GlobalWatt Claims on Applications for MEGA Deals Disputed, Raise Questions About MEDC Scrutiny

State Should Investigate GlobalWatt's Claims, Says Center Analyst

For Immediate Release
Friday, Sept. 29, 2010

Contact: Michael D. LaFaive
Director of Fiscal Policy
Mackinac Center for Public Policy
Michael D. Jahr
Senior Director of Communications
Mackinac Center for Public Policy

MIDLAND — A Mackinac Center investigation into a Michigan Economic Growth Authority deal with solar module manufacturer GlobalWatt Inc. has raised troubling questions about the veracity of claims made during the application process for state incentives, said Michael D. LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy. GlobalWatt's assertion that Michigan's competitive disadvantage stemmed in part from up-front cash inducements from state and local units of government in Texas appears to be untrue, LaFaive found. The applications led to the awarding of millions of dollars in state incentives.

MEGA, the state's chief business incentive program, in December 2009 offered GlobalWatt "high technology" credits to locate a plant in Saginaw in the hope GlobalWatt would create as many as 500 direct new jobs. State and local incentives offered to GlobalWatt in Michigan are reportedly worth as much as $42 million. The deal was celebrated by Gov. Jennifer Granholm in her 2010 State of the State address.

"The two applications submitted by GlobalWatt claim that the company was offered 'up-front cash' incentives to locate in Texas, but officials with the Texas state government and with Corpus Christi's development unit said they never offered such assistance," said Mackinac Center Communications Specialist Kathy Hoekstra, who today posted an investigative video about the apparent discrepancies. Documents secured by the Mackinac Center also indicate that GlobalWatt's claims were at odds with reality.

While GlobalWatt did apply for incentives in Texas, the Corpus Christi grant request was performance-based and no up-front offers were made, LaFaive and Hoekstra report in an essay posted today. The Texas Enterprise Fund - run by the state - rejected outright GlobalWatt's application for incentives.  TEF did so weeks before GlobalWatt's chief executive officer signed the second of two MEGA applications that repeated the claim that Texas was under consideration.

Telephone calls to GlobalWatt by the Mackinac Center went unreturned.

"The inconsistencies between claims made by GlobalWatt and the information we have uncovered suggest that state investigations by both the MEDC and the Attorney General's office of Michigan are warranted," said LaFaive.

The state's MEGA law clearly stipulates that "misrepresentation in the application" could result in the loss of tax credit opportunities. Moreover, state law prohibits making false claims for credits or refunds. Violations can be punished by up to five years in prison or a $5,000 fine or both.

"Given the state's recent embarrassments over the RASCO and Hangar42 deals, we believe the state should waste no time in re-vetting GlobalWatt's entire application for tax incentives," LaFaive added.