The ripple effects of a fraudulent audit at the New Mexico Finance Authority washed over the the agency’s chief executive officer on Thursday (Aug. 9th) when the NMFA board unanimously voted to put Rick May on administrative leave with pay.

“We felt we needed to change the direction of that organization immediately,” board chairwoman Nann Winter told reporters right after the NMFA board made the announcement that came during a closed-door session that took two and a half hours.

May will be replaced on an interim basis by Dr. Brett Woods, who is currently the deputy secretary at the New Mexico Energy, Minerals and Natural Resources Department.

The board also announced that the NMFA’s chief operating officer, John T. Duff, has been put on leave without pay after he was arrested Wednesday morning by officers of the State Securities Division while at NMFA offices.

Rick May, CEO of NM Finance Authority

Authorities also arrested a former controller at the NMFA, Greg Campbell, yesterday. Duff and Campbell are facing multiple felony counts of alleged forgery, security fraud, racketeering and conspiracy to commit racketeering in connection to the bogus audit filed for fiscal year 2011.

Both men bonded out of jail in Santa Fe on Wednesday afternoon.

Beyond the criminal charges, the financial questions surrounding the NMFA are huge.

Wall Street ratings agencies such as Standard & Poor’s and Moody’s are considering downgrading state bonds as a result of the NMFA controversy — actions that could cost taxpayers millions of dollars in additional interest rate payments.

It’s unclear whether the arrests and the administrative leave decision concerning May will make the ratings agencies more nervous or give them reassurance the state is getting to the bottom of things.

“Well certainly we’re taking action,” Winter said. “I hope they’re paying attention to the fact that we’re addressing this as quickly as possible and moving agency and the culture of this agency in the right direction.”

As for Woods, his background is in law enforcement. John Bemis, who is secretary of Energy, Minerals and Natural Resources and is also a member of the NMFA board, told Capitol Report New Mexico that Woods is a Viet Nam veteran who served in Special Forces, a former US Marshall who also served in the Secret Service and has worked in a number of state agencies.

Here’s Bemis talking about why he thinks Woods is a good fit as the NMFA’s interim boss:

NMFA board meeting, 8/9/12

State Auditor Hector Balderas said he agreed with the board’s move regarding May.

“I believe the board is taking the management operations very seriously and it’s very important that they stabilize management’s function and more importantly, separate management’s power and authority from their current opeations” Balderas told Capitol Report New Mexico. “It makes us [the State Auditor's Office] and our ability to audit this organization much easier.”

Update: In a phone interview with Associated Press, May said: “I am proud of my service. I did everything I could to help defend and protect and improve the missions and programs of the Finance Authority. I think the Finance Authority, until this most recent incident, is better” and told AP he will continue to cooperate with investigators to “get to the bottom of it and tell the truth.”

May has been the CEO at NMFA since last September when he moved over to the authority after serving as the head of the Department of Finance and Administration for eight months when current Gov. Susana Martinez came into office.

Due to the uncertainty about the authority’s numbers, large-scale projects and bonds across the state — which are administered through the NMFA — are in jeopardy, including a $27.2 million project in Albuquerque. Some of the investors behind those projects are scrambling to find other revenue sources and there’s been discussion that the State Treasurer’s Office may be used as an alternative.