How government grant and loan “contests” can actually be rigged kick-back schemes: LESSON 1
3 years ago NEWS CONTRIBUTORS 0
You should consider any City, State, Federal or Foundation grant, “incentive business loan” or special industry tax credit to be rigged (ie: Crooked) unless the organization requires that each application be posted online, the second the applicant applies, with a column next to the applicants name showing the total amount of campaign contributions the applicant, or any party associated with the applicant, has ever paid out. After 30 years of investigations, it turns out that 90% of all City, State, Federal or Foundation grant, “incentive business loan” or special industry tax credits are given, as kick-backs, to campaign donors, while superior applications are usually rejected if they did not pay a bribe or campaign donation (same thing.)
You can draw a chart of past winners and line them up with the amounts of their campaign donations and, invariably, the size of the donations and bribes matches the hierarchy of the “winners” on the list. You SHOULD do such a chart if you have any concerns.
Launch a corruption action if you see any sign of this in your region.
Companies run by Andrew Cuomo’s biggest donors have won millions in state grants: records
EXCLUSIVE: At least seven companies that received a total of $15.25 million in grants from state Regional Economic Development Councils are linked to $1.25 million in donations to Cuomo’s campaign treasury since 2010, the records show.
ALBANY — Several companies run by big-time donors to Gov. Cuomo have won millions of dollars in state economic development grants since he took office, state records show.
At least seven companies that received a total of $15.25 million in grants from state Regional Economic Development Councils are linked to $1.25 million in donations to Cuomo’s campaign treasury since 2010, the records show.
One of those companies, Taylor Biomass LLC in Orange County, was awarded $1 million in 2013 to build a waste-to-energy facility.
Its president, James Taylor, gave Cuomo’s campaign more than $100,000 since 2010, including $34,000 this year, campaign finance records show. And the company and its affiliates gave Cuomo another $50,000, including $12,500 this year.
In another case, BFC Partners, of Brooklyn, won $3.5 million in 2013 to construct Empire Outlets, a planned development on Staten Island featuring 100 designer outlets and a posh hotel just steps from the ferry terminal.
BFC donated $25,000 to Cuomo’s campaign in 2014, the year following the grant. And three of the company’s partners, Donald Capoccia, Joseph Ferrara, and Brandon Baron, have ponied up a combined $81,500 since 2010.
Cuomo aides said the grants cited by the Daily News represent a fraction of the more than 2,600 projects awarded $2.2 billion in funding since2011 under the Regional Economic Development Council program.
The aides also said the governor’s office has no formal role in selecting who receives the awards. The projects, they pointed out, are recommended by the 10 regional councils, under a system Cuomo established in 2011 to create competition for the hundreds of millions of dollars in state funding distributed each year.
The Cuomo-controlled Empire State Development Corp. scores the recommendations and picks the winners, which Cuomo typically announces in a public ceremony.
Cuomo aides said the process is far better than the old “member item” system in which state legislators picked projects in their districts to fund, without much vetting. The aides also argued that some donors to the governor applied for project funding but did not receive grant money.
“To suggest any conflict or connection here is absurd as the recommendations for all of these projects are made by local community representatives,” said Cuomo aide Melissa DeRosa.
Cuomo aides said several of the companies cited by The News, including Taylor Biomass, received state and federal funding for other projects in the past. Some of the grants, they said, funded projects that already were under way before Cuomo even became governor.
In one case cited by The News, a $2 million grant for the Dover Knolls Development, a plan to renovate an abandoned psychiatric hospital in Dutchess County, was withdrawn when the developer sold the project.
The company, its parent, Benjamin Millennium Group, and assorted affiliates contributed a combined $271,700 to Cuomo, and the company’s president at the time, Alvin Benjamin, gave $25,000 in 2011.
Bill Mahoney, of the New York Public Interest Research Group, said the awarding of grants tied to donors raises questions. “Businesses rarely contribute to candidates for purely altruistic reasons – in most cases, they’re hoping to help their bottom lines,” Mahoney said.
“If Gov. Cuomo had fulfilled his promises to overhaul the campaign finance system, perhaps there wouldn’t be concerns over decisions like these.”
ALL OF THE “WINNERS” OF THE DEPARTMENT OF ENERGY FUNDING UNDER OBAMA’S STEVEN CHU WERE THE BIGGEST OBAMA CAMPAIGN DONORS AND FRIENDS OF CHU. ALL OF THEIR BUSINESS COMPETITORS WERE KICKED OUT OF THE PROGRAM.
The system is rigged against the little guy. A true technical innovation company, who has not signed onto the bribe programs, will never have a chance.
