Moments after judge rules, a state task force releases stunning report taking aim at political power broker

Posted Jun 17, 2019

In a stunning report issued just minutes after a state Superior Court judge refused to block its release, a special governor’s task force concluded the state’s economic development program was hijacked to favor special interests when giving out billions of dollars in tax incentives.

At the same time, the highly critical report found that the New Jersey Economic Development Authority “did not have adequate procedures in place” to vet applications, including misstatements that would have led to the rejection of some applications or “a significant reduction in the amount of certain awards.”

The task force said it may also refer companies to appropriate law enforcement authorities for further investigation.

Much of the report commissioned by Gov. Phil Murphy focused on a number of business entities tied to South Jersey power broker George Norcross III, a fellow Democrat who fought hard to keep it from being disclosed to the public.

Attorneys for the Camden insurance executive sought a temporary restraining order to block its release. But after a five-hour hearing earlier on Monday, Superior Court Judge Mary C. Jacobson in Mercer County denied the request.

The report included a number of examples and exhibits that showed just how the deck was stacked in the awarding of literally billions of dollars in tax incentives by the EDA.

In one November 2014 email attached as an exhibit, a vice president of real estate for Cooper University Hospital in Camden, where Norcross serves as chairman, sought information about a potential location outside New Jersey to use in an application for a tax incentive.

“I think Center Square may be the right comp,” he said, referring to a location in Philadelphia. “Can you get me a term sheet for 120k sf? Quietly? No probability of us moving to Center Sq, so I don’t want to make too much noise...”

The task force said the obvious reference was that the hospital executive, Andrew Bush, was seeking a “sham” real estate term sheet as evidence of its bona fide intent to relocate outside New Jersey, when in fact Cooper Health had no such intention.

Other companies with Norcross ties also had issues with their applications before the EDA that did not come to light before determinations on their own tax incentive applications.

The report said a simple internet search revealed that one company, Holtec International, had been debarred by the Tennessee Valley Authority, even though Holtec claimed it had never been debarred in its Grow NJ application.

“Although such a debarment would have been grounds for the EDA to deny Holtec’s application for tax incentives, the task force found no evidence that the EDA discovered Holtec’s debarment,” said the report.

Apparently unaware of the debarment, the EDA ultimately approved Holtec for a $260 million tax incentive.

The report said another internet search revealed that three other companies with Norcross connections — Conner Strong & Buckelew, which is owned by Norcross, The Michaels Organization and NFI — committed to move to Camden more than a year before submitting their applications for tax incentives, in which they claimed they were considering relocating to Pennsylvania as a potential alternative. They sought state tax credits to relocate administrative offices to the Camden Tower, a high-rise development, in 2016.

But there was ample evidence demonstrating those companies always intended to keep the jobs in New Jersey, the report said. Two years earlier, Phillip Norcross held a meeting with EDA officials to discuss “a large office building on the Camden Waterfront. Then in 2015, George Norcross confirmed to reporters he had invested $50 million into the project.

In emails sent during the application process in 2016, however, the EDA’s Director of Bonds and Incentives John Rosenfeld noted he had not calculated any income tax credits for the jobs “because he had ‘assumed that this was a situation where the jobs would stay where they are in NJ without the award.“

Then-EDA president and chief operating officer Tim Lizura replied, “The retained jobs are at risk. Can you run them as such?”

The report said had the EDA’s employees investigated, the agency may have found these applications misleading, and denied an award.

“At a minimum, armed with this information, the EDA should have calculated these awards based only on new jobs moving to Camden from outside the state, and the awards to these three entities combined would have been reduced by over $70 million," it said.

According to the report, the task force, third parties and the media have all discovered significant and adverse information about program applicants, which required little effort.

“It seems quite clear that—whatever the EDA’s underwriters are doing in the way of independent research on applicants—the work has been deficient. Moreover, the notion that awarding applicants millions, tens of millions, or even hundreds of millions of dollars in tax incentives without a rigorous background check on the company, its officers and affiliates defies common sense.”

The report’s references to special interests had come to light during public hearings by the task force, in particular the role played by Kevin Sheehan, an attorney at Parker McCay — the law firm run by Norcross’ brother, Philip — in re-writing the draft legislation that would ultimately become New Jersey’s tax incentive law. Those changes benefitted George Norcross and other clients of Parker McCay, said the task force.

“Special interests — in the form of a law and lobbying firm and the clients on whose behalf it apparently operated — appear to have had a significant impact on the design of the Grow NJ statute as amended by the Economic Opportunity Act of 2013,” the report said.

The EDA task force was created by Murphy after the state comptroller in January concluded that the authority may have “improperly awarded, miscalculated, overstated and overpaid” tax credits to a number of companies.

Attorneys for the task force earlier in the day urged the immediate release of the report.

“They don’t want the report to come out. They don’t want the report to be issued,” said Theodore V. Wells Jr., who represented the task force and Gov. Phil Murphy.

But in court filings, Norcross argued that the task force was an illegal exercise of the governor’s power. He has stated publicly that Murphy’s targeting of the EDA was nothing less than a politically inspired attack as part of an escalating feud with the governor.

The judge was unconvinced by the arguments to shut down the task force.

“Frankly the public interest is to allow the task force to report," Jacobson said. “The public has a right to know.”

In a late evening statement, a spokesman for Norcross called the decision disappointing.

“We will continue this litigation in an aggressive manner to protect our rights," said Daniel Fee. “Our litigation has never been about blocking an investigation, but rather to ensure that the governor’s task Force gave each firm basic due process rights, including the opportunity to present fully the facts about their companies, their applications, and their decisions to move to Camden. Each of these companies has only ever requested a fair hearing and it is clear that was never going to happen with the governor’s task force.”

Do you like this post?

Be the first to comment