who was appointed after the CDR deals were done.
The agency, which is cooperating, has given investigators “massive boxes” of documents related to the bond and swap deals, he said last month.
To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net .
