(Corrects audit firm, clarifies Duff suspended with no pay)
By Zelie Pollon
SANTA FE, NEW MEXICO Aug 9 The New Mexico
Finance Authority, which issues debt to help local government
with public works, suspended two executives on Thursday
following the arrest of the agency's chief operating officer and
a former controller, an official said.
Chief Operating Officer John T. Duff and former Controller
Greg Campbell were arrested on Wednesday by State Securities
Division officers among charges of submitting a fake audit,
misrepresenting financial statements, and covering up $40
million in losses to the state, State Auditor Hector Balderas
The New Mexico Finance Authority announced the discovery of
the falsified audit in July, after it was notified by the
state's auditor that no audit was filed, Balderas said. An
investigation by the authority then found the audit to be
According to the arrest warrant filed in Santa Fe District
Court, the two men face felony charges on eight counts of
securities fraud, one count of racketeering and one count of
conspiracy to commit racketeering.
Alongside Duff, who was suspended without pay, Rick May, the
finance authority's chief executive officer, was suspended with
pay, pending the outcome of the investigation. Brett Woods has
been appointed interim director, New Mexico Finance Authority
Board Chairwoman Nann Winter said.
"Time is of the essence, but I don't want to sacrifice
quality findings for time," she said.
PricewatershouseCooper will audit the authority's financial
Winter added that the authority has roughly $35 million to
$37 million cash on hand and felt confident that with more
stringent loan requirements, the agency could function
comfortably for another 6 months.
A bond sale originally planned for July 26 was delayed. The
Series 2012B Senior Lien Public project Revolving Fund Revenue
Bonds has been postponed until after the new audit is completed.
"We're confident that we have enough to continue lending,
based on our new loan policy," Winter said.
In July, Moody's Investors Service put the authority's
Public Project Revolving Fund Aa1 Senior Lien and Aa2
Subordinate Lien ratings under review for downgrade, a move
affecting $1.26 billion in outstanding total debt.
"The implications are higher costs to do business for
taxpayers in New Mexico and a crisis in confidence to
investors," Balderas said. "Ultimately this hurts small villages
and governments and systems. We're a poor state, so it's
essential we have access to capital. We need to get to the
bottom of this crisis so we can stabilize NMFA."
(Reporting by Zelie Pollon; Editing by Stacey Joyce)