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John Lang

Insider's Game

NMFA's problems go far deeper than a faked audit. Yet almost no one seems to know - or care.

July 16, 2013, 10:00 pm

Nann Winter once told a newspaper that people often mistake her quiet, reserved demeanor for a “cold and arrogant” attitude.

Instead, she asserted, she likes to listen.

An Albuquerque lawyer with 26 years’ experience in local government law, Winter was Gov. Susana Martinez’ pick to right the ship of the New Mexico Finance Authority, a quasi-governmental agency that funds key infrastructure projects around the state.

Winter came on to chair NMFA’s board of directors last July—just after a high-profile scandal hit the agency. She later won praise for leading a turnaround that the Albuquerque Journal described as “nothing short of remarkable.”

But that didn’t stop state Senate Majority Whip Tim Keller, D-Bernalillo, from raising concerns in February, as his chamber met to confirm Winter.

Winter came with a stellar reputation and relevant on-the-ground experience. But Keller worried about her legal work with the state Department of Transportation, which finances key bond projects through NMFA. Heading the board of an agency that awards public money to clients Winter represents as a lawyer, he warned, could be a conflict of interest.

“I think the board should properly be chaired by a member who doesn’t have any financial interest with NMFA,” he said.

At the time, Keller had no proof that anything was amiss. What he didn’t know was that Winter had already used her influence as board chairwoman to help one of her legal clients: the Albuquerque Bernalillo County Water Utility Authority.

Nine weeks before Keller’s speech, Winter appealed to John Gasparich, the NMFA’s interim CEO, on the water authority’s behalf. (As CEO, Gasparich directs NMFA’s day-to-day activities. The board—under Winter’s leadership—oversees NMFA, and has the power to hire and fire its CEO.)

In an email to Gasparich, Winter wrote that the water authority was on the verge of losing a $2 million loan funded by NMFA.

“It appears the size of this project could consume all available funds, but, that is NOT a reason to manufacture a denial,” she wrote, referring to NMFA’s limited budget.

She requested “mediation…with relevant staff BEFORE” the project could be denied and ended the email with a plea: “I’m at your mercy…”

The project would bring clean water to Carnuel, a tiny, impoverished town just east of Albuquerque. It’s a good example of NMFA’s key function: offering bonds to local towns like Carnuel at a lower cost than private lenders.

Yet despite the project’s merits, Winter herself also stood to benefit from it. As the water authority’s general counsel, she would be bringing up to 52 new customers to one of her biggest clients.

Three weeks later, Winter’s persistence seemed to pay off: NMFA staff agreed to recommend the project (albeit on less lucrative terms than the water authority wanted). When that recommendation later came before NMFA’s board, Winter recused herself from discussing or voting on it.

Gasparich tells SFR there’s nothing amiss—that Winter was simply asking him for public information about the project’s funding.

“In my opinion, her questions were reasonable and appropriate,” he writes in an email to SFR. “I don’t see a conflict, since everyone concerned was trying to address the serious drinking water issues at Carnuel.”

But to Rick May, who served as CEO of NMFA until last fall, the exchanges were “completely inappropriate.”  

“You have to recuse yourself not just from the standpoint of formal voting, but in a way that has no impact on the project,” he says. In other words, May believes Winter shouldn’t have been emailing Gasparich, asking for mediation to make sure her client didn’t lose the loan money. “Mr. Gasparich should have said, ‘You are conflicted in this matter; there’s nothing I can do.’”

Keller says the situation illustrates exactly what he warned about that February afternoon on the Senate floor.

“When you have someone whose firm literally receives money from the agency whose board you chair, that is an inherent conflict of interest,” Keller says. “It’s just wrong.”

NMFA kept a relatively low profile until last year, when a respected, longtime top employee forged an audit, landing the agency in headlines and hot water. In the aftermath, three top officials were fired. Today, both NMFA and the Martinez administration claim everything is on the right track.

“Lots has changed,” Gasparich says, noting that NMFA retained its high credit rating, restructured its auditing committee and is in the process of hiring an internal auditor. “NMFA, at this point, is basically back in business.”

Yet new revelations—including the exchange between Winter and Gasparich—reveal a host of problems beneath the surface, ranging from cronyism and insider access to incompetence and a lack of accountability. While the audit scandal disgraced some NMFA officials, others have gotten a free pass—and in some cases have been given even more authority over future audits.

