ALBUQUERQUE, N.M. -- New Mexico officials are investigating the office of state Treasurer David King, who has accused a New York City businessman of using physical threats and bribery to try to win state investment contracts.
The treasurer, who said he turned the matter over to the state's Organized Crime Commission in March, discussed his charges in a series of interviews with The Bond Buyer after testifying last month before a state grand jury.
King said he told the Bernalillo County grand jury about his contact with a New York businessman, Peter G. Maggi, and Maggi's attempts to gain an investment contract from the state of New Mexico and its Public Employee Retirement Association.
A mid-level employee in the treasurer's office, Joseph O. Garcia, said he countered much of King's testimony in a grand jury appearance last week. Ben Montoya, the deputy treasurer, has also appeared before the grand jury.
Bernalillo County district attorney Robert Schwartz would confirm only that the grand jury is looking into a series of allegations "that revolve around the treasurer's office, or people in the treasurer's office." An investigator with the state's organized crime task force declined comment.
King told The Bond Buyer that he turned to the state's Organized Crime Commission after Maggi's two-year attempt to gain an investment contract turned ugly in March of this year. King said that, among other things, Maggi threatened him with physical violence, tried to bribe him with a $50,000 campaign contribution, and recruited Garcia to help with the effort.
King said that Maggi, in making his threats, warned that he had ties to organized crime through his associate, Edward J. Muzio. Muzio acted as a consultant in soliciting the state's business from mid-1991 until last spring.
Maggi last month denied King's allegations. "Obviously, that's not true," he said. "I don't think it's fair to say things that can't be proven." He denied any organized crime connection by him or his associates.
Muzio, contacted at his personal finance business in Albuquerque, denied he threatened King or that he has links to organized crime. Muzio said it was King who solicited the $50,000 campaign contribution.
King's office manages a cash investment portfolio that averages $1.6 billion per day. He sits on the board of the Public Employed Retirement Association and the State Investment Council, which manages $6 billion in mineral tax funds. King is also a board member of the Education Retirement Association and the $300 million New Mexico Educational Assistance Foundation
King, 45, has been treasurer for three years and is running for re-election this fall. A longtime state employee and former state cabinet member, he is the nephew of New Mexico Gov. Bruce King.
The contacts between the treasurer and Maggi began in 1991, according to King. Maggi had recruited a local consultant, Fred Montano, as a broker for Marisana Ltd. of Bethesda, Md. Maggi, King said, later approached the state under two other company names. The first of the companies, Magfinco Ltd., is owned by Maggi. Muzio said that Maggi acted for the second, Trans-Euro Trading Ltd., only as a broker.
A 50% Return
King claims that Montano approached the treasurer's office about selling an investment plan that promised a 50% return on the state's money in six months. The idea was to trade standby letters of credit issued by banks. Montano wanted the state to invest $300 million, according to King.
Originally, King and his officers took the investment proposal "as a joke," the treasurer said. "We had a big laugh about this thing. We all thought it was a big joke until the threats came and we took it seriously."
Muzio said that the plan called for an initial investment of $1 0 million and promised annual returns of 9% to 14%. He also said that Montano was working on the promise of a commission.
Montano, contacted at his Albuquerque real estate brokerage, confirmed that he had represented Maggi. He said that under the best-case scenario presented to King, buying and trading the standby letters of credit once a week could have brought returns of 30% to 40%. The worst-case scenario was a 9% to 14% profit over a period of one year, he said.
Montano said he broke off his association with Muzio and Maggi shortly after his meeting with King, stating that he had not had the time to gather enough information for the deal. Montano said he has had no further contacts with either man and that his involvement lasted for four months. He said he had known Muzio in earlier years. when Muzio was a mortgage broker and tried to raise loans for Montano's real, estate brokerage.
Montano said he has no knowledge of organized crime and has trouble believing that Muzio ever did.
King says that after nothing came of the first attempt, Montano returned to him and asked him if he would at least write a letter to Marisana and request a proposal. King said he did so in July 1991 out of courtesy to Montano, whom he had known previously. The letter stressed that the state was not committing itself in any way by asking for a proposal.
In December 1991, King said, instead of a response from Marisana, he received a letter and investment agreement from Trans-Euro Trading, headquartered in the Turk and Calcos Islands in the British West Indies.
Muzio said that Maggi had broken ties with Marisana when the company could not provide enough information on its investment plan for New Mexico and the retirement association. Maggi was referred to the second company, Trans-Euro Trading, by a New York law firm, Muzio said.
King said he made short work of the Trans-Euro letter. "We called them immediately and said it was illegal. Under state law we can't have an outside manager invest our funds. They said no problem. We closed the file Dec. 12, 1991," King said.
In mid-1992, Maggi's group approached Phil Archibeck, the chief investment officer for the State Investment Council, with an investment proposal. Archibeck and staff investment officer Duane Johnson met with Montano. Johnson said Montano offered returns reaching 50% a year.
"We reviewed it and we asked our adviser Duff & Phelps to look at it," Archibeck recalled. "[Dean Jackson] Call, the senior vice president, looked at it and said they thought this investment would be unwise to the point of being imprudent." He said in a letter, ~The word Ponzi keeps coming to mind.'"
In a Ponzi, or pyramid, scheme, some early investors are paid off with money put up by later investors, creating the illusion of a lucrative venture. When the pyramid collapses, most investors are left with nothing.
Apparently undaunted, Maggi's group again approached the Public Employment Retirement Association in late December 1992, according to King. At that time, King alleged he discovered that Garcia, an employee in the treasurer's office, had attempted to help the group.
