Wednesday, September 11, 2013

Auditing Governor Perry's Texas Enterprise Fund

Governor Rick Perry's Texas Enterprise Fund report to the Legislature is full of the same lies and misrepresentations regarding a $35 million TEF award to Vought Aircraft Aviation in 2004, then owned by The Carlyle Group.

How would you like to have $35 million in Texas taxpayer money for over six years and not have to provide a single new job, much less the 3,000 promised?  That's what Vought did under Carlyle Group ownership years.  In 2010 Carlyle monetized Vought via a sale to Triumph, just as their first TEF report to the state came due.

I wrote Representative Drew Darby with my concerns in 2009, believing he had influence via his legislative subcommittee assignments.  After Darby wrote me back about oversight provisions (or lack thereof), Governor Perry renegotiated the deal in secrecy as Carlyle worked behind the scenes to sell Vought.

Vought, Carlyle Group, the City of Dallas weren't the only ones over-promising and under-delivering.  The Standard Times reported on local TEF recipient Hirschfeld Steel

Hirschfeld Industries received $500,000 from the Texas Enterprise Fund in 2008. The San Angelo-based company was set to produce 225 full-time jobs by 2013 with an annual payroll of $8 million and to invest $40 million in a new plant and expansion.

That was when Hirschfeld Industries had partnered with Martifer to make wind towers, but since then Martifer, a Portuguese company, left Hirschfeld and its plant in West Texas.

According to the latest compliance report Hirschfeld submitted at the beginning of the year, the company had produced 37 of the 225 jobs promised, with an average salary of $35,000 to $39,000.

The latest version of the contract states that Hirschfeld must pay back $861 in damages per job that it is short. It can also roll over credits from years when the company creates more jobs than the contract specifies.

Hirschfeld Industries has paid $264,000 in damages, according to a governor’s office report.

When asked about working with the state, Hirschfeld deferred comment to the state.
Latest version of the contract?  Does that mean Rick Perry renegotiated this deal as well in 2010?

In 2008 Hirschfeld's private equity investors and owners pulled $28.2 million from the firm in partner distributions.  Since money is fungible, did TEF's $500,000 go straight out as partner distributions?

Both Vought and Hirschfeld have deep pocket private equity owners.  Both sought public subsidy for their operations.  Neither wants to speak to their failures to provide the promised jobs or how they profited from TEF grants.

The Texas Legislature repeatedly allowed the Governor's office to persist in its lies and misrepresentations.  A hapless media couldn't find Perry's bald faced untruths during his Presidential run.  Let's hope an auditor offers more in accountability than the Legislature or the media.  Both have been sorely lacking.