A task force convened by Gov. Phil Murphy to scrutinize the recipients of billions of dollars in tax breaks has begun grilling those individual companies for any holes in their applications and whether they gamed or cheated the system.
Murphy unveiled the task force, armed with subpoena power, in January to scrutinize the companies which already received Grow NJ tax break money.
Rutgers Law School Dean Ronald Chen, who heads the task force, said in an opening statement that 100 companies – all recipients of some amount of tax breaks, were warned not to destroy any relevant documents pertaining to their tax breaks.
The task force sent similar letters to 20 companies that consulted recipients on their tax break applications, Chen said.
“Most companies readily agreed to cooperate with our investigation. Indeed, one company went so far as to disclose to us on our very first call to them that they were not in compliance with program requirements,” Chen said, adding that the EDA was in the process of recouping the $1.5 million of tax breaks the company received.
Jim Walden, an attorney at Walden Macht & Haran LLP and the task force’s legal counsel, said that none of the names of the companies could be disclosed at that meeting, citing “due process.”
But many of the relevant documents were easily ascertainable via a Google search or glance at the EDA’s meeting minutes over the past several years.
One alleged company highlighted at Thursday’s task force hearing was financial services firm Jackson-Hewitt, which the Economic Development Authority awarded $2.7 million Grow New Jersey tax breaks at their May 2015 board meeting, following bogus claims that it would have to leave the state without those incentives.
The then Parsippany-based company was eyeing locations in New York, Florida and Jersey City.
“The CEO certification was false, and known by the CEO to be false, the decision to relocate to Jersey City was already a done deal,” testified Gulsen Kama, who was vice president of financial planning and analysis at Jackson-Hewitt between 2015 and 2016, according to her LinkedIn profile.
Jackson-Hewitt was required to keep at least 69 jobs in New Jersey to comply with the program but did not do so, Kama said at her Thursday testimony.
Kama alleges that a consulting firm told the company to falsify the records and generate bogus claims about moving to phantom locations out of state.
That firm is allegedly Biggin, Lacy, Shaprio & Co. LLC, headed by John Biggins, who donated $3,000 to former-Gov. Chris Christie’s 2013 reelection campaign.
The company instead moved many of those jobs to Florida and New York, which would have made them ineligible, Kama said. But even still, the company knowingly gave false claims about the number of jobs it kept in New Jersey, Kama said.
Kama said she brought her concerns about the numbers to her higher-ups in December 2015 and was subsequently let go in February 2016. In her whistleblower suit, Kama alleges she was dismissed because of her complaints about the company’s alleged actions.
Jackson-Hewitt was also not compliant with a $2.7 million grant it was awarded in 2001 under the now-closed Business Employment Incentive Program and after the EDA found out, agreed to a settlement to pay back roughly $260,000 of tax breaks it received, Kama said.
In October, the EDA board granted Jackson-Hewitt a second six-month extension to verify that it was fulfilling the eligibility requirements to receive the tax breaks.
The media relations office for Jackson-Hewitt could not be reached for comment.
The EDA is tasked with overseeing the state’s tax breaks and economic incentive programs, and a January audit from the state comptroller found that the EDA has serious deficiencies in its oversight and administration of $11 billion of tax breaks.
But much of that money had not yet been given to companies, according to a response letter from EDA CEO Tim Sullivan – only $696 million of tax breaks were already given out and the rest would be given out over a 10 to 20 year period. Critics argued that Murphy’s depiction was misleading that the $11 billion was already lost.
State Comptroller Patrick Degnan, who oversaw the audit’s preparation, said Thursday that no law exists in New Jersey requiring the EDA to exert a certain amount of oversight. Rather, the agency bases its compliance on good governance practices.
Proponents of Grow NJ, such as business advocates and lawmakers, argue that the deficiencies lie with the EDA and its lack of oversight.
Meanwhile, Murphy argues that the agency itself and the incentive programs its tasked with overseeing are in need of significant reform.
“Gov. Murphy has said from the start that while tax incentives are an important part of any economic development package, they have to be targeted and transparent and taxpayer money must be fully accounted for,” Darryl Isherwood, a spokesman for the governor, told NJBIZ in a statement.
“The comptroller’s report earlier this year detailed a disturbing lack of accountability that was highlighted in news accounts last week and again in today’s testimony before the task force. The governor appointed the task force to ensure that every dollar of taxpayer money that has been awarded by the EDA is accounted for and every promised job created or retained. Based on the findings so far it seems the task force is doing that job admirably,” Isherwood added.
Murphy said he does not want to renew Grow NJ once it expires in July and instead, would replace it with five capped and significantly reined in incentive programs totaling $400 million a year.
In mid-March, radio station WNYC reported that the Christie-era EDA and his administration pressured officials to overlook tax break rules and regulations in an effort to rush out billions of dollars in economic incentives for which the recipients might not have qualified.
The WNYC report highlighted a whistleblower complaint by former staffer John Rosenfield, who alleges he was let go from the agency in 2014 after refusing to comply with the EDA’s requests to pump out tax breaks.
A court ruled against his case after the state successfully argued he was terminated because of his work performance.