This is the first of a series of reports on the Indiana Economic Development Corporation through the combined efforts of investigative reporters from FOX59 and State Affairs.
(WXIN/WTTV) — It was a special matinee scheduled for the Goshen Theater.
The headlining act on Sept. 20 was Governor Eric Holcomb and the board of directors for the Indiana Economic Development Corporation (IEDC), on stage for their quarterly meeting. A sizable crowd was on hand for the early afternoon gathering of the IEDC’s governing body.
Holcomb is a fan of the 15-member board, and he should be. The Governor gets to appoint all board members.
The mission of the IEDC, according to its website, is to promote the Indiana economy by “helping businesses launch, (grow) and locate in the state.” Board members are among the state’s business elite. The Governor leans on their knowledge to guide the IEDC’s deal-making to lure companies here.
“They represent regions, ecosystems, industries, sectors, and they come from the private sector,” Holcomb explained. “They, they get it.”
Board members also get insider information, some of it never disclosed to the public. They have access to business negotiations, research, trade secrets, lists of customers and prospects and confidential financial disclosures.
All that data helps board members decide which businesses get the millions of dollars of grants, loans and tax breaks the IEDC hands out each year.
There are strict rules about this secretive information. The IEDC’s Confidentiality and Conflict-of-Interest Policy states: “Board members and (IEDC) employees shall keep all confidential information in the strictest of confidence and shall now disclose (it)… either during or after their service.”
But Julia Vaughn, executive director of Common Cause Indiana, said the entire set-up of the IEDC board is problematic.
“These are some of the state’s wealthiest individuals,” Vaughn said. “They’re some of the movers and shakers and a lot of times movers and shakers take shortcuts.”
FOX59/CBS4 and State Affairs have examined contracts between the IEDC and businesses and have found millions of dollars worth of deals linked to board members.
A long-time investor
Scale Computing is a growing success story in downtown Indianapolis. Headquartered in the Union Building, the cloud-based computing and data storage company has clients around the world.
IEDC has helped Scale grow. Since 2009, the company has received grants, job training funds and tax credits worth $3,832,871. At the Goshen meeting, there was more good news from the IEC’s Entrepreneurship Committee Chairman John Thompson.
“The committee approved an investment of up to $1 million for Scale Computing,” Thompson announced.
The funds come as Scale Computing is readying for an Initial Public Offering (IPO), where the company would make shares available to the public. There is no announced date for an IPO, but if successful, it could mean a financial reward for early investors.
That includes Thompson, who disclosed this at the Goshen Meeting.
“I’d like to add here I recused myself from voting on Scale because I am a long-term investor in that company myself,” he said.
Thompson also said because of his financial connection to Scale, he was not in the room when the IEDC funds were discussed or voted on.
More question-worthy deals
Our investigation found numerous other examples of businesses with close connections to board members landing financial support from the IEDC.
The late William G. Mays was an original member of the IEDC board. In 2009, his company Mays Chemical in Indianapolis got a job training grant from IEDC worth just under $37,000. Mays’ signature is on the IEDC contract.
The Warsaw medical device manufacturer Biomet was co-founded by the late Dane Miller who served on the IEDC board from 2005 through 2015. During that time, Biomet had five contracts with IEDC providing the company with $4.7 million dollars’ worth of state investment.
Columbus-based Cummins has had back-to-back CEOs as board members. Tim Solso was followed on the board by Tom Linebarger. During their combined tenure, Cummins landed at least a dozen IEDC contracts benefitting the company by at least $22.1 million.
Dr. John Lechleiter, PhD., joined the IEDC board in 2017 after retiring from Eli Lilly having served as the drug company’s CEO and chairman. Just last year, Lilly signed on to become the cornerstone tenant of the ambitious LEAP project in Boone County. In that deal, Lilly gets close to $21.8 million in grants and tax credits.
The total amount of state investment by IEDC in deals with businesses linked to past and present board members is at least $53.4 million dollars.
If that strikes you as a conflict of interest, the IEDC disagrees.
“They have no role”
Indiana Commerce Secretary and IEDC President David Rosenberg declined our request for an on-camera interview to discuss this issue. Instead, FOX59/CBS4 was supplied a statement.
It reads, in part: “There is nothing that prohibits the companies with which our board members are associated from…receiving…incentives from the state…provided that they have no role in the IEDC’s decision-making process.”
An IEDC spokesperson added that the quasi-governmental agency has a robust system for identifying conflicts of interest. Once identified, we’re told board members and other decision-makers are “screened” from influencing or voting on these matters.
However, the mere fact that companies receive state incentives while being represented by members of the IEDC board gives state residents reason to doubt decisions are made fairly.
“It would really behoove them to do everything they can to ensure Hoosiers that these decisions are being made on a fair and even-handed basis,” Vaughn said, “And that no one, including board members, have an inside track to these state dollars.”
Read State Affair’s story here.