Committee votes to halt tax credit scam, but Republicans stand with Cate Street

Committee votes to halt tax credit scam, but Republicans stand with Cate Street

After a heated discussion in the Maine legislature’s Labor, Commerce, Research and Economic Development committee on Thursday, a majority voted in favor of an amended bill that would allow the state to recoup taxpayer dollars distributed through the New Market tax credits program if investments are deemed to be “sham transactions.”

The bill is a reaction to the recent revelations that out-of-state investors have been bilking the state for millions of dollars in tax credits through single-day loans and other shady practices.

One particularly egregious case involves a scheme orchestrated by Cate Street Capital, a New Hampshire private equity firm that claimed it would bring $40 million in investments to the Great Northern paper mill it owned in East Millinocket.

As Whit Richardson at the Press Herald reports:

“But of the $40 million, $32 million was in the form of one-day loans, $7 million was used to pay down high-interest debt and the rest went to brokers’ fees. None of the money was used to modernize the mill as described in the initial application to the program, yet taxpayers will pay $16 million to the investors. The mill closed and filed for bankruptcy last year.”

Richardson’s reporting has revealed that $91 million, nearly half of the money meant to be invested in low-income communities through the tax credit program, “never made its way to the designated companies for new upgrades or expansions.”

Despite the overwhelming evidence of misuse of the program, and the enormous amounts of money that have apparently been lost to bad actors, every Republican on the committee voted against the bill to revoke the tax credits for sham transactions.

Democratic legislators on the committee expressed concerns that failing to recoup the funds and reform the tax credit program would not only continue to reward Wall Street con artists, but would lead to decreased state funding available to invest in local communities and would disadvantage local small businesses that play by the rules.

Representative James Campbell, an independent from Newfield, was particularly incensed by the excesses of the program and made his anger clear during the committee’s work session.

“When we can’t afford to take care of our children and our elderly and our poor, but we can give sixteen and a half million dollars to a couple of shysters and I read in the Portland Press Herald what a bunch of idiots we are up here, how the hell do you go home and, excuse me, how do you go home and tell…” said Campbell, before being gaveled down by Committee Chair Amy Volk (R-Scarborough).

The full House and Senate will now consider the measure and decide whether the state can attempt to recoup funds from sham transactions under the program.

You can make a difference on this issue. Sign the MPA petition in support of the bill right here.

Photo credit: Flickr/frankieleon

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