CDR and New Mexico

Bill Richardson and associates may have been non\exonerated for his numerous connections with CDR, buts its quite likely that significant impropriety may have occurred withing in the state, as usual it was the housing agencies that became the scene of possible wrongdoing in the name of the people:

Nov. 2 (Bloomberg) -- Vincent “Smiley” Gallegos, who ran a state housing agency out of an office next to a used-car lot in Albuquerque, New Mexico, should have known better when he borrowed $27.7 million, the Internal Revenue Service said.Gallegos, then the executive director of Region III Housing Authority New Mexico Inc., sold bonds in February 2003 with the help of Los Angeles-based CDR Financial Products Inc. and its founder, David Rubin.

“At the time the authority issued the bonds, there was ample evidence that the program would not be successful,” the IRS wrote in March 2007 after investigating the transaction. “A prudent person would not have taken the same actions.”

Two months later, federal tax authorities revoked the bonds’ tax exemption. The IRS found that one of the agency’s banks, Paris-based Societe Generale SA, would earn as much as $1.5 million on a program for low-income and first-time homebuyers that lent only about $2.6 million. Tax authorities also found that CDR was collecting more than $50,000 a year from Societe Generale in fees not disclosed in public bond documents.

Gallegos, 56, and Rubin, 47, are under criminal indictments as the result of separate investigations unrelated to that debt.The unraveling of Region III investments shows how municipal financing arranged in the dark costs as much as $6 billion a year through lack of disclosure, officials’ mistakes and public corruption, according to data compiled by Bloomberg. It also reveals how financial professionals may enrich themselves by taking advantage of a tax benefit worth $36 billion a year to state and local governments and non-profit agencies that borrow.

Rubin Indictment

Gallegos, a former five-term Democratic state representative, oversaw two troubled bond issues in 2003. Region III defaulted on the second series of bonds it sold in July of that year to a state investment fund chaired by Governor Bill Richardson, a Democrat. Two grand juries in Albuquerque indicted Gallegos on June 19 on criminal charges of fraud, embezzlement, money laundering and conspiracy related to the operation of Region III.

“No jury is going to find that Smiley violated any law,” said Gallegos’ attorney, Paul Kennedy, a principal of the Kennedy & Han PC law firm in Albuquerque, in an interview.Rubin, his investment advisory firm and two of its employees were named on Oct. 29 in a federal indictment in U.S. District Court in the Southern District of New York. The nine- count criminal conspiracy case alleges bid rigging and price fixing on investments that CDR brokered from 1998 to 2006. Rubin is contesting the charges.

The multi-million dollar deals struck in some office next to a used car lot remind me of the Gulf Breeze incident where 3 people in an office were technicaly in charge of millions in bond deals.