At around the same time, Garcia approached Montoya, the deputy state treasurer, on behalf of the group, King asserted. Montoya told Garcia that they would have to go through all the normal channels in obtaining a request for proposals, King said.
Garcia told King that "he might go to work for them," and that he was working for them on his own time, King alleged.
~That's Not True'
But in an interview yesterday Garcia said he did not have any business relationships with either Muzio or Maggi. "That's not true, any of it," Garcia said. "I just believed In the project well enough that I wanted the state treasurer to allow them to present it to the PERA board."
King said that after his rebuff, Maggi's efforts heated up. Maggi and his consultant, Muzio, attended a $100-a-ticket raffle and fundraiser on Jan. 8, 1993, in Santa Fe to benefit King's fall re-election campaign. The event raised about $20,000.
King said that Maggi and Muzio asked him out to dinner that evening, but that he declined. Instead, the two took out Garcia and a coworker that evening, according to Maggi.
The next day, Maggi, Muzio, and Garcia met King at Pete's Mexican Restaurant and Cantina in Sandia Park, east of Albuquerque, to talk about the investment proposal. King said he agreed to meet with the group for 10 minutes.
"Maggi asked me if I wanted a $50,000 donation to my campaign." King said. "He said it was just a legitimate campaign contribution, if I just helped him get a fair shake. I said, ~Look, fifty thousands bucks to a campaign is not a legitimate campaign contribution in a treasurer's race in the state of New Mexico.' It wasn't directly a bribe, but it was pretty close. They offered me $50,000 to my campaign if I could help them with PERA." King said that after he refused the money he thought the issue was settled.
But he said that Garcia, after having been told to "get the hell away from this thing," by his supervisor, investment officer Jim Steward, refused to let the proposal drop and requested a meeting with King. The meeting, on March 5 with King, Garcia, Montoya, Paquin Terrazas, an attorney in the treasurer's office, and PERA director Leo Griego, left King stunned.
"That day we almost got into a fistfight before the meeting was over and I told him if we had one more time like this I would fire him on the spot," King said of his encouter with Garcia and the others. "We went to the state police and they said we had to go to [the] organized crime [bureau], that we recognize those names -- Joe's associates Muzio and Maggi -- and at least one of them has been convicted before on investigations we've worked on, the police told us."
King said after he contacted the organized crime bureau, he agreed to several more meetings with Maggi and Muzio. During several of these encounters, King said he wore a wire. King said some of the threats were repeated and recorded. The first meeting was with Garcia at a Village Inn restaurant on May 3.
Garcia "just started in threatening that we were going to be ruined, I would never get re-elected, that they already had things figured out how they were going to blackmail us. They were going to say they did a proposal and we owed them money on the proposal," King said of the later meetings.
"He said they were rough and that they were mean guys and we'd have to look under our hoods every morning and stuff like that," King said.
King said that while wearing a wire in a later meeting with Maggi and Muzio, "They said, ~Wouldn't it be better to work with us?'" King alleged that they told him Muzio was a "hit guy." They said, "He wasn't a killer but he was a mean guy and a felon and has been tied to organized crime," King said they told him.
Muzio's story is far different. He claims that at the Saturday morning meeting at Pete's restaurant, King said that instead of investing $10 million, as Maggi had suggested, the state should invest $300 million.
"He said it in front of Maggi and Garcia. We were shocked. He suggested we do a request for proposal and he wanted the investment criteria," Muzio said.
While walking out of the restaurant, Muzio said King pulled him aside and began telling him how expensive campaigns were.
"He said, ~My campaign needs $50,000 very badly.' He was very cool about the way he said it and didn't have me alone very long," Muzio said.
Garcia said he does not recall Maggi broaching the subject of a campaign contribution.
"I was there 100% of the time, and Mr. Maggi never said that," Garcia said. "If that conversation was taped, then listen to the tape."
On May 22, King fired Garcia, who has denied any wrongdoing and is attempting to regain his $43,000-a-year job.
Muzio said King wore a wire at meetings with Garcia on May 3 and May 5, and again at a meeting with Muzio, Maggi and Garcia May 7.
But no threats were made, Muzio said. He said that King turned over only the May 5 tape to authorities but edited out the part where King allegedly asked for campaign contributions again. The other two tapes were not given to investigators. Muzio said.
"You've got a treasurer in deep trouble." Muzio said. "He's always doing unscrupulous things."
Muzio filed for personal bankruptcy in 1985 and was convicted of writing bad checks in 1986. He confirmed he served four months in the state penitentiary on the bad check conviction. He was reached at a company called Prime Funding in Albuquerque, which he says is a personal finance business.
King said he believes that Mexico became a target because of its reputation -- two of the last five treasurers have been convicted of financial crimes.
King said he bends over backward to avoid impropriety. For example, all new issues are bid competitively.
Chris Romer, a Smith Barney investment banker based in Denver who does extensive work in New Mexico. said that in the past 10 years only three issues, all refinancings, have been negotiated deals.
Because the treasurer sits on so many rich boards, "It is an unusually powerful state treasurer's office. But they are absolutely pristine in their approach to using RFPs," Romer said.
King said he wants to send a warning to others: "If you try to do something illegal, don't mess with New Mexico. You've got to be straight and aboveboard."
"I think David King deserves a lot of credit to step up and reveal this type of thing." Archibeck said. But Garcia said King's version of the events is an "attempt to save a political career."
"There's been a lot of fabrication here." Garcia said. "[King] has slandered a lot of people.
