The Watchdog received a tip this week that a private equity investment by the State Investment Council, an investment managed by Brian Birk at Sun Mountain Capital, is moving to California.

Your Watchdog reporter jumped in his car and drove over to the Science and Technology business park near UNM campus where Exagen Diagnostics has offices.

Suite 103 had a security-card entry so I peered through the window-slit front-door and saw that there was indeed no receptionist and not much employee activity moving about the offices. There were several packing boxes throughout the offices.

Exagen Diagnostics has had a tough birthing from its beginning as it searched for customer markets since being founded by Albuquerque biotechnology entrepreneur Waneta Tuttle in 2002.

Exagen develops genetic tests to predict the course and severity of breast cancer and hepatitis C.

As much as the Watchdog has been able to verify the company has gone through at least four CEOs in its 10-year history.

James McClintic replaced founder Waneta Tuttle in 2004. At that time, Exagen described itself “as an emerging leader in the development of prognostic and predictive vitro diagnostic (IVD) kits.

According to the Albuquerque Journal in a report on venture capital investment in New Mexico in 2007, State Investment Council spokesman Charles Wollmann said “the private equity investment program had caused investment in 38 companies and created 1, 900 jobs.” Wollmann added: “The program has earned a return of about 8.4 percent, based on the valuations of the companies and funds in its portfolio – most notably Eclipse Aviation.”

Eclipse Aviation entered an unsuccessful Chapter 11 bankruptcy in November 2008, which was converted into a Chapter 7 bankruptcy liquidation in February 2009.

New Mexico invested $20 million dollars in Eclipse, not including millions in employee training tax credits, property tax breaks and other financial benefits.

In 2008, Exagen was on life-support.

By early 2008, Exagen Diagnostics was teetering on the edge of bankruptcy itself. Exagen laid off 40 of its 50 employees in February 2008. At that point in time, Exagen had received $20 million in private equity, including $4 million from the State Investment Council. Sun Mountain Capital, which advises the SIC on its private equity program, continued to lead follow-on rounds of investment in Exagen. With more money and a new strategy in October 2009, Exagen attracted a nationally renowned serial entrepreneur named Scott Glenn – its third CEO.

In October of 2010, Exagen acquired the medical diagnostics division of Cypress Bioscience Inc. in San Diego, California. According to a New Mexico Business Weekly report at the time, Exagen assumed the lease for Cypress’s laboratory operations in San Diego. Which makes the Watchdog wonder if this is where the Albuquerque part of the company is headed to with its packing boxes in its Science & Technology offices.

Enter CEO No. 4: Ron Rocca. The Exagen board of directors hired its current CEO, Ron Rocca, in October of last year, which LinkedIn lists his residency as the “Greater San Diego Area.”

Again, like another Sun Mountain Capital managed company, Earthstone International, we got an out-of-state CEO running a company invested in by the New Mexico taxpayers. You can read my reports on Earthstone whose current CEO lives in Toronto, Canada here.

The Watchdog was able to make contact with Wendy Swedwick, the current CFO of Exagen, who did reply to my email inquiring about the rumor that Exagen is pulling up stakes in New Mexico and moving to California.

When I pointed out to Ms. Swedick that upon my visit to Exagen’s office there was no receptionist and that the offices appeared to have space for at least 30 employees and I could only spot three employees, Ms. Swedick replied to the Watchdog in a follow-up email: “Exagen is a New Mexico company and is considering a move within Albuquerque when our current lease expires, but we have not yet finalized a location.”

Next State Investment Council Meeting.

The next State Investment Council monthly meeting is on Tuesday, April 24th. At the last meeting, March 27th, SIC council public member Lee Rawson made a motion to sever the relationship between the SIC and Sun Mountain Capital. The motion was put on hold until the April 24th meeting as it was not on the agenda for the March 27th meeting.

In a nutshell, Mr. Rawson’s problem with Sun Mountain Capital running the $90 million private equity program on behalf of the SIC is that Sun Mountain and Brian Birk represent the old Gary Bland/Bill Richardson SIC, in which state private equity investments were run as a pay-for-play slush fund by Richardson. Anyone that contributed to his campaign funds got preferential treatment: both Earthstone and Growstone investors, Andrew Ungerleider and Gay Dillingham and Brian Birk were major campaign contributors to Bill Richardson.

Ex-state senator Lee Rawson and current public member of the SIC council seeks to forward the reputation of the Gov. Martinez chaired SIC as totally transparent and end the perception that SIC investments are involved in “crony capitalism.”

Fair enough. The Watchdog applauds the new SIC. But in the Watchdog’s opinion, Brian Birk and Sun Mountain Capital is old Richardson baggage that needs to be thrown off the train.

We’ll see on April 24th if council member Lee Rawson has enough support to help him lift the crony baggage and give it the heave-ho.