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Did StepStone’s PCG Ties Cost it the New Mexico Advisor Deal?

The New Mexico State Investment Council reversed its decision to hire Calif.-based StepStone Group to help it manage its $1.3 billion PE portfolio, and is now in final negotiations to hire LP Advisors as its private equity advisor instead.

The council was “unable to reach a mutually satisfying agreement” with StepStone Group, its chief information officer Charles Wollmann told peHUB Wednesday morning.

However, what might have been most unsatisfying about StepStone to the New Mexico council is a former StepStone president’s ties to a national pay-to-play scandal. One source acknowledged the board had a difficult time getting over StepStone’s past affiliation to Pacific Corporate Group, which, in 2009, was dragged into the pay-to-play investigation launched by then-New York Attorney General Andrew M. Cuomo. Steve Moseley, who joined the advisor in 2008 and resigned the following year without being charged with any wrongdoing, had previously served as co-president and managing director of PCG Capital Partners.

In a prior discussion with a peHUB reporter, Wollman did not say this was the case, however.

“It was not to be,” he said Wednesday of New Mexico’s deal with StepStone.

The state of New Mexico is carefully crafting its image in the wake of the Cuomo investigation—the council prematurely terminated its prior PE advisor’s deal, Aldus Equity Partners, when that firm became embroiled in the national investigation. Complicating matters is federal investigators’ ongoing inquiry into pension investments made under former New Mexico Governor Bill Richardson, who was alleged to steer money toward advisors with whom he was friendly.

StepStone declined to comment for this story.

Buyouts senior correspondent Gregory Roth contributed to this report.