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04 October 2011

Davis: Beware of “Scallywags”

Op. note: Rep. Mike Kelley sent a similar missive on 6 Oct 2011, 9:04a.

At left: Proud to have been able to sew the Joplin tornado US flag into the National 9/11 flag during the 9/11 ceremony.

"We are all a little weird and life's a little weird, and when we find someone whose weirdness is compatible with ours, we join up with them and fall in mutual weirdness and call it love." –Dr. Seuss

Here is why I do not like government getting involved in private industry. Most of the people I talk to on a daily basis feel like if it is a good deal and profitable venture, private business and industry will do it on their own, without government help or intervention.

In July of 2010, an announcement was made in Moberly that Hong Kong based Mamtek International would bring over 600 manufacturing jobs to that community. That company promised that it would produce the “SweetO” brand of sucralose, an artificial sweetener. The City of Moberly issued $39 million in industrial development bonds. The State offered nearly $18 million in incentives. When the ground was broken for the plant, Governor Nixon and former Governor Bob Holden were on hand. “SweetO” is just about to make Missouri’s economy a little sweeter”, Nixon reportedly said that day.

This sounded like great news for Randolph County where unemployment exceeded 10%. The promise was that 120 good paying jobs - $17 per hour - would be created by Christmas and up to 600 more jobs as assembly lines were added over the next few years. Officials bragged that the whole package was put together in the amazing time of 73 days and was supposed to include $8 million in private investment.

Several delays have occurred over the last several months but everything appeared to move forward this summer. Now this sweet deal has turned sour. Plant construction has halted. Mamtek has layed-off all of its employees. The company missed its first $2.2 million bond payment on August 1st. The public became aware of these problems when the bank who was the agent for these bonds released a statement on September 1st. Unless the City of Moberly can find someone else to take over the project, the City appears liable for $39 million. In this situation there were obvious clues that this proposal was too good to be true. I believe that the problems that eventually resulted in the default of this project would have been discovered if the State of Missouri and local developers had practiced “due diligence”. “Due diligence” is the standard of care that we should exercise when we are dealing with someone else’s money.

When questioned at a recent news conference about the States involvement, Governor Nixon said “I don’t run the Department of Economic Development”, he said, “and I don’t work details at the ground level.” The Missouri Department of Economic Development has now made assurances that no State money has been paid to this ill-fated project because the laws authorizing these incentives require that actual jobs be created before payment is made. Despite the Governor’s denials, it is clear that local economic development officials first learned of Mamtek International through the Missouri Department of Economic Development.

Despite his attempt to avoid responsibility, the Governor, who appointed the Director of the Missouri Department of Economic Development and his appointees, bear much of the responsibility for the mistakes made. It is apparent that the Governor, through his appointees, did not exercise “due diligence”. Any investigation into Mamtek International would have raised red flags. Even a Google search of this company might have put these folks on notice. Just before the deal was struck with Moberly, this company was in negotiations with Bismarck, North Dakota. In an article in the Bismarck Tribune posted on the internet on May 7, 2010, Russ Staiger, President and CEO of the Bismarck-Mandan Development Association indicated that their city had declined a similar offer from Mamtek without further research into the project, which he called “a bit sketchy”. In a recent interview, that same individual described the company as having a “pushy” demeanor that made him uneasy. Staiger recently told the Columbian Tribune that “The business of economic development is full of carpet baggers and scallywags. You just have to be cautious.”

While the company said it had a plant in Fujian Province, China, Janet Morales, editor and publisher of a weekly newspaper called The Moberly Mirror could find no evidence of one. She contacted trade publications and competitors, and found no one who knew of Mamtek. Due diligence, including contact with Staiger and Morales, might have avoided the bad decision to proceed with this project.

There have been several news reports recently that Mamtek was raising private capital by finding Chinese citizens so eager to become U.S. Citizens that they would invest $500,000 in the project to make them eligible to obtain a United States Visa. There is no indication that Missouri officials knew of this offensive practice. This practice does cause one to reflect on the integrity of the developers that Missouri was doing business with. I believe that the State had a responsibility to carefully and cautiously look into this matter instead of expediting the approval to 73 days from the more normal approval period of 6 months. There are some indications that at least one other Missouri community, Marshall, passed on this proposal.

Currently, investigations have begun by the Security and Exchange Commission, the Missouri Attorney General, the Randolph County Prosecuting Attorney and a Missouri Senate Committee. Hopefully, this experience will cause the Governor and his staff to be more cautious of the possibility that they are dealing with carpet baggers and scallywags.

I encourage you to contact me with any suggestions that you may have for Missouri legislation. Also, if you should experience problems in contacting or resolving an issue with a Missouri state agency, please feel free to call my Capitol office at (573) 751-7082 or email at charlie{dot}davis{at}house{dot}mo{dot}gov. Thank you for the honor to serve as your Representative in the Missouri House of Representatives.

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