May 18, 2010

Re: Oklahoma Tax Commission internal email ("See note below")

From: Charles Robertsons
Sent: January 20, 2010
To: Dawn Cash
Cc: Monty Bivens, James Forcade; Mike Kaufmann; Lisa Haws; Joan Korthanke

... Today I received ("Cottonwood Valley Ventures") Forms 518 for the 2009 tax year. This was a little surprising because I thought all of us were on the same page that the 2357.7 credit had a sunset date of 12/31/08 and there wouldn't be any filings beyond this date. Unlike the Capital companies, the venture Capital credit was triggered when the investment was made into the venture Capital company -- it was not dependent on the money being invested in an Oklahoma business venture. This changed in 2006 when 2357.70 was amended to require investment in an Oklahoma business venture to generate the credits. In spite of this change, the filing methodology that Cottonwood Valley Ventures employed for all tax years through 12/31/2008 was to generate the credits based on investment in the venture Capital company (see original 2008 filing attached).

For the 2009 filing, they have changed their filing position and are now generating credits based on when the funds are invested in and Oklahoma business venture Cottonwood Valley Ventures invested in 2009). On attachment to the 518-A for 2009 they note: "Investments in the Venture Capital Company was completed before January 1, 2009 per Oklahoma statute 2357.7. Credits are generated based on investments by the Venture Capital Company into Oklahoma business ventures." At first glance, this would indicate that they are generating credits that had already been claimed when the money was invested in 2008. But then I received an "amended" filing for 2008 that indicated an additional $800 million invested in Cottonwood Valley Ventures on 12/31/2008 that was not reported on the original filing. The Statement of Changes provides: "Line 2: A year-end investment was omitted from Section A. This investment was not used to generate any credits in 2008, but will be used to fund venture Capital loans in 2009 and thereafter." Since the additional 2008 investment will generate $160 million of additional credits, I wanted to make sure everyone was aware of this situation. Also, based on the email Joan forwarded to me yesterday, I knew you had been talking to the Cottonwood Valley Ventures people.

What is hard to understand is how they "omitted" the $800 million investment in 2008 and how it took over a year to realize the error they made. BOKF (BOK Financial) is a public company that issues audited financial statements each year with related party footnotes that should deal with this type of activity. If there was a bust in the 2008 filing, it should have been detected by March 1, 2009.

The amended statute seems to clearly indicates that no credits can be generated in taxable years beginning after 12/31/2008. Obviously, they are interpreting the same statute differently and I don't understand or agree with their interpretation. Hopefully, you can shed some light on this if they discussed it with you previously. Please let me know if there is any specific action you want me to take with respect to the 2009 filing or the amended 2008 filing.

Additional information will follow revealing far more including:

This program, created in 1986, was limited to two entities; Cottonwood Valley Ventures and Cimarron Business Capital Company.

Based on available records, 2006 thru 2008, Cottonwood Valley Ventures received investments slightly over, $1 billion, all coming from CVV Partnership. Both, BOK subsidiaries. All tax credits going to BOK and subsidiaries.

Why the claimed investments do not appear to qualify for tax credits. Rather the list of investments looks like the average commercial loan portfolio of any bank. Examples, venture Capital investments were claimed for nonprofits, University of Tulsa, YMCA: as well as several from other specifically excluded industries, like real estate, other investment funds, etc.

This has all the earmarks of an exclusive scheme for one bank to pick up a state subsidized 20% bonus for issuing the same commercial loans issued by any other Oklahoma bank.

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Lists of claimed investments 2006 2007 2008 Original 2008 Amended 2009

2008 OTC Form 518 Original listing totals: $40 million received and $102,107,700 invested. 2008 OTC Form 518 2008 Amended filed Jan 10, 2010, claiming BOK had overlooked investing $800 million in 2008. The program BOK was using 68 2357.7 expired in 2008

2009 OTC Form 518 listing totals: $0 received and $99,103,000 invested.

Notes:

Whited-out areas of the original email were filled best effort based on information found in accompanying documents, all of which links are provided. The original PDF file can be found here. Benefiting the state no more than any of all the other banks not receiving this exclusive bonus.

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