December 17, 2014

Bill would make no due diligence a crime for DED employees

One of the first bills created in response to issues raised after the failure of a deal to bring a sucralose plant to Moberly has been filed.

Representative Tom Flanigan (R-Carthage) is the sponsor of HB 1061.

Its sponsor, Representative Tom Flanigan (R-Carthage) sits on the House Interim Committee on Government Oversight and Accountability. His legislation, House Bill 1061, would make it a class “D” felony for any employee of the Department of Economic Development to issue, authorize, allocate or recommend the issuance, authorization, or allocation of economic development bonds to a project without first doing due diligence on it.

Flanigan says not enough information is being gathered before tax credits are issued by the Department. He says that has to change. “When you’re dealing with tax credits, you’re dealing with money…taxpayer money. And so I thought if you’re not going to do your due diligence it’s a crime, and I made it one in the bill.”

Flanigan considers himself one of many the state who thought DED was doing due diligence on projects it was connected to. He was surprised to learn otherwise. “Until that came out in the hearing the other day, I was shocked. That the Director of Economic Development, David Kerr, said before our committee, ‘we don’t do due diligence.’ That set the committee down because people were surprised…very surprised at that. That was when a lot of people started looking at each other wondering, ‘what are you doing then?'”

Kerr told the committee on November 30 that DED’s tax incentive programs are performance based, protecting taxpayers if a company does not deliver on its claims. He told lawmakers this reduces the need for “costly, time-consuming and quite frankly wasteful due diligence by state workers when our programs allow the free market to police whether the company will ultimately receive the tax incentives requested.” Even so, he says due diligence checks are done and were done in the Mamtek deal, looking for indications of fraud or misrepresentation as early as possible in a project.

The Representative thinks the discussion that began in the interim with those hearings on the Mamtek project will propel his bill into the session. He expects the bill will receive time in committee and on the floor, where it will become more defined. Right now, the bill it does not include specific parameters on how much due diligence must be done or other details.

He stresses that any DED employee would be subject to prosecution if found to be violating the law set forth by his bill, up to its Director. He would not speculate what would have happened had his bill been law when the Mamtek deal was developing, however. “I can’t go there, don’t know that. Don’t know how people react when they have all the information in front of them. This obviously wasn’t in place when Kerr was running…when he was doing his thing. So, who knows? I don’t know. We can only go forward from today.”

See our stories from the House Committee’s hearings on Mamtek on November 29 and November 30.