State contracts spark audit to look into procurement violations

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Did high-ranking New Mexico workers break the law by making up their own rules on how to spend your money? Questionable contracts with the state sparked an independent audit to find out.

“I think it’s a big deal,” said Ken Ortiz, cabinet secretary of the General Services Department.

Lawsuits can be costly, and New Mexico may not have been getting the best bang for its buck fighting cases where state workers are accused of wrongdoing.

“This is public money and when cases are assigned or goods or services are purchased without a valid contract, that’s a big deal,” Ortiz said. 

Every time the state gets sued, the Risk Management Division within General Services has to defend that case. But with so many cases and so few lawyers, the state also has contracts with dozens of outside law firms to handle the workload.

Some of those contracts are now raising eyebrows after the new administration came in and looked them over.

“There were 25 case assignments assigned to outside counsel that didn’t have a valid contract, and this was in 2018 prior to this administration,” Ortiz said. 

It was in the last year of Gov. Susana Martinez’ administration. Ned Fuller led the General Services Department as cabinet secretary with Director Lara White Davis heading up its Risk Management Division. They both declined an on-camera interview with KRQE.

The two were in charge when, instead of opening up the competitive bidding process to law firms throughout New Mexico for new contracts way before the old ones expired last June, records show they started advertising requests for proposals that month. In the meantime, they simply extended old contracts for about a dozen law firms to take on new cases piling up.

That move that has people taking a closer look to see if it violated the state procurement code, which is supposed to prevent waste and corruption when spending public money. 

“The procurement code was instituted to make sure the public gets the best value for its tax money,” said former Sen. Dede Feldman. “To make sure there is competitive rather than rigged bidding, to make sure that contracts are awarded on the basis of merit rather than on the basis of favoritism or nepotism.”

Feldman is a long-time advocate for ethics reform, pushing for the State Ethics Commission that’s now taking shape after voters supported it in 2018.

“We should be transparent. We should be honest, and we should be responsible to the constituents,” Feldman said.

In this instance, emails show Fuller and the State Purchasing Agent at the time said everything was done openly and within the law, specifically within a section in the law that allows automatic contract extensions for firms to finish cases they were assigned before their contracts expired.

15-7-10. Legal defense contracts; renewal.  

Any valid contract between the risk management division and any law firm, to defend claims against the state or any of its public employees pursuant to Subsection B of Section 41-4-4 NMSA 1978, shall be automatically extended for the purpose of and as long as necessary for completing and concluding any matter in litigation, including appeals, referred to the firm for defense prior to the termination date stated in the contract or any applicable amendment thereto. Automatic renewal pursuant to this section applies only to matters which were in litigation and were referred to the law firm prior to the contract termination date and does not apply to regular contract renewals. 

They zeroed in on a couple of words at the end of the statue that refer to “any applicable amendment.”

They argue that changing when the contracts expired was an amendment and they could assign new cases to those firms after their original contracts would have expired.

But in a scathing November letter News 13 obtained, the Department of Finance and Administration criticized Risk Management’s “egregious” and “misguided” interpretation of the law, saying that “no procurement would ever be needed again under such a reading of the language—the result is absurd.”

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The department called for an end to it, saying otherwise, it would “consider RMD’s practices, in addition to their clear illegality, willful.”

The law says anyone willfully violating the procurement code with more than $50,000 of public money is guilty of a fourth-degree felony. This involved at least $109,000, according to the current administration’s review of the records.

A few months ago, the current State Purchasing Agent did find this broke the rules, violating the procurement code.

“I believe it is a lot of money,” GSD Secretary Ortiz said. “Citizens of the State of New Mexico should be concerned about this.”

Now, the state says it’s hiring an independent auditor.

“I think that the department is really acting properly here by asking that there be an audit to see exactly whether there was great harm in this action of the previous administration, or whether it was just a technical error,” Feldman said.

Ortiz said the people in charge at the time of the possible violations aren’t working for the state anymore. Lara White Davis actually moved on to become Risk Management manager at the City of Albuquerque. After News 13 contacted her about this story, a city spokesperson said White Davis resigned. 

 
 
 

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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