Mo. Senate Kicks Off Mamtek Investigation
JEFFERSON CITY, Mo. (KMOX/MDN) - The Missouri Senate kicked off its investigation into the state’s involvement with Mamtek, the failed Chinese economic development project in Moberly, on Wednesday. Lawmakers will explore the ramifications of failed projects and how faulty investments affect communities across the state.
The Missouri Senate is the fourth entity to investigate the Chinese sucralose manufacturer, Mamtek – a project that government officials up to Gov. Jay Nixon touted as one that could bring more than 600 jobs to Moberly.
“It is important for us to look through the process that’s in place currently in the Department of Economic Development, in their due diligence to make sure that all the T’s are crossed and all the I’s are dotted in the protection of all the communities in the state,” Lembke said. “And that is the purpose of this committee.”
The Government Accountability Committee intends to investigate the Department Economic Development’s procedures to determine if there are enough safeguards in place to protect taxpayer dollars, Chairman Jim Lembke, R-St. Louis County, said. The committee also wants to know how much the Department of Economic Development recommendation influenced the local government’s decision to invest.
The committee is beginning with a request to the Department of Economic Development for all documentation and correspondence relating to the Mamtek deal.
To determine if the Department of Economic Development misrepresented the risks involved with investing in Mamtek, the committee is considering hearing testimony from Department of Economic Development officials and Moberly city government officials. They will determine exactly who will testify after reading the requested Department of Economic Development documents.
“That is going to set the stage for who we’re going to be calling to testify before this committee,” Lembke said.
Mamtek defaulted on its first payment to the city of Moberly, which dedicated $39 million in industrial development bonds to the project, causing Standard and Poor’s to downgrade the city’s credit rating to the nearly junk rating of “CC.”
Residents of Moberly have already been affected by the change through heightened costs for loans and municipal bonds, said Sen. Kurt Schaefer, R-Columbia, who’s leading the investigation. The committee said it intends to discuss what will happen if Moberly cannot make up for the missing money.
“One thing we will attempt to do in the committee is really figure out exactly what are the municipal obligations under an appropriations bond,” Schaefer said. At this point, committee members are unclear about the requirements of the bonds, which differ from routine municipal or revenue bonds, Schaefer said.
The Missouri attorney general and Randolph County prosecuting attorney are working together on a criminal investigation to determine if Mamtek was misrepresented to encourage Moberly residents to invest. The Securities and Exchange Commission and the trustee of the bonds, United Missouri Bank, are also investigating the investment in Mamtek.
Since the default, Mamtek has transferred its assets, abandoned construction of its facility and laid off the few employees it had already hired. Its former CEO, Bruce Cole, said he would repay Moberly for the defaulted payment under a new company, American Sucralose Manufacturing Inc. Cole sent the city $45,000 of the $250,000 he promised would be paid back, according to the Columbia Daily Tribune.
The investigation begins at a time when the General Assembly has debated about a major tax incentive bill to prop up a trade deal with China, but doubt about failed projects such as Moberly could help prevent lawmakers from reaching a compromise before the special session ends.
“I think there is enough smoke that there may be fire,” Lembke said. Lembke said he thinks the legislature should slow down on approving more tax credits and revisit the bill during the regular session, which begins in January.
“The timeliness of this, while unfortunate for this community, can help make sure we have the right checks and balances in place,” said Sen. Brad Lager, R-Maryville.