That is why you always see the “same old crap” from the same old-boys clubs getting the grants, and “never any new technology that would actually make a difference”, Said Arnold Wester of The Inventors Alliance
The FIX IS EASY! WRITE YOUR ELECTED OFFICIALS, HERE (AT THIS LINK) and DEMAND a law in EVERY STATE that makes it illegal for any group who has a connection to campaign funding to receive a state or federal grant! Easy!, DONE!
Recognizing the problem
The problem is easy to recognize.
Step one: Does your City, State or Federal group offer a grant program, application-based funding program or other program which gives tax dollars to outside entities?
Step two: Have you had this, or a similar program, in operation for more than a year?
Step three: When you line up a list (LIST A) of the past “winners” alongside a list (LIST B) of their campaign contributions, lobbying expenditures, gifts and incentives; are the curves of each of those lists “strangely” the same?
If the answer is Yes: THEN YOU HAVE THE PROBLEM!
The General Process Issues
Over 30 “green”, “cleantech” companies were put out of business by the DOE ATVM/LGP program.
Many more companies, in each state, were terminated by the “efforts” of the officials of those states. Some were intentional terminations because they competed with contributor’s business interests and some were terminations caused by mismanagement of the grant process.
Most grant programs ostensibly seek innovation and better solutions.
BUT: Most “winning applicants” end up being big old companies who supply the same old thing who generally usually “win” the “contests”.
True innovators are scientists, chemists, physicists and engineers. They do not know about, have the skills for or have the aptitude for generating political documents.
BUT: Big old campaign contributor companies have rooms full of grant writers and spin doctors who can conveyor-belt out, political grant document-after-grant document, with all of the checklist items in carefully mnemonically metricized catch-phrases, but they offer no innovation.
Big campaign contributor “winners” have big teams of people that go around and “work the system” (promise or imply incentives). These teams are smiley, golden-ratio faced, out-going personality-type PR people.
BUT: True innovator scientists, chemists, physicists and engineers are, more often than not, socially awkward and uncomfortable with that sort of PR pretension and they avoid working the system.
If one wants to pay off campaign contributors then these “contests”/”grant programs” they actually are a great way to provide “kickbacks in plain sight”.
BUT: In the age of the Everybody-Can-See-Everything internet, the public is now pretty much aware that this is what is going on, ie:
If a City, State, Federal or NGO group wants true innovation solutions to public problems and issues, then they need to recognize that their grant programs, award programs and public funding programs are, in most cases, set-up to accomplish exactly the opposite!
One Perspective- From Tesla’s Former Marketing Head
By Edward Niedermeyer in “THE TRUTH ABOUT CARS”
Former Tesla PR honcho Daryl Siry lays into the Department of Energy’s Advanced Technology Vehicle Manufacturing Loan program (ATVML) at Wired’s Autopia blog, taking the $25b program to task for “stifling innovation.” At its core, his argument is a simple one:
Startup companies that enjoy DOE support, most notably Tesla Motors and Fisker Automotive, have an extraordinary advantage over potential competitors since they have secured access to capital on very cheap terms. The magnitude of this advantage puts the DOE in the role of kingmaker with the power to vault a small startup with no product on the market -– as is the case with Fisker — into a potential global player on the back of government financial support.
As a result, the vibrant and competitive market for ideas chasing venture capital that has been the engine of innovation for decades in the United States is being subordinated to the judgments and political inclinations of a government bureaucracy that has never before wielded such market power.
All of which sounds very TTAC… in fact, our lengthy Bailout Watch series began with a similar analysis of the ATVML program (albeit with a Detroit-focused twist). Unfortunately, Siry’s intentions in this case are questionable… as are his conclusions.
At the very bottom of his editorial, Siry reveals himself to be a “special advisor to Coda Automotive,” the EV startup born from the ashes of Miles Electric Vehicles. That Coda has not sought an ATVML handout (because all its manufacturing is done in China) is presumed to give Siry a free pass on conflict-of-interest questions, but Siry’s critique relates directly to the private capital market as well. Siry writes:
The proposition is so irresistible that any reasonable person would prefer to back a company that has received a DOE loan or grant than a company that has not. It is this distortion of the market for private capital that will have a stifling effect on innovation, as private capital chases fewer deals and companies that do not have government backing have a harder time attracting private capital. This doesn’t mean deals won’t get done outside of the energy department’s umbrella, but it means fewer deals will be done and at worse terms.
Translation: Coda can’t raise funds without DOE backing, a reality the company petulantly hinted at in the most recent post on its corporate blog. There, the company lashed out at analyst suggestions that DOE loans would be best spent on established automakers, and now Siry is bashing the DOE’s “kingmaking” of “small startups with no product on the market.” So which is it? The answer can be found in Siry’s conclusion:
A potential solution to this problem may seem counter-intuitive. The best way to avoid market distortion would be for the DOE to cast the net more broadly and provide loans and grants to a larger number of companies — which ironically means being less selective. Subject to the existing equity matching requirement, this would allow the private markets to function more effectively in funding a broader range of companies and driving more innovation. Several innovative companies with great potential have been in the DOE pipeline for many months. Perhaps it is time for the DOE to stop playing favorites and start spreading the love.
