A politically connected law firm whose chief executive is Philip Norcross, brother of South Jersey powerbroker and insurance executive George Norcross, had far-reaching control over how lawmakers and former-Gov. Chris Christie crafted the multi-billion dollar, lucrative Grow New Jersey tax break program, according to various witnesses who testified at a task force Gov. Phil Murphy convened to scrutinize the incentive program on Thursday.
During the nearly eight hours of testimony Thursday in Newark, current and former EDA officials testified how real estate lawyer Kevin Sheehan, a partner at Philip Norcross’ law firm Parker McCay, took part in what amounted to “unregistered lobbying” by crafting parts of the Grow NJ tax break to benefit Parker McCay’s clients.
Many of those clients moved their United States headquarters to Camden and received the largest Grow NJ tax breaks following the New Jersey Economic Opportunity Act of 2013, which created the tax credit program in its current form.
In other cases, testimony from EDA officials highlighted how Sheehan, in his capacity as a partner at Parker McCay, represented and provided consult to businesses that provided questionable data about where they would move out of state if they did not receive the tax breaks.
Two of those businesses were controlled in part by George Norcross – the Cooper Health System where Norcross sits on the board and insurance company Conner, Strong & Buckelew, where he is the executive chairman.
Much of the so-called “unregistered lobbying” was reported first by the New York Times on Wednesday. A report that same day by WNYC revealed how $1.1 billion of the $1.6 billion of tax breaks awarded to companies to do business in Camden went to businesses in which George Norcross or his friends, families, allies or business partners had a financial interest.
Earlier in April, the task force revealed that it made a criminal referral for “unregistered lobbying on behalf of special interests, which materially affected the legislation and regulations governing New Jersey’s tax incentives granted to businesses,” but did not identify the defendant.
A spokesperson for Parker McCay denied that any such activities took place and at most, the law firm’s expertise was sought by lawmakers to provide insight on how Grow NJ could benefit the Camden and South Jersey economy.
“No one at our law firm was engaged to lobby or paid by any party with respect to those activities,” reads the Wednesday statement to NJBIZ. “Parker McCay has always complied with the laws governing the practice of law and lobbying and this instance is no exception.”
Murphy unveiled the task force days after the comptroller’s audit, which found that the EDA lacked oversight of whether companies should have gotten $11 billion of tax breaks between 2005 and 2017, as well as the means to monitor compliance with the program.
The governor said in a Wednesday statement that he was “deeply troubled” by both reports.
In a back and forth series between EDA underwriter David Lawyer and Task Force Special Counsel Jim Walden, Walden Macht & Haran LLP, the task force learned of at least four companies, including the Cooper Health System and Conner Strong & Buckelew, that provided questionable information in their tax break applications about where in Philadelphia they would move without the incentives.
In 2014, Connor, Strong & Buckelew and Cooper Health were awarded tax breaks of $86 million and $39 million respectively to move into Camden. The other two companies were NFI, which was awarded $79.4 million in 2014 and The Michaels Organization, which the EDA awarded $79.4 million in 2017, and Sheehan prepared the applications for all four companies.
Walden presented documents to Lawyer showing that Conner Strong, NFI and The Michaels Organization obtain quotas for rental office space in Philadelphia, but the offers expired.
The three companies had to submit new documents, which showed dramatically different lowered square-footage. Conner Strong, for example, went from 153,335 square feet to 110,000 square feet.
Conner Strong and The Michaels Organization also indicated that they would be renting out of non-consecutive floors at the Philadelphia site. John Boyd, principal at site selection firm the Boyd Company, told the panel that such a change in square footage and the lack of consecutive floors would both raise an eyebrow.
Lawyer said that kind of dramatic change in numbers would trigger additional scrutiny into the applications, but this was not done in the case of these three applications.
Walden also showed documents detailing Cooper Health System’s plans to move its Mount Laurel and Cherry Hill offices to one of three potential sites in Camden in the spring of 2014, months before it submitted its tax break applications.
An email from Cooper Chief Financial Officer Doug Shirley to then-Chief Executive Officer John Sheridan detailed how the L-3 site was the best option of the three.
“I have the proposal … and it is very rich! From a cash flow and balance sheet the L-3 [building] is the best deal by a long shot,” the email reads. “No other option can touch it, so you need to be okay with this option before we go out with it.”
Cooper Health System applied for the tax breaks months later, initially saying there were no jobs at risk of leaving the state. When asked what states New Jersey was in competition with, Cooper wrote “[to be determined].”
Cooper indicated it was touring a Philadelphia office only after it submitted the tax break applications, Walden said, and was approved for the tax breaks four days after getting a quote on the lease from Philadelphia.
Lawyer said such a timeline would trigger additional scrutiny by an underwriter, but this was not done with Cooper.
Cooper spokesperson Thomas Rubino said that it “did not state that any of its jobs were going to move out of [New Jersey].”
But the EDA certified in the application and public documents that 353 jobs were at risk of leaving the state.
“To date, Cooper has invested $15 million into this project and the number of jobs at this facility has grown to nearly 500 employees,” the statement adds.
Walden, in a back and forth with former EDA President and Chief Operating Officer Tim Lizura, reviewed a laundry list of changes that Sheehan made, which were added directly into the 2013 legislation. Walden suggested that many of the changes put into the legislation by Sheehan were oddly specific.
With one change, Sheehan specified that grocery stores in Camden and Atlantic City would only be eligible for tax breaks if they were at least 75,000 square feet in size and in a retail complex of at least 150,000 square feet – a move which scuttled the tax break aspirations of a supermarket competing against developer The Goldenberg Group, a client of Philip Norcross’ lobbying firm Optimus Partner.
The Goldenberg Group’s supermarket met those specific conditions, but ultimately never came to fruition.
Philip Nocross’ name came up in an email read by Walden on changes the Grow NJ net benefits test so that companies can insert so-called “phantom taxes” into the calculation.
“Phantom taxes” allow the company to calculate the amount of taxes from which it is already exempt into the net benefits test, which according to Walden would “artificially inflate the benefit to the state,” thereby qualifying the business for even more tax credits.
Lizura said it was likely that in addition to The Michaels Corporation, Conner Strong and NFI, other companies that benefited from these phantom taxes included Subaru, American Water and the Philadelphia 76ers basketball team.
Walden asked: “Do you know if Parker McCay represented all those companies?”
“I know they had some role in most of those,” Lizura responded.
In another instance, Sheehan wrote a provision in the bill for tax breaks, which was tailored specifically to Subaru of America so that it would move its headquarters to Camden, Walden said – the company was awarded a $118 million tax break.
Christie later in the day took a shot at Murphy, saying in a statement that the tax breaks were responsible for an economic boom in Camden.
“While Governor Murphy was collecting his pay-to-play gift from President Obama entertaining the wealthy of Germany at embassy parties, we were back here doing the hard work to rebuild Camden from the most dangerous city in America to the most hopeful city in America,” Christie added.
Hours earlier, a handful of officials representing Camden said they were “deeply appalled” by Murphy’s blatantly political leaning task force established by him,” and that Murphy harbored a vendetta against Camden for not scrutinizing tax breaks for businesses that set up shop in North Jersey.
“We find it surprising and hypocritical that Governor Murphy happily accepted $165 million in tax credits when he was on the management committee at the huge and lucrative firm, Goldman Sachs, and was fully prepared to give away $5 billion to the planet’s richest company, Amazon, but has feverishly insinuated without proof that irregularities exist for tax programs that would help Camden,” reads the joint statement which was signed by Camden Mayor Frank Moran, the freeholder director, city council president and Sen. Nilsa Cruz-Perez, D-5th District.