Earthstone: Money for Nothin’, Checks for Free

The Rio Grande Foundation’s investigative journalist, Jim Scarantino, continues to uncover problems at New Mexico’s State Investment Council. The tale of Earthstone and the SIC’s $9 million investment in that company — in part the taxpayer investment was supposed to be used to build a factory in Santa Theresa, New Mexico that was never built (Scarantino reported on this here).
The unique aspect of Scarantino’s latest article, “Friends in High Places,” Anatomy of the SIC’s Bad Investment in Earthstone International” (which is available here) is that the SIC’s analysts actually tried to stop this investment from happening, but they were overruled by the Governor who had a strong desire to get the owners of Earthstone (well-heeled political donors to the Governor) some significant funding. As Scarantino reports:

The SIC knew that Earthstone was a bad bet. But only two months later, on January 27, 2004, the SIC announced that it would extend Earthstone $9 million in a convertible loan. What happened?
Documents in the SIC’s files reveal that promptly after being turned down by the SIC, Earthstone’s representatives began contacting other members of Richardson’s administration, particularly Rick Homans, who was then Richardson’s Economic Development Secretary. So, Governor Richardson, who exerts total control over the SIC, an entity that manages billions of New Mexicans’ taxpayer dollars, forced the SIC to go along with the Earthstone investment.
Unfortunately, as Scarantino reports, the story does not end with the loss of 9 million taxpayer dollars. Despite having not built its factory and not providing any new jobs for New Mexicans, Earthstone recently received another $3.5 million from the SIC.