Former New Mexico Tech president contends he was fired for exposing mismanagement

Yahoo

30-01-2025

Jan. 30—Stephen Wells is a geologist by profession, but after becoming president of one of the state's most prestigious universities, the New Mexico Institute of Mining and Technology, he became a financial sleuth.
He wanted to know why all of Socorro-based New Mexico Tech's short-term funds — to the tune of more than $46 million in cash — were parked at a single local bank that paid an "extremely low" rate of return, according to a new whistleblower protection lawsuit filed in state district court in Santa Fe.
Wells contends his questioning of that practice and other "critical issues of mismanagement" cost him his job. He was abruptly "forced out" a month after the bank's lawyer became president of New Mexico Tech's Board of Regents, his lawsuit states.
"He did nothing wrong except he stepped on toes," said one of his lawyers, Joleen Youngers.
Wells discovered the university was losing millions of dollars in interest income that his lawsuit states "would have gone to the benefit of the university and students." An outside university lawyer and an accounting firm he consulted confirmed as much, his lawsuit stated. But when he informed the school's Board of Regents of his concerns in 2020, the regents took no action.
He also investigated the mismanagement of endowment funds; the payment of $1 million in unjustified royalties; the improper use of certain scholarship funds; and the continued employment of an employee "who was given a six-figure salary by a member of the administration with whom she was having an affair," states the lawsuit filed against the New Mexico Tech Board of Regents, who have the authority to hire and fire the school's president.
A New Mexico Tech spokesman, reached Tuesday, told the Journal in an email, "We do not comment on pending litigation."
Wells, who was hired by the board as president in 2016, was also awarded a tenured full professor position in the Earth and Environmental Sciences Department at the school, which "has kind of been a shining star in terms of esteem," Youngers said.
The lawsuit states that he was fired "out of the blue" in April 2023 by a 4-1 vote of the regents. Spearheading his dismissal was attorney Jerry Armijo, who has been on the board since 2003, becoming president in March 2023, the lawsuit states.
Armijo, who could not be reached for comment for this story, asked to meet with Wells before a scheduled board meeting and gave him a "mutual termination agreement." Armijo allegedly told him he wanted Wells to step down that same day.
Wells says he never got an answer from Armijo as to whether he was being let go "for cause."
"Dr. Wells recognized that if he were forced out, not only would he lose a job he loved and be unable to finish the work he had begun at NMT, but an abrupt termination would cast a shadow of suspicion that would damage his reputation and that of New Mexico Tech," the lawsuit states.
Wells requested that the university news release about his departure indicate that he had retired due to health reasons to minimize reputational harm. Two of the four regents who voted for the "mutual separation agreement" had been regents for only two months. Regents are appointed by the governor.
Following his "forced resignation," he asked to continue as a tenured professor emeritus in the Department of Earth and Environmental Sciences, but his lawsuit states he learned Armijo had denied the request.
"The most egregious issue Dr. Wells had faced and fought against involved the failure to protect and invest in excess of $40 million in cash reserves," the lawsuit states. After becoming president in 2016, he started asking about the status of the university's cash reserves, and was informed by a university vice president that the funds "would yield a higher rate of return if placed with the State Investment Council."
An independent accounting firm, RVK, reported in 2020 that the university had entered an agreement with the First State Bank in which it had to keep a minimum of $30 million in cash with the bank, the lawsuit states. That led to Wells asking the university's outside counsel to analyze the agreement. The lawsuit states that the attorney responded in a six-page memo that the agreement "most likely violated the Anti-Donation Clause of the New Mexico Constitution by providing $30 million to a private bank in exchange for no benefit for the university."
The independent accountant concluded that the bank held an average of $46 million of university funds, meaning New Mexico Tech had earned $101,751 in interest when it could have collected $2.2 million had the funds been invested in a treasury mutual fund.
At the time, First State Bank had assets of about $180 million, the lawsuit stated, meaning that the university's public funds tied up in the low-interest-bearing account made up about one-fourth of the bank's assets, states the lawsuit.
The RVK study also criticized the agreement with the bank because, unlike treasury securities that are regulated by the Securities and Exchange Commission and are FDIC-insured, keeping the $46 million with First State Bank was risky because only $250,000 of those millions were insured by the FDIC because it is a bank, the lawsuit states.
Efforts to obtain comment from bank officials this week were unsuccessful.
Santa Fe attorney John Day, who also represents Wells, said the regents have a fiduciary duty to make the best investments of the school's funds.
"What's the benefit to the school to keep the money in a lower or basically zero-interest-bearing account? And who benefits?" Day told the Journal. "Does the small, family-owned bank benefit? Yes.
"The reality is, the regents are duty bound to put the interest of the school, the university, above their own self-interest. That's why we believe it was a betrayal of the public trust."