INDIANAPOLIS (AP) - The U.S. Department of Treasury plans to recoup nearly
$500,000 from Indiana after a federal watchdog agency found the “intentional
misuse” of economic development money by the state.
The Indianapolis Star reports an federal audit found a contractor the
Indiana development agency had hired to invest taxpayer money in promising
startup companies should not have awarded $499,986 in federal cash to a
business managed by the contractor’s chairman.
The federal Office of the Inspector General, which conducted the audit,
noted that Indiana and federal officials disagreed about whether the funding
was intentionally misused.
A review by the auditing firm KPMG ordered by Gov. Mike Pence last year
found that Elevate Ventures, hired by the Indiana Economic Development
Corp., directed the money to a pair of companies connected to Elevate
Chairman Howard Bates and his son.
That review found Elevate was “substantially compliant” with its own
policies, but it also found two noncompliance issues and made 25
recommendations to strengthen the private nonprofit investment manager’s
policies. Among the recommendations was that IEDC be given final say over
the contractor’s investment decisions and that the centralized powers of
Bates, a well-connected businessman and Republican campaign donor, should be
more broadly distributed among an executive board.
The federal audit said Elevate Ventures should not have awarded the federal
money to Smarter Remarketer, managed by Bates.
The federal audit also found that $300,000 Elevate Ventures invested in a
company called MaxTradeIn in which Bates is an investor, did not violate
federal rules, though it “created the appearance of potential nepotism.”
Bates’ son, Justin, was the company’s CEO.
The inspector general also recommended the U.S. Treasury’s State Small
Business Credit Initiative determine whether Indiana’s funding should be
reduced, suspended or terminated and that the Indiana Economic Development
Corp. review every investment decision by Elevate Ventures going forward.
Elevate Ventures board member Mike Davidson issued a statement Thursday
saying he believes the Inspector General’s characterization of the
investment was inaccurate. He also said the investment has been fully
recovered by the state with a 15 percent return on investment.