Foy goes after Texas firm linked to Madoff

Frank Foy on Tuesday added a Texas-based firm that caused New Mexico teachers’ pension funds to be indirectly invested in what some are calling one of the largest Ponzi schemes in history.
Austin Capital Management was added to a growing list of defendants named in Foy’s lawsuit, which is seeking the recovery of millions of taxpayer dollars lost to bad investments.
Austin Capital invested money from the state’s Educational Retirement Board and State Investment Council into a hedge fund that itself was heavily invested in Bernard L. Madoff Investment Securities, LLC. When Madoff admitted in December to bilking investors of billions of dollars over several decades, the two New Mexico state agencies lost a combined $25 million.
“So you end up having school teachers money invested in this Ponzi scheme,” Foy’s attorney, Victor Marshall, said during a late-morning press conference.
Austin Capital also figured in another lawsuit that was unsealed Tuesday — that of the National Education Association of New Mexico, which is seeking damages due to the losses related to the Madoff fraud.
The teachers’ union is accusing Austin Capital of professional negligence.
The Educational Retirement Board and State Investment Council hired Austin Capital as a money manager. In essence, the Texas firm was trusted to invest the two agencies’ funds in other hedge funds. One of those Austin Capital invested in was Tremont Group Holdings, which had invested billions with Madoff, according to the complaint. Published reports have put Tremont’s investment with Madoff at more than $3 billion.
A spokesman for the State Investment Council, meanwhile, said Tuesday that his agency had looked into suing Austin Capital, but hadn’t yet.
“The SIC has looked at possible legal action against Austin for some time, and has discussed the subject with the Attorney General’s office previously,”  Charles Wollmann of the State Investment Council said in an e-mail.  “The SIC cannot proceed with such a suit without prior approval or representation from the AG.”
Austin was not the only new name added to Foy’s lawsuit Tuesday. Foy’s attorney also named Tremont Holdings, as well as many other names that have dominated New Mexico headlines of late, including Aldus Equity and Marc Correra.
Saul Meyer, the founder of Aldus Equity, once an investment adviser for the State Investment Council and Educational Retirement Board,  has been indicted in New York investment scandal on criminal charges.
Correra, meanwhile, shared in $16 million in so-called third-party marketing fees, which has led to questions from lawmakers and others. Third-party marketers like Correra, once obscure figures, have burst into the public consciousness because of the amount of money they have earned as matchmakers between fund managers and investors such as the State Investment Council and Educational Retirement Board.
Foy’s expanded lawsuit had very few new revelations, partly because it incorporated many facts already uncovered by newspapers, online news sites and TV stations in recent months.
In essence, Marshall suggested the complaint showed that many firms that received fees or contracts to manage or consulting work on New Mexico’s investments were involved in an intricate system of pay-to-play orchestrated by Gov. Bill Richardson’s administration.
“You’d have to come from another planet to not know what was going on,” Marshall said.
But not everyone saw it that way.
“The complaint is thin on facts but rife with unsubstantiated allegations and malicious innuendo,” Wollmann said. “Today’s latest exercise in tort claim abuse and political slander is simply an act of financial opportunism originating from a very uncredible source.”

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Austin woman to serve prison term for role in meth sales

An Austin woman must serve more than one year in federal prison for her role in a methamphetamine bust in December 2008.
Emily Elaine Young, 22, got a 15-month prison term Wednesday in U.S. District Court in Minneapolis after pleading guilty to one count of conspiracy to distribute and possess with intent to distribute meth, court records show. Young, who was released pending her imprisonment's start, will have three years of supervised released after prison.
Judge John Tunheim granted Young's request for a lesser term than called for by sentencing guidelines.
Local authorities, including the Minnesota Bureau of Criminal Apprehension, arrested Young and her boyfriend, Jason Reinartz, 35, while serving search warrants Dec. 5 on the couple, their Lansing Township home and a northeast Austin residence linked to drug sales.
Authorities reported finding about seven ounces of meth in a box Reinartz carried into the Austin home at 800 Second Ave. N.E., a criminal complaint says. The box also allegedly had 92 grams of marijuana, urine-cleanser products, a scale and two cell phones.
Later that month, a federal grand jury indicted Reinartz and Young for knowingly conspiring together and with others to distribute at least 500 grams, or about 1.1 pounds, of meth from April 2008 to Nov. 25 in Minnesota.
Young's attorney John Fossum, of Northfield, Minn., argued in a court document last week that Young deserved probation rather than a prison term. Young, who has no significant prior criminal record, is employed, paying taxes and abstaining from drugs, he wrote. He added that placing Young in prison would be a "burden to the taxpayers."
Young has taken steps to deal with her addiction, including completing outpatient treatment and continuing to attend Alcoholics Anonymous meetings, Fossum wrote.
"(Young) had a minor role in the offense," Fossum stated. "She assisted her boyfriend but was not the instigator of the offense."
Reinartz, who remains in custody, faces one count of conspiracy to distribute and posses with intent to distribute meth. He was set for a change-of-plea hearing Feb. 2, but court documents from that hearing remain sealed, records show.
A recent court document, however, shows a plea agreement was reached in the case, with both sides agreeing that Reinartz doesn't qualify as a "career offender." It also states that both sides are preparing for Reinartz's sentencing.
In July 2008, Reinartz opened A-Town Tattoo. He was on supervised release after serving time in state prison for drug convictions in Mower County.

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