Newly uncovered documents expose more tax credit abuse details.
January 12, 2009
prowlingowl.com has obtained documents verifying Oklahoma's tax credit incentive programs is the same CAPCO scheme banned in other states where officials and leading experts declared CAPCO "a scam," "raid on the state treasuries," flawed beyond repair" and "one of the biggest rip-offs out there," etc, etc…
Based on these documents Scissortail presented a plan to raise $5 to $15 million (suspiciously $60 million later) from investors, by promising $2 in tax credits for each $1 invested. Scissortail would then borrow $90 million more in capital using the assets of the business venture (the capital was intended to help) as collateral to secure the loan.
The Scissortail plan contradicts the basic principles of venture capital investment and eliminates true venture capital candidates. The plan unfairly burdens the business venture whose assets would be tied up to secure the loan. This raises the question - is this a cover for some other activity? Two immediate questions come to mind - is this a straw buyer/loan scenario? Why would the Oklahoma Tax Commission (OTC) issue a "determination letter" legitimizing such a scheme?
Example: using the $10/90 million plan Scissortail would raise $100 million in capital and claim 30% or $30 million in tax credits. Below are some of the many wrongs with this plan.
The law states - to qualify for tax credits "the investor's funds were at risk." A timeline of this process reveals investor funds would never be at risk in the context of the intended purpose, a business venture's success or failure.
The documents also reveal Scissortail was only obligated to invest as little as one-third (or $33.3 million) of the capital funds in the business venture. The plan provided no specific language for how the remaining two-thirds (or $66.7 million) would be used. Some vague generalities were mentioned, but nothing concrete. The treatment of this $66.7 million is reflective of the 66% and 70% skimmed by the Missouri and Louisiana CAPCO's respectively.
The Scissortail fund bridged the 2006 amendment to the tax credit incentive program, which included a grandfather section allowing funds like Scissortail, which had previously received a "determination letters" before March 15, 2006, to complete those investments by November 1, 2006. That grandfather section also stated "no credit shall be allowed unless: The "investor's funds were at risk" and "the investment was not made chiefly for the purpose of reducing tax liability."
In addition Scissortail's previous "determination letter" included in these documents was based on $15/90 million. The letter soliciting investors stated the $15 million had been raised to $60 million, which would have pushed the $90 million to $540 million. Raising the question are "determination letters" treated as signed blank checks that allows CAPCOs to just fill in the blanks?
For more details and copies of the documents: http://prowlingowl.com/Scissortail/ScissortailScheme.cfm