Jan. 6 (Bloomberg) -- One of New Mexico Governor Bill Richardson’s senior political advisers lobbied the state on behalf of JPMorgan Chase & Co., which won a leading role on municipal bond deals under federal scrutiny and played a part in his decision to withdraw from becoming U.S. commerce secretary.

JPMorgan paid Michael Stratton, president of Denver-based Stratton & Associates, $269,000 in 2003 and 2004 to help win public finance business relating to “state, county, and local government and corporate entities” in New Mexico, according to records filed with the Municipal Securities Rulemaking Board. Stratton’s firm gave $2,000 to Richardson’s first gubernatorial bid in 2002, and Stratton advised the governor on his 2008 presidential campaign, according to New Mexico records and the firm’s Web site.

“He worked with the people the governor needed to support his efforts,” said Joe Velasquez, who ran Richardson’s Moving America Forward political organization in 2003 and was a political adviser on Richardson’s national campaign.

President-elect Obama planned to name Richardson as commerce secretary until Jan. 4, when the New Mexico governor withdrew, citing a pending investigation. He later said it involved a bond advisory company that records show worked for the state after making contributions to Richardson’s political action committees.

CDR Contributions

On Dec. 15, Bloomberg News reported that the grand jury in Albuquerque was meeting to review how the company, Beverly Hills, California-based CDR Financial Products Inc., received almost $1.5 million in fees from the New Mexico Finance Authority. CDR contributed $100,000 to Richardson-affiliated groups. New York-based JPMorgan, the second-largest U.S. bank by assets, helped underwrite the bonds sold by the authority.

Stratton, 54, worked over the past two decades for Democrats who included former President Bill Clinton, former Massachusetts governor and presidential candidate Michael Dukakis and former Colorado Governor Roy Romer, according to the Stratton & Associates Web site.

Stratton also was a so-called “bundler” for Richardson’s presidential run, according to Public Citizen, a nonprofit consumer advocate. Bundling describes the activity of fundraisers who pool a large number of campaign contributions from political action committees and individuals, according to Public Citizen.

Political Consulting

When Richardson, 61, led the Democratic Governors Association in 2005 and 2006, Stratton’s firm was paid at least $160,000 for political consulting, according to U.S. Internal Revenue Service records. He also was a senior political adviser on Richardson’s presidential bid, which ended last January after fourth-place showings in the Iowa caucus and the New Hampshire primary, according to Richardson’s campaign Web site.

JPMorgan’s lead banker on the deals was Chris Romer, 49, whose father was governor of Colorado from 1987 until 1999. On Aug. 21, JPMorgan told regulators about an investigation being conducted by the U.S. Attorney for New Mexico involving the municipal securities business, according to Romer’s brokerage records with the Financial Industry Regulatory Authority.

No one has been charged with wrongdoing. Stratton declined to comment on the investigation, as did Tasha Pelio, a spokeswoman for JPMorgan in New York. Gilbert Gallegos, a spokesman for the governor, didn’t return calls seeking comment.

Influencing Hiring

The Federal Bureau of Investigation asked current and former officials from the state agency whether any of the at least 30 people in the governor’s office influenced CDR’s hiring, said people familiar with the matter, who declined to be identified because grand jury proceedings are secret. The grand jury is examining the authority’s hiring of CDR, an adviser on interest-rate swaps and escrow accounts related to bond sales, the people said.

“I acted properly and my administration acted appropriately,” Richardson told reporters in Santa Fe yesterday. “A fair and impartial review of the facts will bear that out.”

CDR President David Rubin, in a statement yesterday, said his company underwent “a rigorous vetting process” and “has never practiced pay-for-play on any playing field where we do business.”

Royal Bank of Canada, UBS AG, George K. Baum & Co. and First Southwest Co. also donated to Richardson’s political committees before or after receiving bond work from the New Mexico Finance Authority, which arranges financing for government agencies throughout the state.

‘Not a Subject’

Kevin Foster, a spokesman for Royal Bank of Canada, said the company complies with all political giving rules and has “no reason to believe we are the subject of any investigation.” First Southwest Chief Executive Officer Hill Feinberg said in a statement the firm has not been targeted for any wrongdoing and has been advised that it “is not a subject or a target of the investigation.”

Jonathan Baum, George K. Baum’s chief executive officer, declined to comment. Doug Morris, a spokesman for UBS, declined to comment.

Romer, who joined JPMorgan in 2002, said he cooperated with investigators looking into transactions involving the New Mexico Finance Authority and the University of New Mexico. The New York office of the Justice Department’s antitrust division subpoenaed documents from the university concerning bond sales arranged by the bank in 2002 and 2003, records obtained from the university show.

Federal Interview

“I voluntarily participated in an interview with federal investigators regarding their investigations of the New Mexico Finance Authority and University of New Mexico,” Romer said.

CDR’s Rubin and three other employees of the firm donated $6,000 to Smart Government Inc., a Denver political organization overseen by Thomas Romer, Chris Romer’s brother.

Stratton & Associates and Chris Romer also donated to the group.

Thomas Romer said the group supported a ballot measure to promote efficiency in the Denver government. He said he couldn’t recall exactly who solicited the contributions from CDR. “We just called people we though might be willing to contribute,” he said.

Richardson, explaining his withdrawal from the cabinet appointment, said the probe threatened to postpone his confirmation by the Senate to a key economic policy position at a time when Obama seeks quick approval of legislation to lift the U.S. out of a recession. Richardson said he expects his administration to be vindicated, and he has hired an Albuquerque criminal defense attorney, the Associated Press reported.

Firm Employed

JPMorgan employed Stratton’s firm in New Mexico from the first quarter of 2003 through mid-2004, when the bank stopped using political consultants before a ban on the practice by the industry regulator, Municipal Securities Rulemaking Board records show.

JPMorgan was the senior underwriter on $1 billion of the $1.6 billion of bonds sold by the New Mexico Finance Authority to pay for Richardson’s transportation projects.

JPMorgan was also among the five banks that sold the authority interest-rate swaps tied to the bonds. The other institutions were Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., UBS and the Royal Bank of Canada.

CDR advised the authority on the purchase of the swaps.

Interest-Rate Swaps

Interest-rate swaps are derivatives, or contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as changes in interest rates or the weather. Borrowers use them to lower costs and reduce their vulnerability to swings in interest rates.

The federal grand jury is looking at how CDR won work from New Mexico in 2004, according to people familiar with the matter. CDR donated $100,000 to Richardson’s efforts to register Hispanic and American Indian voters and pay for expenses at the 2004 Democratic National Convention.

In October 2003, Rubin gave $25,000 to Moving America Forward Inc., a political action committee formed by Richardson, disclosure forms show. Seven months later, CDR, known then as Chambers, Dunhill, Rubin & Co., gave $75,000 to Si Se Puede! Boston 2004 Inc., formed to help pay expenses at the 2004 Democratic National Convention in Boston, where Richardson was chairman.

There is no public record of the scope of the grand jury’s deliberations. Richardson yesterday said he wouldn’t discuss the details of “the CDR investigation.”

To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net; William Selway in San Francisco at wselway@bloomberg.net.

Last Updated: January 6, 2009 15:50 EST