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1/25/06 HB
SB 23
ANALYST Schardin
APPROPRIATION (dollars in thousands)
or Non-Rec
(Parenthesis ( ) Indicate Expenditure Decreases)
Relates to HB326.
LFC Files
Responses Received From
Secretary of State (SOS)
State Treasurer’s Office (STO)
Public Employees Retirement Association (PERA)
State Land Office (SLO)
State Investment Council (SIC)
Office of the State Auditor (OSA)
Department of Finance and Administration (DFA)
No Response Received From
Attorney General (AG)
Educational Retirement Board (ERB)
Synopsis of Bill
Senate Bill 23 would make it a fourth degree felony for any “state agent” or candidate for state
office to knowingly solicit or accept anything of value (excluding the cost of refreshments up to
$25 per day or refreshments at a public receptions or other public social function that are avail-
able to all guests equally) from an “investment agent” doing business with a state agent.
Senate Bill 23 – Page
The crime will apply to both state agents who accept such contributions and investment agents
who give such contributions.
The bill would also stipulate that if an investment agent has contributed anything of value to a
successful candidate for a state office that invests public funds or issues bonds, the investment
agent shall not conduct business with the state or its political subdivisions that involves invest-
ment of public funds or issuance of bonds for two years following the candidate’s election.
Further, it will be a fourth degree felony for a state agent to solicit any investment agent to ap-
point a person to employment or hire a person on a contract in any capacity.
The bill creates several penalties in addition to making these crimes a fourth degree felony. The
bill would penalize state agents and investment agents who break the provisions of this bill with
a fine of up to $10 thousand and/or imprisonment of up to 18 months. Further, if an investment
agent is convicted of the provisions of this bill, the state and its political subdivisions will be pro-
hibited from contracting with that investment agent for a period of five years after conviction.
Finally, a person convicted of these crimes will be disqualified from employment by the state or
its political subdivisions indefinitely.
An “investment agent” is defined as a person who receives compensation for financial services
involving public money, who provides advice on the investment of public money, or such a per-
son’s officers, employees or agents.
A “state agent” is defined as a person who meets any of the following criteria: 1) elected state
government officials (governor, lieutenant governor, state treasurer, state auditor, secretary of
state, attorney general, commissioner of public lands, or a state legislator); 2) state officials who
have authority over public fund investment or bond issuance or have the authority to appoint
public officers who invest public funds or issue bonds; 3) agents of a state office that invests
public funds or issues bonds.
The bill’s definition of “state agent” means it will apply to state elected officials and state offi-
cials involved in the investment of public funds and bond issuance. Some but not all executive
agency heads will be affected. Areas not included in Senate Bill 23 that should arguably face the
same restrictions include judicial bodies, the public regulation commission, the regulation and
licensing department, the gaming control board, and the state racing commission, and the eco-
nomic development department. While these and other state agencies are not involved in the in-
vestment of public funds, they do have the power to influence financial outcomes in the state.
SIC notes that the provisions of Senate Bill 23 will significantly deplete the pool of qualified in-
vestment professionals with which state investing agencies may conduct business.
STO reports that passage of SB23 will necessitate a review of campaign reports of current and
newly-elected officials to identify contributions by individuals and companies that meet the bill’s
Senate Bill 23 – Page
definition of “investment agent.” Further, the STO will need to modify its code of conduct to
establish limits on what can be accepted from an “investment agent.”
PERA reports that it is already subject to stronger restrictions than those found in Senate Bill 23.
The PERA Act precludes PERA board members, PERA employees or candidates for the PERA
board from accepting anything of value from any person with a current contract with PERA or
any person who is a potential bidder, offer or contractor for the provision of services or personal
property to PERA. The PERA act defines “anything of value” as anything except food and bev-
erages provided in a place of public accommodation, consumed at the time of receipt, not ex-
ceeding $50 for a single give, not exceeding an aggregate value of $150 per calendar year. PERA
board members are also required to disclose anything of value received in their official capacity
from any source except per diem.
Senate Bill 23 relates to House Bill 326, which is Governor Richardson’s anti-corruption bill.
STO notes that Section H, which disqualifies anyone convicted of a crime under this act from
state employment, may conflict with the constitutional impeachment process. If a sitting elected
official were convicted of an offense under this act, that official would be disqualified from state
employment. However, impeachment is the constitutional way to remove an elected official from
The definition of “investment agent” includes some state agents because it does not specify that
investment agents do not include state officials.
DFA suggests that the definition of “state agent” could be improved by linking it to the definition
of public officers established by the Per Diem and Mileage Act, which includes every elected or
appointed officer of a governmental entity, including the judicial branch, the legislative branch,
and all board and commission members.
The terms “refreshments,” “public reception,” and “legally entitled to receive” are not defined.
The bill does not provide for any system to identify violations or give notice to state agencies
that certain investment agents are not eligible for employment or contracts. None of the state’s
investment agencies have the staff or expertise to cross-reference campaign contribution reports
to check for donations from any employee of an investment agent.
Depending on the effective date of the bill, it will have implications for investment agents with
which state agents are currently conducts business. The bill does not specify how to handle exist-
ing contracts.
SLO suggests that the word “knowingly” should be added to Sections C, D and E to prevent in-
advertent violations of these provisions. This will also be more consistent with sections A and F,
which do contain the word “knowingly.” However, DFA notes that it will be difficult to prove
whether someone accepted something “knowingly” or unknowingly.
Senate Bill 23 – Page
OSA recommends adding the public regulation commissioner to the list of state agents listed on
page 2, lines 12 to 15 because the PRC handles large amounts of cash and investments.
OSA states that while this bill proposes good changes, it does not ensure that violations will be
prosecuted. OSA recommends adding a requirement to Senate Bill 23 to require the AGO to
prosecute violations of these provisions.
DFA also noted the following technical issues:
-Section 1, A., (2) add "or who may in the future receive compensation for financial services
involving public money" to cover prospective contractors of the state.
-Section 1, A., (4) is missing the word "or" after paragraph a.
-Section 1, H. add "and is disqualified from seeking election to any elected office."
-Throughout Senate Bill 23 delete the limiting phrase "the revenue of which is used for pub-
lic projects in the state."
SIC notes that Senate Bill 23 will have a significant impact on the pool of available bro-
ker/dealers for all the state’s investing agencies. They give the following scenario to illustrate
how this bill might impact their investment freedom:
A secretary for Financial Services Company X in Albuquerque contributes $10 to a state leg-
islator’s reelection campaign. Company X, a huge multi-national corporation based out of
Chicago, is on the approved bond trading list for the SIC. The SIC doesn’t even do business
with Company X’s Albuquerque branch, but rather the Chicago office, however, under the
definition of the bill, because the secretary is technically an employee of Company X, it
would no longer be able to “conduct business with the state or its political subdivisions that
involves the investment of public funds or the issuance of bonds for any state agent for two
years following the election of that candidate” (Section D).
SIC also that the definition of “investment agent” in Senate Bill 23 would not include third-party
marketers, who act in an introductory capacity between investment agents and state agents but do
not provide financial services involving public money.
The bill allows an investment agent who violates the provision of this bill to contract with the
state again five years after conviction. However, a person convicted is ineligible for employment
with the state or its political subdivisions indefinitely.
Each state agency that submitted analysis on Senate bill 23 expressed significant concerns about
the functionality of the provisions. The SIC recommends a Joint Memorial to send this issue to
the State Permanent Fund Task Force for further discussion and consideration.