Tax credit fraud details found in recently uncovered Foxborough prospectus!
From the new Foxborough prospectus dated December 2009 is promising investors $2 for each $1, they invest in the fund. For prospectus view.
Most revealing is the prospectus describes the methods Foxborough uses to obtain 200% profits. It was soliciting public entities to sell parking garages and airplane hangars, which provide the assets to obtain loans that are misrepresented as at-risk investments to claim tax credits. The results? Receiving unqualified tax credits while creating no new jobs or economic growth.
The prospectus states, "The primary objective of the Capital Company (Foxborough) is to make investments in Oklahoma small business ventures and Oklahoma rural small business ventures that qualify for Tax Credits under the Business Incentive Acts." Seeking to invest in: "Capital Structure/Available Unencumbered Assets." Investments "will be very capital intensive, in contrast with service companies, for example, which personnel intensive are."
Avoiding personnel intensive investments means avoiding creating jobs, which we will show below. Capital intensive and unencumbered assets describe a business that is in sound financial condition and can borrow their own money. Foxborough and others merely seek out these kinds of business as a means to obtain unneeded loans, which the Oklahoma Tax Commission wrongly allows tax credits. Clearly showing there is no interest or effort in creating jobs.
What kind of investment meets these criteria? City parking garages and airport hangars. But, to get a business like that, you have to get some folks in other public agencies to sell public property. City parking garages and airport hangars have few jobs and certainly do not create any new jobs. That is what was done and is being done. That smells as well.
This prospectus promises $2 in tax credits for each $1 invested and explains how that is done using no-risk loans. The prospectus goes on to say the loan amount will be determined by how much is needed to obtain the $2 in tax credits. The prospectus says the loan amount will be either 6 or 9 times the Investor's Base Investments. Using the "Small Business Incentive Act," which pays 20% in tax credits, will require a loan of 9 times the Investor's Base Investments to get the $2 for $1. Using the "Rural Incentive Act," which pays 30% tax credits, requires a loan of 6 times the Base Investments. Only the Base Investments meets the qualifications for tax credits.
It has nothing to do with creating jobs or economic growth, merely a scheme to make 200% profit at the expense of the public. And, yes, this violates the program requirements! No, this is not a loophole deal! YES, this is as illegal as any other scheme that receives public funds disproportionate to that which is returned to the public. That is the definition of unjust gains, a Federal offense. Deliberate ignorance, or state officials turning their backs, is also a federal offense, and one the Enron folks were tried on.
Soliciting cities to sell parking garages and airport hangars that create no new jobs, but make loan collateral to borrow money. Add the loans to the real investment to scam tax credits.
Tax credits are allowed on loans, but only the amounts the investor is at risk. In plain words, how much the investors would lose if the investment failed. In these cases, it's only 10 to 15% of what was allowed.
The garage deal. The prospectus describes Foxborough's 2007 claim to invest $10 million in Town Centre Theatre, that rendered $2 million in tax credits. Town Centre Theatre turned out to be a diversion to cover a scheme involving Foxborough and a group named Specialty Real Estate Service, with ties to Valliance Bank, Foxborough uses for loans. After filing the $10 million claim to invest in Town Centre Theatre; Foxborough requested and received a redacted or identity withheld ruling from the Oklahoma Tax Commission to rename "Town Centre Theatre" to "Center City Garage East." This secret ruling allowed Foxborough to hide the paper trail.
How do you get a parking garage? Specialty Real Estate Service solicited COPTA (Oklahoma City's Parking Authority) to sell City Center East parking garage. COPTA obligingly went through the obligatory process of issuing an RFP to sell four garages. Only one bid was received. One from Specialty Real Estate Services for $7.6 million, approximately $1 million less (based on parking space share of a two garage deal) than the garage cost to build three years earlier. (In 2008 Foxborough claimed tax credits for investing another $21 million in 2 more garages, which is still in the works). In October 2009, COPTA sold City Center East parking garage to Specialty Real Estate Services. Soon after the sale was completed, Specialty Real Estate Service then started the process of renaming itself "Center City Garage East." That would match the new secret investment name. The connection could only be found in records OTC denies the public access.
Purchasing a parking garage creates no new jobs, and parking garages aren't the kind of business that will pack up and take jobs to another state. "Center City Garage East" has 637 parking spaces. According to the International Parking Institute (IPI), parking garages average one employee for each 105 parking spaces. 6 to 7 jobs already in existence. Usually low paying part-time jobs.
This cost the taxpayers $2 million and created not one job. They were fulfilling Foxborough's objective of investing in capital intensive company's while avoiding job investments. It was fulfilling Foxborough's objective of investing in capital intensive company's while avoiding job investments. As will be seen in later reports, this is only $2 million of nearly $500 million in mostly fraudulent tax credits handed out for unqualified and fraudulent claims. This is representative of one of many schemes operated by the Oklahoma Tax Commission to funnel public funds into the pockets of a select few, including state officials.
This whole deal of COPTA selling the garage, for no apparent reason other than Foxborough and Specialty Real Estate Service, was in need of an asset-intensive deal to borrow money to pull off tax credit fraud looks highly suspicious.
This is only one of the many schemes stealing public funds under cover of the media ignoring and public ignorance and gullibility. Foxborough has two more garages, locations unknown, and Hangar 84 at the Tulsa International Airport in the pipeline.
Foxborough first surfaced in 2007 when Barry Switzer, former University of Oklahoma Football coach, joined Josh Brim and Robert McDonald, formerly of Capital West Securities, as subjects of a Capital West letter offering $2 for $1 in tax credits. That deal was quickly swept under the rug by an overnight investigation by the state securities department, declaring it found no securities violations. Apparently, no one realized that securities violations had nothing to do with the tax credit issue. Again proving this fraud operates under cover of flagrant ignorance and gullibility on the part of the media and public.