Earlier this year, the state Legislature attempted to reform the agency. One bill in particular, introduced by Keller, would have reduced the governor’s control over NMFA’s leadership. Yet in spite of near-unanimous support for the bill, Martinez vetoed it. Now, Keller warns of major challenges for New Mexico’s infrastructure.

“When you’re driving down the road or drinking water out of your faucet, those are financed by this agency,” he says. “Anytime those aren’t working, the answer goes back to NMFA.”



Rick May sits in a quaint study with papers and folders sprawled on the table in front of him. A short figure with a round face, May speaks louder and more assertively than his policy-wonk appearance suggests.

May got his start in the 1970s, as a staffer for the Ohio Legislature. Later, he moved to Washington, DC, and worked for Republican former congressman (now governor of Ohio) John Kasich. In the ’90s, as a GOP budget director for the US House of Representatives, he helped write budgets that led to surpluses during the Clinton years.

In the mid-2000s, he came to New Mexico “to get out of the rat race in DC.” It wasn’t long before he started work at the state capitol as an advisor for the House Republican budget staff.

“It was so refreshing to have someone to work with who looked at every piece of legislation as a whole,” former state legislator and current Albuquerque City Councilor Janice Arnold-Jones, a Republican, says of May. “He is one of these guys that when he operates, he would never shake the truth.”

But May’s biggest break in New Mexico came with the election of Martinez in 2010. One of her first moves after taking office was to name him secretary of the state Department of Finance and Administration—effectively putting him in charge of balancing a gaping $450 million state budget deficit.

The significance of his role wasn’t lost on May, but he clashed with the Martinez administration from the start.
First, he claims that Keith Gardner, the governor’s chief of staff, forced him to bring in veteran state employee Dorothy “Duffy” Rodriguez as his deputy at DFA. Rodriguez had years of budgetary experience, but she was also at the center of nepotism and fraud allegations at the state Department of Health, including the alleged cover-up of a $1.7 million accounting error. May raised concerns over why the governor’s office wanted him to bring someone with such a checkered past under his wing.

Gardner, May says, responded that he would “trust Duffy with his life.” For the rest of the year, May claims a mutual lack of trust prompted the governor’s office to exclude him from key budget meetings.

Earlier this year, Gov. Susana Martinez vetoed a bill that would have reduced her control over the embattled New Mexico Finance Authority.
John Lang

In summer 2011—disillusioned with his job—May came upon a 13-point memo written by Rodriguez. Titled “Actions That Need To Be Taken With The New Mexico Finance Authority,” the memo called for moving May out of DFA and putting him in charge of NMFA.

To May, it was both a risk and an opportunity.

NMFA’s mission, he explains, is to provide local governments with cheap loans. Because NMFA is a quasi-state agency, it isn’t subject to the state’s procurement code—meaning it can offer bonds at lower interest rates and trade them on Wall Street. May describes the agency as “an engine of economic development.”

“It is a great opportunity for local governments to borrow money—at very, very competitive interest rates—for water projects, for new buildings, for new streets, anything to do with infrastructure,”  he says. “And I think anybody who has been in New Mexico for any amount of time can see that New Mexico really has…an infrastructure problem.”

But Rodriguez’ memo also called for more drastic measures. In addition to tapping May as NMFA’s head, it made specific staffing recommendations—hiring Andrew Jacobson, the husband of New Mexico Tourism Secretary Monique Jacobson and a former hedge fund financial analyst, as his deputy; and moving Kim Gonzales, May’s personal secretary, out of the DFA secretary’s office.

Still more concerning was the memo’s call for a “complete assessment” of NMFA’s approximately 40 staffers, “with view to downsizing to half the current staffing level.” It advocated eliminating large projects—Gov. Bill Richardson signatures like the Rail Runner and the Spaceport—to bring the agency “back to its core mission of assisting with projects for smaller, rural areas in the state.” Finally, it outlined a plan to cut the $20-plus million in tax dollars—the agency’s only public funding—that supports NMFA bonds.

To May, the memo was a “major, major red flag.” If enacted, he says, it would “dismantle and destroy” the agency, changing its purpose from a key incubator of state infrastructure to a “sleepy little entity that gives small loans to small communities.”

