The quasi-public Indiana Economic Development Commission, created in 2005 as a replacement to the Department of Commerce, boasts on its website that it operates like a business.
While the business-like flexibility and independence afforded by its unique structure might be an advantage in courting investment, its shield from public scrutiny is a distinct disadvantage in delivering accountability. News that federal investigators are looking into possible conflicts of interest and nepotism involving an IEDC contractor should prompt immediate review of the trade-off between transparency and oversight of public spending.
The Indianapolis Star reported this month that Elevate Ventures, a company hired to manage a research and technology start-up fund formerly handled by IEDC staff, had steered $800,000 to companies owned by the companys chairman and his son. Combined, those companies – MaxTradeIn and Smarter Remarketer – collected more than a third of the federal dollars made available to Indiana under a 2010 jobs program. The U.S. Department of Treasury is investigating.
Elevate Ventures officials insist the grants were above aboard. But an investment managers decision to invest in a company in which he holds a financial interest is clearly a conflict.
Nepotism questions also come into play: Elevate Ventures hired not only two former IEDC staff members, but also the nephew of Elevates CEO. The state has paid the company $4.3 million, but Elevate Ventures wont reveal salaries because it is a private company.
The companys entanglement with state government extends beyond the IEDC. Its founder, Howard Bates, was CEO and president of Haverstick Consulting, a familiar name on campaign contribution filings and contract awards. Bates and his software consulting firm donated more than $80,000 to Republican candidates and committees and won more than $30 million in contracts from state agencies.
Gov. Mike Pence has rightly ordered an independent review of Elevate Ventures investment decisions and business practices. He should go further by demanding an evaluation of the IEDCs structure, particularly the latitude it has in handing out millions of tax dollars.
Economic developers insist their work requires confidentiality. The companies they court must protect trade information from their competitors. The privacy they demand, however, too easily lends itself as cover for misuse of public money. In addition to Elevate Ventures, the IEDC became entangled with a contractor whose negotiations with foreign investors were questioned. The state economic development commission encouraged ventures by companies such as Litebox and Global Energy Solutions, both of which were quickly proved to be unqualified. Its job creation claims have been vastly inflated.
In the eight years since the IEDC was created, in fact, the number of private-sector jobs in Indiana has decreased by 1.3 percent, while the number of private-sector jobs in the U.S. overall has increased. Hoosiers earned 88 cents for every dollar the average American earned before the quasi-public commission was created; today they earn 86 cents on the dollar.
What, exactly, have Hoosiers gained in exchange for the secrecy the IEDC commands? Is it really worth the risk?