4-21-2022 9:28am

Campaign Finance Searchlight Media Investigators report

Chris Edwards Editor

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Over the past two months, several of the nation’s large law firms have poured money into the campaign coffers of Brian Colón, New Mexico’s state auditor and leading Democratic candidate for attorney general.

Since 2018, when he was elected state auditor, Colón has received more than $165,000 from out-of-state litigation firms. Of those donations, $124,000 came from just seven firms — or employees and family members affiliated with those firms.

The donations reflect a practice that is now commonplace: large law firms, usually from out of state, making big donations to campaigns for attorneys general. In New Mexico, many of these same firms have later been offered lucrative contracts to represent the state in litigation and class action lawsuits.

“It happens a lot in different states,” said James Copland, director of legal policy at the Manhattan Institute, a conservative think tank that has published several reportson states’ use of outside trial lawyers. “And it, at least, creates a colorable impression of a pay-to-play type of arrangement.”

The practice dates back to the 1990s when many states, including New Mexico, were involved in class action suits against tobacco companies. Since then, states have relied heavily on outside firms to pursue litigation against companies for a number of public ills, like the opiate crisis and climate change.

In an emailed statement, Colón defended the state’s litigation model and said he would continue the practice of contracting outside law firms for consumer protection cases, while defending his donations from such firms.

“The procurement process requires full disclosure of any donations, and I have consistently supported a transparent and open process,” he said. “If a conflict of interest arises, it will be handled in the manner consistent with the ethical standards associated with my license to practice law in the State of New Mexico.”

The current attorney general, Hector Balderas, and other past AGs have defended the practice as a cost-effective way for the state to take on large companies that have wronged citizens. Outside law firms working on contingency usually absorb the substantial upfront costs of suing large entities and only get paid if they secure a settlement. Balderas has argued that using these firms allows the state to pursue lawsuits on behalf of New Mexican consumers that his office would otherwise lack the resources for.

In an emailed response for an interview, Balderas cited the U.S. Supreme Court’s 2010 decision on Citizens United, which handed significant power to multinational corporations. “Yet,” he wrote, “we have built a nationally recognized fraud recovery unit that has successfully sued the largest most powerful corporations in the world that violate the unfair practices act, and recovered hundreds of millions of dollars for New Mexico.”

Over the past few decades, New Mexico has pursued many such cases and often, the outside firms contracted for these cases have made large donations to the campaigns of the AGs who hired them.

Balderas’s two predecessors — Gary King and Patricia Madrid — were also known for taking large campaign contributions from lawyers and law firms across the U.S. Records from the New Mexico secretary of state show that King and Balderas both received about 10 percent of their career donations from out-of-state law firms or lawyers — about $520,000 and $300,000, respectively. Complete records are not available online for Patricia Madrid.

Because firms often make donations through employees and their families, tracking the full scale of contributions is difficult. The largest donation uncovered by Searchlight New Mexico was more than $79,000 in career contributions from the New York-based Labaton Sucharow to former Attorney General King, who later contracted the firm. Labaton Sucharow has also donated to Balderas’ campaign and Balderas has used the firm in several cases in recent years, according to a review of contracts from the attorney general’s office.

The same law firm is also a leading contributor to Colón’s current campaign for AG. His opponents, however, have been left out in the cold.

Raúl Torrez, the other Democratic candidate, has not taken any major donations from out-of-state plaintiff’s firms. He has accepted at least $32,200, all from New Mexico-based litigation firms — none of whom currently has a contract within the state.

Torrez fell short of promising to change the state’s litigation strategy, but his campaign manager said that Torrez tries to avoid conflicts of interest when accepting donations and that, if elected, he would focus on growing the AG’s office by farming out fewer cases.

Meanwhile, Jeremy Gay, the Republican candidate for attorney general, is a plaintiff’s lawyer himself. The only legal contribution he received for his campaign was from his own firm

Criticism from every side

The practice has drawn criticism from conservatives and liberals alike.

The Manhattan Institute, along with other conservative civil law reform groups, generally sees the practice as a threat to free-market principles. Liberals have different issues.

Daymon Ely, a Democrat state representative from Corrales and a legal malpractice attorney, said he is concerned about the number of cases farmed out to powerful law firms in places like New York, Chicago and Denver. Beyond conflict of interest concerns, he said that the extensive use of outside lawyers has eroded legal expertise within the AG’s office and that unlike state lawyers, outside firms have an incentive to settle a case quickly in order to get paid, often to the disadvantage of New Mexico consumers.

To illustrate, he cited the recent settlement with Vivint Solar, a Utah-based company accused of fraud and racketeering.

In 2018, Balderas brought a complaint against Vivint, accusing the company of deceptive marketing that adversely affected thousands of New Mexican homeowners. Though the case ended in a $1.95 million settlement, not one consumer in New Mexico received financial restitution.

And in the end, Balderas agreed to seal all of the documents in the case, impeding the ability of in-state lawyers to seek restitution for dozens of Vivint customers.

Most of the money from that settlement went to the attorney general’s office for legal fees, while nearly 40 percent went to the outside law firm contracted for the case. That firm was Philadelphia-based Barrack, Rodos and Bacine, which made a $5,000 donation to Balderas’s campaign about six months prior to being contracted for the case.

“I really firmly on principle believe the AG’s office is the consumer’s lawyer,” said Ely, who has sought to draw attention to the practice. “If somebody comes in and starts ripping off thousands of New Mexico consumers — and that was the allegation in the case — they shouldn’t all have to go out and hire their own private lawyers.”

In recent years, other states have sought to rein in the powers of attorneys general, treasurers and comptrollers that can contract outside law firms by capping the fees that those firms can receive for their work, outlining competitive bidding processes for contractors, or creating processes for legislative oversight of attorney’s contracts.

Under Balderas, the use of outside law firms has gone beyond consumer fraud cases. The AG’s office has contracted them for cases that would usually be considered core functions of the office. The largest of these is Texas v. New Mexico, an interstate water dispute before the U.S. Supreme Court with as much as $1 billion on the line for the state. For that case, Balderas hired Robles, Rael and Anaya, an Albuquerque firm that donated at least $36,000 to Balderas’ campaigns for State Auditor and Attorney General, according to a previous Searchlight investigation.

Marcus Rael, the named partner, is not a water attorney, nor did he have experience before the Supreme Court prior to this case. He is, however, a friend of both Balderas and Colón from their days at UNM Law School. The relationship between Rael and Balderas prompted several ethics complaints last year, which were later dismissed. The group involved in those complaints, New Energy Economy, filed a new lawsuit in early April, alleging that Balderas failed to provide public records of contracts with outside law firms.

Criticism from every side

The practice has drawn criticism from conservatives and liberals alike.

The Manhattan Institute, along with other conservative civil law reform groups, generally sees the practice as a threat to free-market principles. Liberals have different issues.

To illustrate, he cited the recent settlement with Vivint Solar, a Utah-based company accused of fraud and racketeering.

And in the end, Balderas agreed to seal all of the documents in the case, impeding the ability of in-state lawyers to seek restitution for dozens of Vivint customers.

article by

Lindsay Fendt

Lindsay Fendt got her start covering the environment as a reporter for The Tico Times in San José, Costa Rica. She covered human rights, immigration and the environment throughout Latin America before moving to Colorado in 2017 for the Scripps Fellowship in Environmental Journalism at the University of Colorado. Before joining Searchlight Lindsay worked as a freelancer and is finishing a book about the global rise of murders of environmentalists.