Kansas City Chiefs owner Clark Hunt improperly secured hundreds of millions in state investment money through a kickback deal tied to former New Mexico Gov. Bill Richardson’s administration, the state claims in a lawsuit.
The New Mexico State Investment Council filed the lawsuit in late August in the 1st Judicial District Court in Santa Fe. It names as defendants Hunt, HFV Asset Management LP and others, who were named only as “John Does.”
The lawsuit contends that Hunt agreed to a “pay to play” arrangement 12 years ago with political insiders Anthony and Marc Correra. In exchange for kickbacks, the Correras were to use their influence to steer state investment money to a hedge fund firm in which Hunt was a partner.
According to the lawsuit, the New Mexico State Investment Council awarded $300 million to HFV and paid the firm millions in management fees, “which enriched Hunt and his business partner.”
Attorneys representing the defendants denied those accusations, saying HFV received less than that amount and actually made money for the investment council.
The state investment council is headed by public officials and manages New Mexico's $21.5 billion permanent endowment — the third largest such endowment in the U.S. The funds provide a significant portion of the state’s budget.
The council has said it lost tens of millions of dollars in a pay-to-play investment scandal under Richardson’s administration and has since reached settlements with several investment firms and advisers it said mishandled money.
On Sunday Rob Hoffman, an attorney representing Hunt, issued a statement denying the allegations.
"The NMSIC lawsuit is, in a word, baseless,” Hoffman wrote in a statement to The Star. “The unfounded allegations against my client contravene both the facts of this case and his long-standing, irrefutable commitment to character and integrity. It represents nothing more than an irresponsible attempt to extract financial gain by damaging my client’s good name and we intend to explore all available legal remedies in pursuit of a just outcome."
The lawsuit says that, in exchange for steering the state money to Hunt’s firm, Hunt agreed to pay Marc Correra 25 percent of the fees HFV received from the investment council. Those payments were disguised by a fee-sharing deal through a Chicago-based broker-dealer that passed 90 percent of the fees it received from HFV to Correra, according to the Albuquerque Journal.
Anthony Correra, frequently joined by his son Marc, was considered a political gatekeeper to the investment council, according to the lawsuit. Companies paid them millions of dollars in finder’s fees to get access to state investment money.
Hunt allegedly met with the Correras at an airport in Albuquerque, where they told him they could use their personal relationship with Richardson and then-investment officer Gary Bland to get Hunt’s firm a substantial investment.
At the time, HFV — then called Arbitex Asset Management LP — was one of 82 firms seeking investments from the council, which had sent out a request for proposals nationwide. HFV had already responded when it entered into the finder’s fee arrangement, according to the suit.
“Lacking confidence that HFV would prevail on its own merits,” the lawsuit says, “Hunt sought to gain unfair advantage by paying for influence over the process.
“They knew they were paying for influence and were participating in a fraudulent scheme,” the lawsuit said of Hunt and his partner.
In May 2005, the investment council awarded HFV Management $300 million for investment in two hedge funds, three times what other hedge fund managers received.
Bland allegedly made the investment without seeking the approval of the council. He did so even though the council’s adviser on hedge funds did not recommend that HFV receive any state investments, the suit says.
One of the hedge funds lost $13.8 million while Hunt and his partners were paid millions of dollars in management fees, according to the suit. Another fund also underperformed.
Ben Silva, a New Mexico-based attorney representing the defendants, disputed the lawsuit’s claims and said the accusations of pay-to-play in Hunt’s case were false.
Silva said federal regulators examined HFV’s dealings with the New Mexico investment council about seven years ago and found no wrongdoing. State officials had signed off on the details, he said.
And while HFV was approved for $300 million, it actually only received $200 million, Silva said. When HFV and the investment council mutually agreed to part ways around 2009, he said, the funds HFV managed had made several million dollars.
The investment council is seeking an unspecified amount in damages.
Defendants named as “John Does 1-20” in the lawsuit are thought to include Hunt family trusts through which Hunt owned some or all of his interest in HFV, according to the lawsuit. The state agency said it has not yet been able to discover the identities of those trusts and trustees.
The allegations in New Mexico came to light in 2009 as part of a criminal investigation in New York that ended with several convictions. Those included Barrett Wissman, a partner in HFV who pleaded guilty to a felony charge of securities fraud.