After two days of testimony, lawmakers on the House Committee on Government Accountability still have many questions about Mamtek. The company was to have built a plant at Moberly to turn sugar into sucralose, but that project failed resulting in $39 million dollars in bonds that must be paid off.
City of Moberly officials on Tuesday testified that they looked to the Department of Economic Development to do due diligence into Mamtek’s claims. In testimony on Wednesday, Department representatives countered that.
Director David Kerr says DED’s tax incentive programs are performance based, and therefore protect taxpayers by making sure nothing is done 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.
Also discussed in the two-day hearing were e-mails DED released last week to lawmakers. One in particular is from Edward Li, an employee of a DED Contract Office in Shanghai on April 13, 2010, responded to a request from Economic Development officials seeking information on the China production facility. Li wrote:
“We found their plant in Fujian Province, China, never started to manufacture. In 2007, their investment project was approved by Wuyishan City, Fujian. As the initial agreement, local government build the factory and all facility for Mamtek, while Mamtek rent the facility in the beginning and will finally purchase the facility. The planned investment capital is 20 million USD, which will be invested by three phases. In 2008, although most of the facility was built, Mamtek still didn’t start manufacturing. One of the reasons is the protest from local conservation department, who insisted that the project is a kind of fine chemical industry, which should not be set in this zone. In 2009, Mamtek made the deal with local government and agreed to move out (they never started) and so far there is no other news about the new location in China.”
Kerr was asked by lawmakers why that letter was not made available to Moberly Area Economic Development Corporation President Corey Mehaffy. Kerr told the Committee his staff shared its concern with Mehaffey, but did not include the details of the e-mail.
He also told lawmakers an e-mail a week earlier from DED Project Manager Lynne Shae to Mehaffy, and officials in the other communities in consideration for the Mamtek plant, did advise them that more information was needed. That included data on any locations in China.
DED General Counsel Chris Pieper told the Committee that Mehaffy was also getting information from other sources that supported Mamtek’s claim of a China facility. That included a telephone conversation with Michael Wise, a patent attorney with the law firm Perkins Coie, working for Mamtek. Wise alleged to have visited the Fujian facility on more than one occasion and even to have product made there in his possession. Pieper says Mehaffy acted on that information. Kerr says DED at the time also considered Wise’s information more definitive, since Li’s report was based on preliminary and limited research via the internet.
Kerr also told the Committee that had the issue not already been the subject of more than one investigation, DED would have referred it to the Attorney General’s Office. Pieper later added, based on information that has come to light, “…there is at least the potential that there was misrepresentation made in the applications, perhaps, and the materials submitted with the applications for state incentives.”
Chairman Jay Barnes (R-Jefferson City) did tell the DED representatives they should make getting a company into the partially-built plant at Moberly a top priority, as he had told the City’s officials on Tuesday he would. The representative suggested the Department call the 20 largest sucralose manufacturers in the world, followed by other chemical companies, and keep making calls until an entity is in that plant.
Kerr told the Committee the Department can do that. He expressed a willingness to help Moberly, having told lawmakers in the first few minutes of his opening statement, “We in DED are extremely disappointed and upset that this development did not bring the jobs and opportunities we thought it was going to.”
Representative Barnes said he would formally seek an extension of the Committee from the Speaker of the House, and he plans to have it meet again in January. He wants it to next look into other deals that have sought performance-based incentives from DED to see how many make it to the point of receiving those incentives.
He also plans to continue trying to get Mamtek executives before the Committee, as well as Michael Wise.
AUDIO: Listen to the opening statement of Department of Economic Development Director David Kerr before the House Committee on Government Accountability – 41:52
See our story on the first of two straight days of hearings on Mamtek here.