Give out money to more firms, less selectively. What a plan. But if Siry is suggesting that Coda Automotive represents the kind of “innovation” being “stifled” by the ATVML program, he’s able to see far more innovation in selling an electrified Chinese Hafei sedan with 100 miles of range for $45k than we do (he doesn’t explicitly, preferring Aptera as a poster child for stifled innovation). The reality is that the EV sector is crammed with as many hucksters and wannabes as legitimate innovators, and “spreading the love” is more likely to result in wasted investments. In theory we agree that DOE “kingmaking” distorts the market, and elevated some questionable firms to near-player status… but interpreting those results as a reason for the DOE to be “less selective” with its lending makes even less sense. Unless, of course, you work for a firm that might benefit from lowered loan standards.
As a lesson in the ATVML’s unintended consequences, Siry’s editorial is dead-on. As a roadmap for future DOE policy, however, it comes up way short.
The Solutions- Part 1
- Go to greater lengths to find the small innovators and let them know about the program. Sending a general email out to “the usual suspects” doesn’t cut it.
- Provide a dedicated small innovator advocate, in each funding program who is missioned to assist the small innovator companies. Make them call, and email, each one personally.
- Fire that advocate if more than 3 small business groups prove that they are compromised.
- For any applicant with less than 10 staff, YOU, verbally interview them and fill out the forms for them. They do not have the staff to do it. You place them in a “no win” situation by even offering these grant opportunities, they all know it by now and so almost none of them apply any more unless they just formed their company. After the first burn, when they realize the cards are stacked against them, they won’t waste their time again.
- Make the application as simple as possible. One of the richest people in the world: Bill Gates, and his wife Melinda, decided to give away quite a lot of money in grants. They had the resources to test, validate and prove what the best kind of grant application is. What did they figure out for the Grand Challenge: That they just needed a TWO PAGE APPLICATION. They have used this for years, it works great and has funded some of the greatest innovations in the world.
- Announce who your reviewers are, by name and affiliation. Just like the law now requires for financial writers. State ANY positions your reviewers have in any companies related to the industry involved in the grant.
- Post the reviewer results online. Allow the transparency to have their assumptions, or comments challenged to prove the game isn’t rigged.
- Does the world seem to be in disarray? Does every news cycle seem like there are more and more problems and more and more people complaining? IT ISN’T TRUE! The same amount of disarray and problems exist today as have existed over the last few centuries. BUT NOW EVERY VOTER CAN SEE EVERYTHING. While the internet has brought us awful things like cyber-bullying child suicides and the hacking of everything, it has created a transparency that will never go away. The toothpaste is out of the tube. Organizations need to accept the fact that corruption only works in darkness and the internet has lit up everything. If old systems of reward exist to pay back donors, it can now be found out by a bored soccer mom or an out of work construction worker with a notebook computer, and there are millions of them. Change up any systems that could be rigged because we live in an age where those sorts of things can come back and bite you during your current career cycle. The FBI is much tougher on these sorts of things these days.
- News Media now have databases equal to those of the NSA. New online media outlets have been starting up in great quantities, lately, using “big data” story research engines. They can track every connection of every applicant, executive and associate and other party in a very short period of time. Just read the detail they have gone into about CGI Federal, the company that screwed up Obamacare, and their staff, ownerships, personal relations, etc. Plan on transparency in the new world. It has arrived.
- To repeat, however efficiently you think your application is written: YOUR APPLICATION PAPERWORK IS TOO LONG. The DOE spent more money and resources on due diligence and had more application paperwork for their ATVM/LG and other loan programs THAN ANY COUNTRY HAD DEVOTED IN HUMAN HISTORY! Yet we had the stunning failures of Abound, A123, Fisker, Solyndra, etc.. etc…
- Hold three online web conference for 1.) Under 10 person companies 2.) Under 20 person companies 3.) The big guys. Give each segment a chance to comment, ask questions and get informed within their peer group.
- Publicly identify revolving door staff.
- Allow for a challenge process for any member of the media or applicant groups to challenge a decision and correct, or comment on, erroneous data.
- Don’t rig the stock market or investor market by setting up financing that makes your organization cause outside investors to wait until they see your term sheet like DOE did.
- Provide a CrowdFunding support resource in all new funding from now, forward. The SEC has made CrowdFunding fully legal now. Allow Crowdfunded offsets and co-promote them using your agency PR resources.
- Don’t use the “delayed review” tactic to try to put contributors competitors out of business by stringing them along until they run out of cash. The media has covered this tactic in great detail and new laws allow those who got strung out to sue you and win if they catch you.. and it is easier to catch people these days.
- More Solutions coming…