Altus Venture $126 million View
Scissortail $90 million View
Foxborough $300 million View
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Venture capital (also known as VC or Venture) is a type of private equity capital typically provided to early-stage, high-potential, growth companies where the rewards are years out and carry a high risk. Venture capital is a special kind of funding to create a foundation for building the businesses that will replace today's diminishing industry and jobs. Oklahoma's venture tax credit program was intended to incentivize that venture capital funding needed by rewarding investors tax credits worth 20 to 30% of their at risk investment. |
State legislators failed, for the second time, to close this loophole!
The new legislation was a major rewrite including a wide range of insignificant trivia and rearranging the elements that constitute the loophole so as to be more difficult to find. Extremely difficult!
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The anatomy of a fraud
The entire scheme can be found in the Capital Formation Incentive Act. A scheme so cleverly devised it is a very challenging task to understand. We have provided a guide to help find the key elements.
For more see "The crooked law"
How it works.
Oklahoma's Capital Formation Incentive Act, makes unlimited tax credits available to "qualified venture capital companies". The VCCs are unidentified groups meeting odd qualifications that eliminate every successful venture capital company known to exist in favor of meaningless yet very restrictive criteria insuring only certain groups can participate. The unidentified VCC is the front for the "so called investors."
The program operating outside the budget, with no prior approval or funding, allows the VCC operating with total autonomy to take any amount of tax credits by simply filing a claim which is then authenticated by a member of the Oklahoma Tax Commission. The authentication, "letter of determination", becomes the certificate to be sold allowing the VCC to turn the tax credits into immediate cash.
Example: A VCC," operating with full autonomy (and anonymity), by simply filing a "claim of intention" to invest $50 million in new ventures are authorized to automatically take tax credits of $100 million. Then sell the tax credits using the proceeds to fund the entire $50 million investment and pocket another $50 million in profits. All occurring before the venture receives its first dollar. The "so call investors" are never out one dime!
The law allows taking 30% of an investment in tax credits. However, clause (the loophole) is included that allows taking as much as 200% in tax credits. To get to that 200% the VCC uses artificial loans to inflate the actual investment by nearly 600%. Claiming the investment is seven time the actual money the investors would put at risk. Then takes nearly seven times 30% or 200% in tax credits.
Note: The area of the law addressing the 200% limitations is ambiguous leaving it unclear, what, if anything, is in fact limited to 200%.
It has been purported in some cases the VCC skims the majority of the investment out of the venture using vendor billing embezzlement schemes. Stripping the venture the states investment.
The program operating without official involvement and cloaked in secrecy allows government officials to participate without any risk violating a conflict of interest or anyone discovering their involvement.
Next >> The Cover Up