But he says it wasn’t long until Gardner gave him an ultimatum: stay on as DFA secretary or go to NMFA. When May thought it over and decided he wanted to stay on at DFA, he claims Gardner told him, “wrong choice.” In August 2011, May became NMFA’s new CEO.



Martinez administration officials did not return SFR’s calls and emails for this story, with one exception: DFA spokesman Tim Korte, who in an email downplays the 13-point memo as “a sheet of notes that represent an informal compilation of potential ideas.”

But current and former NMFA staffers interviewed for this story—including some who requested anonymity because they feared retaliation—say it was much more than that.

“I took it as a serious roadmap,” Michael Zavelle, the agency’s chief financial strategist, says. “Rick May basically said, ‘This isn’t going to happen on my watch.’”

To May, the memo reflected the interests of the politically powerful financial community. During his tenure at NMFA, May saw several signs of outright resistance to the agency, including one investment firm vice president’s dismissal of it as a “government bank” that issues “artificially low” bonds.

May also says that as soon as he joined NMFA, he was pressured to fulfill the memo’s second point: hiring Jacobson as his deputy.

May did interview Jacobson—whom he says came off with a negative, “anti-Finance Authority” attitude—and even offered him a job (albeit a lower-level one). Jacobson never took the offer, but today, he serves on NMFA’s board as an alternate member. The memo’s third point—moving Gonzales out of DFA—came next; she later joined May at NMFA.

May also started making changes of his own, including revamping NMFA’s credit card and travel policy and working to balance the agency’s $1.5 million budget deficit, in part by laying off three employees. According to a special report on the NMFA scandal by State Auditor Hector Balderas, some staffers feared that the firings meant that May was actually following the 13-point memo. (May vehemently denies this.) Still, one top official in particular expressed opposition to May’s changes: former NMFA controller Greg Campbell.

Campbell was a longtime NMFA employee charged with managing the agency’s yearly internal audits. He was well-liked—so much so that when he later announced he was leaving the agency, former Chief Operating Officer John Duff actually offered him a raise to stay on.

But according to Balderas’ special report, Campbell “did not enjoy working with Mr. May or his assistant.”

Zavelle says if May had a fault, it was that he was “too focused on changing a number of things which people frankly didn’t have time to devote to.”

“[Campbell] was in wall-to-wall meetings with Rick,” Zavelle says. “He said, ‘I don’t have time to do my job.’” Arnold-Jones contends that May wasn’t the greatest fit for heading an agency like NMFA because his experience was better suited to making public policy.

“To me, you should be playing to people’s strengths,” she says.

But it’s still unclear why Campbell risked his career to fake the agency’s annual audit. In March 2012, Campbell forged a sign-off by Clifton Gunderson LLP, the private firm hired to do NMFA’s audit. He also failed to submit the final audit to the state auditor’s office, as required by law, and instead sent it straight to Wall Street for public trading.

“We had the highest respect for Greg,” longtime NMFA board member Bill Fulginiti says. “Why he did what he did, I have no clue.”

Campbell’s explanations for faking the audit are schizophrenic at best. In Balderas’ report, Campbell admits to repeatedly lying to upper management about turning in the audit on time, but he also insists that the forged audit had accurate information. At one point, he says he feared that if he told upper management the audit was late, it “would provoke a reaction from Mr. May.”

Campbell, who received five years’ probation for his actions, didn’t return SFR’s phone calls before press time.

In May 2012, two months after Campbell faked the audit, Balderas warned NMFA management that the agency was on his “at-risk” list—meaning the audit still hadn’t been filed. (Failing to submit an audit is against state law, but it’s common practice: At the time, NMFA was one of 74 agencies on the list.)

At first, Campbell told his superiors that Balderas’ office was mistaken.

But May found a much more troubling reality on July 12, in a meeting with Clifton Gunderson. There, according to May, Clifton Gunderson auditor J  Michael Stephens admitted that the company had never filed NMFA’s audit. The news sent May and his staff into panic mode.

“They told us, ‘Yep, we fumbled the ball,’” May says. “You can imagine that was a very chaotic period.”

