INDIANAPOLIS – The U.S. Department of Treasury plans to recoup nearly $500,000 from Indiana after a federal watchdog agency found the “intentional misuse” of economic development money by the state.
The Indianapolis Star reports (http://indy.st/1l6YVlO) an audit by the Office of the Inspector General found a contractor the Indiana development agency hired to invest taxpayer money in promising startup companies should not have awarded $499,986 in federal cash to a business managed by the contractor’s chairman.
In the report, the Office of the Inspector General noted that Indiana and federal officials disagreed about whether the funding was intentionally misused.
A review by the auditing firm KPMG ordered by Gov. Mike Pence last year found that Elevate Ventures, hired by the Indiana Economic Development Corp., directed the money to a pair of companies connected to Elevate Chairman Howard Bates and his son.
That review found Elevate was “substantially compliant” with its own policies, but it also found two noncompliance issues and made 25 recommendations to strengthen the private nonprofit investment manager’s policies, including that IEDC be given final say over the contractor’s investment decisions and that the centralized powers of Bates, a well-connected businessman and Republican campaign donor, should be more broadly distributed among an executive board.
The federal audit said Elevate Ventures should not have awarded the federal money to Smarter Remarketer, managed by Bates.
The federal audit also found that $300,000 Elevate Ventures invested in a company called MaxTradeIn in which Bates is an investor, did not violate federal rules, though it “created the appearance of potential nepotism.” Bates’ son, Justin, was the company’s CEO.
The inspector general also recommended the U.S. Treasury’s State Small Business Credit Initiative determine whether Indiana’s funding should be reduced, suspended or terminated and that the Indiana Economic Development Corp. review every investment decision by Elevate Ventures going forward.