After arrests, what's next for the New Mexico Finance Authority?
Posted at: 08/08/2012 8:05 PM
By: Gadi Schwartz, 4 On Your Side
Immediately after being released from jail Wednesday, the former controller of the New Mexico Finance Authority told KOB he did not steal any money.
Current NMFA COO John Duff and former New Mexico Finance Authority controller Gregory Campbell were arrested in connection with an allegedly forged audit that could cause New Mexico's credit rating to collapse.
Campbell told KOB he accepted the blame for the fake audit, but when asked about whether anyone had questioned what he was doing with the books, Campbell said no.
Campbell has been charged with eight counts of securities fraud, four counts of forgery and one count each of racketeering and conspiracy to commit racketeering in connection with a fake audit.
Campbell, the former controller and the current chief operating officer for the New Mexico Finance Authority were arrested Wednesday morning in connection with submitting a forged audit and misrepresenting financial statements for the fiscal year 2011.
4 On Your Side broke the story about the forged audit, which could cause New Mexico's credit rating to drop and cost the state more to obtain loans for doing state business.
We were also the only station to talk to Campbell, who told KOB that he forged the audit and made up a fictitious exit interview that never happened.
That exit interview was alleged to have happened on a Saturday in December and listed several high ranking members of the NMFA and the NMFA board.
The exit interview was detailed in the last page of the audit that was posted publicly and should have been a clear red flag to those listed who never attended, including the current COO John Duff.
A statement from the New Mexico Licensing and Regulation Department said Duff, has also been arrested and charged as an accessory on eight counts of securities fraud and racketeering.
Duff, who was the immediate supervisor of Campbell, also has been charged with allegedly conspiring to engage in a pattern of racketeering activity by fraudulently misrepresenting the financial statements of the NMFA to ratings agencies, investors, bond buyers, and the State of New Mexico, according to the criminal complaint.
The criminal complaint also alleges that Campbell, with the explicit knowledge and permission of Duff, misrepresented approximately $40 million in the financial statements for NMFA for 2010 and 2011.
Instead of reporting a loss of $40 million in revenues, they are accused of concealing that loss by fraudulently reporting it under grant expenses.
The $40 million is believed to have been given over to the state to help cover budget shortfalls.
Campbell admitted to categorizing the loss of revenue as grant payments as opposed to revenue losses, which could have hurt New Mexico bond rating if disclosed to investors or credit agencies.
According to the complaint, "...Campbell represented that the decision to reclassify the reduction in appropriations revenue as 'grant expense' was in fact a misrepresentation of the fiscal year 2011 financial statements as it did not reflect the true financial condition of the NMFA.
In his interview with KOB Wednesday, Campbell accepted the characterization that the action to fraudulently misrepresent the financial statements was in fact 'cooking the books' of the NMFA."
Campbell and Duff were booked into Santa Fe County Jail and posted $20,000 bonds by the afternoon.
On Thursday, the NMFA board will hold an emergency meeting to discuss what to do about management.
Stay with KOB for continuing coverage.