Red-faced governor rejiggers rules after embezzler gets $9.1M 'green' tax credit

Gov. Jennifer Granholm issued new rules Tuesday requiring a state agency to conduct more extensive background checks before awarding tax credits, after a $9.1 million credit was given to a convicted embezzler on parole. The governor's executive order and executive directive will change who sits on the Michigan Economic Growth Authority board that issues the tax credits, put a business integrity verification program in place and require background checks for some tax credit applicants. Granholm wants to make sure there's no repeat of a news conference last week where she shared the stage with tax credit recipients, including RASCO CEO Richard A. Short, only to find out the next day through The Associated Press that Short had a prison record. The Associated Press reported that Short had been convicted in 2002 of embezzling money from a Norton Shores business in Muskegon County and had pleaded guilty in 2002 to earlier fraud charges in Oakland and Genesee counties. Short, 57, was arrested and jailed last Wednesday for probable parole violations and was charged two days later with 24 new offenses related to money and possessions taken from an elderly woman with dementia. He does not have an attorney and was not immediately reachable for comment from jail on Tuesday. Michigan Economic Development Corp. President and CEO Greg Main told a House committee Tuesday that the agency will audit every MEGA tax credit awarded to companies from 2006 through 2008 — and eventually to the present. He said the agency would check whether credits had been given to anyone else with a questionable background, or to companies that haven't hired as many employees as promised or paid those employees at agreed-upon wages. "It's our challenge now to do everything we can to try to restore the integrity of the program," Main told reporters after the hearing. "We're going to make the changes that need to be made and hopefully regain people's confidence." A Senate committee on Wednesday was expected to ask Main about how Short, a parolee who owes $96,000 in restitution to past victims, managed to receive the tax credit. New laws are being introduced to limit who can apply for the credits. Short listed the business address for RASCO as his home in a mobile home park in Genesee County's Mount Morris Township. He had worked with the MEDC for over a year and met with the MEGA board before receiving its approval for the seven-year, $9.1 million tax credit, Main said. "He managed to show us documents which led us to believe that he was in the process of acquiring a site" for the company headquarters he said he was bringing to Flint, Main said. "There was no indication that there was any criminal background." Short never got any of the credit before his background was unveiled. From now on, the MEDC will require companies applying for MEGA tax credits to answer questions about the company's directors, officers and people who own a substantial portion of the company. Civil, criminal or credit background checks will be conducted in some cases. The questionnaires won't be required of publicly traded companies. "I'm not eager to go to Steelcase or General Motors or Ford (Motor Company) and ask Bill Ford to fill out a questionnaire. And I don't think it's appropriate," Main said. "We need to focus on the places where we have the most risk, and it's not with most Michigan companies." No one at MEDC has been fired over the incident. MEDC's executive committee is investigating and will determine if additional action needs to be taken, Main said.