After notifying Balderas and the governor’s office, May and his staff brainstormed next steps. They contacted a crisis management firm, which recommended they hire Steptoe & Johnson LLP—a widely respected Washington, DC, law firm—to conduct an immediate independent investigation. NMFA’s board, however, questioned the firm’s ability to conduct an unbiased review. Ultimately, they voted to kill the contract and put Balderas in charge of a special audit.

May puts some of the blame on Balderas for failing to inform NMFA that the audit was late until months after it was due.

“If the state auditor’s office had provided us with any notice prior to March 12 that our audit had not been filed, we could have avoided this situation,” May says. In his view, it was reason enough not to trust Balderas with a special audit of the crisis.

But Evan Blackstone, Balderas’ chief of staff, says the auditor’s office was the only state government entity capable of conducting an independent audit.

“It poses a serious conflict for NMFA management to conduct its own investigation by a law firm,” Blackstone says.

Balderas wasted no time in pointing fingers. Within hours of learning about the faked audit, he launched a full-on media blitz, taking credit for discovering the audit himself and later characterizing the scandal as “one of the most regrettable situations for the New Mexico taxpayers in the history of New Mexico.” By August, he was telling TV reporters that tens of millions of dollars were unaccounted for and that “the risks right now that we might uncover further fraud, waste and abuse are very high.”

Balderas’ hints about widespread fraud at NMFA didn’t pan out. In the end, the faked audit’s financials were mostly correct. No money was missing, and NMFA retained its high bond rating. Still, Blackstone says Balderas had a duty to communicate directly with the public and move aggressively to determine the full extent of the fraud.

But regardless of how the audit scandal would turn out, it also represented an opportunity to move ahead with the agenda outlined in Rodriguez’ 13-point memo.

“I have to say that the governor’s office, when they heard about the fake audit, was not unhappy,” says one NMFA official who requested anonymity.



Less than a week after the audit scandal broke, Martinez nominated Winter as NMFA’s new board chairwoman.

Winter came with political connections. She’s the wife of Republican Albuquerque City Councilor Brad Winter; Jay McCleskey, Martinez’ top political operative, worked on Winter’s 2011 reelection campaign.

Winter did not return SFR’s calls and emails for this story. But May says he and Winter never got off to a good start. According to May, Winter never offered to hear his side of what went wrong with the audit. Instead, he says they only exchanged a few words throughout the scandal. But for May, it was enough to infer an anti-NMFA attitude.

“I knew she was going to come in there with a hatchet and chop everybody’s head off,” he says.

On Aug. 9, 2012—with the scandal a month old but still virtually no questions answered—the NMFA board, led by Winter, voted to put May on paid administrative leave. Winter told the Associated Press that the action resulted from the board’s “vote of no-confidence” on May’s leadership, claiming he had responsibility “in what has transpired to date.”

Later, Balderas’ special audit made similar conclusions—that May’s leadership created the opportunity for Campbell to commit fraud. May, however, maintains he was a scapegoat in the entire mess.

Regardless of who’s to blame, one thing is clear: Several NMFA officials who received early warnings about the late audit didn’t get in trouble. Some even got promotions.

Take NMFA audit committee member Brett Woods, a certified fraud examiner, who wasn’t punished for missing the fraudulent audit. Instead, he was appointed interim CEO right after May was fired.

Clifton Gunderson, the firm contracted to complete the audit, failed to do the job it was hired to do. The firm even put out its own misleading statements, such as a January 2012 letter—signed by Stephens—claiming the NMFA audit was in order (even though it hadn’t been submitted). The firm is still on contract for additional audits with the state, but Blackstone says several corrective measures have been taken, including barring any staffers who worked on the NMFA audit from state contracts.

Some DFA higher-ups also knew that NMFA’s audit was late. Ricky Bejarano, now DFA’s deputy secretary, has “35 years of experience in accounting, governmental accounting, financial auditing, tax auditing, tax administration and government administration,” according to Korte. He was copied on emails sent by one of his employees to Campbell in December 2011 and January 2012 warning that NMFA’s audit still hadn’t been filed, but appears not to have acted on that knowledge.

Ironically, Bejarano now chairs NMFA’s auditing committee. (“He will not be handling NMFA’s day-to-day auditing responsibilities but will be the general overseer as the chairman of the audit committee,” Korte tells SFR via email.) His boss, DFA Secretary Tom Clifford, is a board member.

