N.M. AG sees problem with state contract given to firm

By Jessica M. Karmasek | Jul 14, 2011


SANTA FE, N.M. (Legal Newsline) - New Mexico Attorney General Gary King, in an advisory letter issued last month, said a State Investment Council contract with a law firm "has problems."

In another letter, he said school districts can hire consultants or lawyers to represent them in collective bargaining talks.

State Sen. Tim Jennings had requested the attorney general's opinion regarding the legality of a contract that was entered into and subsequently amended by the SIC and the Paul Hastings Janofsky & Walker LLP law firm outside of the parameters of the state Procurement Code.

The Procurement Code imposes certain safeguard requirements on the contracting process.

"The purposes of the Procurement Code are to provide for the fair and equitable treatment of all persons involved in public procurement, to maximize the purchasing value of public funds and to provide safeguards for maintaining a procurement system of quality and integrity."

The code also sets up a series of mechanisms for public bodies to procure services from companies in a transparent process.

The SIC, Jennings explained, originally entered into the contract with the law firm in August 2005.

Pursuant to the contract's "scope of work," the firm would "(s)erve as legal counsel to the SIC for the purpose of reviewing documentation relating to direct securities investments, and advising the General Counsel (of the SIC) as to securities law matters generally" and "(c)onduct negotiations, if requested, with respect to investments or other investment management matters."

The original contract term was for one year and the compensation paid to the firm during the term was not to exceed $30,000.

Since entering into the original contract, the SIC and the law firm have amended the contract six times.

The first amendment extended the term until June 2010 and increased the compensation amount to $100,000. The subsequent amendments also increased the compensation, up to $5.8 million under the last amendment.

In addition to the original scope, the fifth amendment provided that the law firm would "(p)rovide advice and assist with reviewing documentation and responding to subpoenas, requests and inquiries from regulators and other government agencies, and document requests made pursuant to public disclosure laws."

The sixth amendment added that the firm would "(c)onduct, and provide advice relating to and in connection with an internal review of issues raised in connection with the matters described [in the fifth amendment]."

Assistant Attorney General Elaine Lujan, in her June 14 advisory letter, said while the original contract may not have been subject to the code, the contract became subject to the code once the scope of work was expanded in the fifth and sixth amendments.

Additionally, Lujan said, the contract fell within the parameters of the code once the scope of work was broadened to include matters that were not investment-related.

However, once the scope expanded outside the parameters of subsection CC, the SIC should have issued a request for proposals and otherwise followed the Procurement Code, she said.

State Rep. Eleanor Chavez also requested the attorney general's opinion.

In her request, Chavez questioned whether public school districts may hire consultants or lawyers to represent the district during collective bargaining negotiations.

The Rio Rancho Public School District has contracted with Management Associates Inc.; Bob Brown Consulting; Scheuer, Yost and Patterson; and Rodey, Dickason, Sloan, Akin and Robb P.A. to represent the district during the collective bargaining process, she explained.

Specifically, Chavez asked the attorney general:

- Do the actions of the school district comply with the New Mexico Public Employee Bargaining Act;

- Do the actions of the school districts comply with the New Mexico Procurement Code; and

- Do the actions of the legal entities comply with an attorney's code of ethics?

In its June 14 advisory letter to Chavez, the Attorney General's Office said "based on examination of the relevant constitutional, statutory and case law authorities," and the information available at this time, the conclusion is that a public school district may contract with consultants or lawyers to represent the district during collective bargaining negotiations, provided the district complies with the Procurement Code.

The Legislature has granted a public school board, as the governing body of a public school district, certain powers. Since a board may sue and be sued and acquire, lease and dispose of property and issue general obligation bonds of the school district, the board may need to seek expertise from lawyers or management consultants in handling these matters, the Attorney General's Office explained.

The Legislature also has expressly granted public school boards the authority to "contract for the expenditure of money" as long as it is done according to the provisions of the Procurement Code, it said.

"Although PEBA does not prohibit a school district from employing a consultant or lawyer to represent it in collective bargaining negotiations, the school district may not employ a consultant, lawyer or other agent to engage in a prohibited practice, interfere with the rights of public employees or otherwise act contrary to the school district's obligations as an employer under the PEBA," Assistant Attorney General Zachary Shandler wrote.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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