Iowa leaders botched their homework in tax credit givaway
Iowans already angry over a fertilizer plant’s record-breaking tax break were ready to blow their stack after learning the company’s sibling stands accused of defrauding the U.S. government.
Already, critics were saying the more than $200 million in state and local tax credits was too much to pay for the much-needed jobs in Lee County. Some call the incentives offered to Iowa Fertilizer Company — a subsidiary of Cairo-based Orascom Construction Industries — the state’s worst economic development deal to date.
It’s certainly the largest, enough to raise the question of how high we want to bid in today’s economic bachelor’s auction where job-hungry states fight over a few good-looking employers’ attentions.
The Associated Press’ recent revelation — that another Orascom subsidiary stands accused of improperly securing $332 million in U.S. funding for construction projects in Egypt — raises another important question. Just who are we trying to woo?
Last week, the AP reported the details of the lawsuit, filed in 2004. In it, the feds say a Virginia-based Orascom subsidiary and another U.S. company lied about the involvement of a third partner — an Egyptian company — to meet U.S. nationality requirements for companies bidding on U.S.-funded water and wastewater projects in Egypt.
The lawsuit is ongoing, and Orascom denies the allegations. The Iowa Fertilizer Company wasn’t required to disclose the lawsuit and so they didn’t. You can even argue it doesn’t matter, that these two small pieces of a vast multinational corporation probably have little to do with each other. But it’s troubling the Iowa leaders who signed off on the tax deal didn’t know the lawsuit existed at all.
Economic Development Authority Director Debi Durham’s explanation doesn’t inspire a lot of confidence:
“It did not come up in our due diligence,” she told the AP. “But you’re talking about a global corporation that has numerous subsidiaries. I’m not sure how anyone would have found that.”
The AP did — by taking a look at Orascom’s annual report. That sounds like Due Diligence 101.
It’s exactly the kind of homework you should do before getting into any long-term relationship, and it makes me wonder:
Are state leaders too head-over-heels for big development deals? What happens when the honeymoon’s over?Comments: (319) 339-3154; email@example.com