Keller says NMFA’s board also bears responsibility for letting a faked audit slip past them. Part of the problem, he says, stems from the board’s nearly complete turnover shortly after Martinez took office. The new members, he argues, lack background and familiarity with how the agency operates.

“As a result, you have a lot of people on the board not knowing what they’re doing,” he says.

To make matters worse, many board members routinely miss meetings. Four are cabinet secretaries with demanding day jobs—two of whom didn’t attend a single meeting during 2011 or the first half of 2012, and none of whom has attended all of the meetings held so far this year.

That poor oversight prompted Keller to propose ambitious reforms. His plan would have reduced the governor’s control over NMFA’s 11 board members, nine of whom are appointed directly by her.

Yet while Keller’s bill garnered widespread support, Martinez had a different idea. First, her office asked state Sen. Steven Neville, R-San Juan, to amend Keller’s bill, effectively putting NMFA directly under the governor’s control.

“Even I wasn’t sure it was a good idea,” Neville told SFR at the time. “But we wanted to get the idea out there.” The amendment failed in committee.

Another lawmaker, state Sen. Mark Moores, R-Bernalillo, authored a bill to make NMFA a state agency that processes its financial transactions through DFA. Clifford was the bill’s author, and Korte says it would have provided “an important layer of outside oversight…[and] promote greater accountability.”

But Keller’s proposal won out, passing unanimously in the Senate and with only two dissenting votes in the House. It was a message to Martinez: that NMFA should, if anything, be more independent from her office than it already is.

It didn’t go over well.

Martinez vetoed the bill, explaining that NMFA’s problems stem not from who serves on the board, but from “its role as a quasi-public agency not subjected to adequate public accountability.”

Rick May, an experienced Republican budget staffer and former CEO of NMFA, says the Martinez administration’s goal “is to slowly but surely dismantle the entity,” which provides bond funding for crucial infrastructure projects around the state.
Joey Peters

To May, it’s evidence that the 13-point memo is still relevant.

“I think there’s a different viewpoint by the governor’s office of what the Finance Authority should be,” he says. “I think, frankly, their agenda is to slowly but surely dismantle the entity.”

Gasparich insists that’s not the case.

“They’ve all been very supportive of us,” he says of the board. “I don’t perceive any effort to reduce the size of NMFA on their agenda right now.”

But in Zavelle’s view, while efforts to bring NMFA into state government represent “a residual desire for the administration to have greater control,” much of the 13-point memo has “gone away” as the administration better understands NMFA’s purpose.   

But in the end, the administration got part of its wish: As a result of the faked audit, NMFA scaled back its infrastructure funding, and Gasparich says the agency recently issued its first bond in 14 months.

Keller warns that dismantling NMFA would “pull hundreds of millions of dollars out of our economy.”

“NMFA has been our state’s construction and development bank, and they’ve done a great job at it,” Keller says. “If we get rid of that, then we’re going to have to go back to essentially the dark ages of project finance.”

Failing to reform NMFA, he adds, has led to “a lack of professional decisions”—like Winter’s pushing for her client’s project, and inaction from a board lacking expertise in the agency’s workings.

“This board should have the highest level of expertise,” Keller says. “As a result of the veto, they have the lowest level.”

May, for his part, says the fallout from the scandal has prevented him from moving on professionally. An active Republican who’s worked on policy with the likes of Trent Lott, Newt Gingrich and Bill Clinton, May is now struggling to find full-time work. Yet he still speaks highly of NMFA.

“When a government-created entity helps local communities do something that saves taxpayer money, that is a legitimate function of government,” he says. “And I’m a conservative. I’m a Republican. I’m not a big-government guy.”

Gonzales, who has also left NMFA, says what happened to May typifies how the Martinez administration does business.

“The more things change in government, the more things stay the same,” Gonzales says. “This administration is no better. They stab each other in the back.”


Editor's note: In a previous version of this story, SFR incorrectly reported that Brad Winter was a former Albuquerque city councilor; he is a current one. In addition, SFR incorrectly reported that Jay McCleskey, the governor's top political adviser, worked on Winter's failed mayoral campaign; in fact, McCleskey worked on Winter's reelection to city council. SFR regrets the errors.

View Nann Winter's emails with Gasparich, and Clifton Gunderson's misleading January 2012 letter on the NMFA audit and the emails to Bejarano:

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