Prowlingowl.com


Below are charts illustrating key differences between 3 different venture funding programs

  1. The traditional private sector venture capital funding (VCF) model that was so successful in creating every high technology growth area in the US. Examples include Silicon Valley, Massachusetts, Denver and Austin TX.
  2. Insurance CAPCOs responsible for scamming several states out of $100's million before the scam was recognized.
  3. Oklahoma's CAPCO a variation of the Insurance CAPCOs.

The private sector VCF is the only legitimate version. The two CAPCOs are nothing more than financial shell games cleverly disguised as a private sector VCF. A close examination of the charts reveals significant major differences. The two CAPCOs use the same basic terminology, i.e. fund manager, investors and business ventures. The significant difference is the way the risk, cost and rewards are split. Anyone knowledgeable enough to perform calculations on real world scenarios would quickly realize the CAPCOs are merely a scam used to reap huge unearned profits at the public expense.

1. Charts illustrating differences between CAPCOs and private sector VCF -

Private sector Venture Capital Fund
Private VCF Cost Share Private VCF Profit Share



State CAPCO Programs that scammed Oklahoma and several other states
State CAPCO Cost Share State CAPCO Profit Share

2. Now see how Oklahoma version differs from basic CAPCOs -

Scam CAPCO CRAPCO - Oklahoma
Investors Insurance
companies
Private
Total refunded
thru tax credits
100% 200%
Milestones to meet A few, mostly irrelevant None
State oversight/audit Yes. Varies by state None

In essence CAPCO consisted of insurance companies partners providing states a 10 year loan. The venture capitalist partners would have the task of managing the investments. Taking 50% of the loan off the top for management fees. Leaving the states obligated to repay the loan in the form of tax credits. An average of 10% in tax credits per year.

Oklahoma's CRAPCO is structured where:

1) The venture capitalist find their own investors, cutting out the insurance companies. With no restrictions.

2) The state repays at the rate of 30% in tax credits up to 200% of the investment.

How does that work? This is the fraudulent shell game part. The venture capitalist arranges a artificial loan to inflate the investment (money at risk) to appear nearly 700% as large as it is. Actually 690% which is what it takes to turn a 30% tax credit into 200%.

Note: The area of the law addressing the 200% limitations is ambiguous leaving it unclear, what, if anything, is in fact limited to 200%.

3. Now compare the 3 private sector VCF, basic CAPCOs and Oklahoma's CAPCO -

Based new business ventures receiving $10 million in funding.
  Cost/Risk   Rewards/Profits  
  Success Failure   Success Failure Notes
Private sector Venture Capital Fund  
Public None $20 million
Loss
  None None Investors and VCF takes all the risk.
Private sector VCF None $100,000
Loss
  1.25 Million +
profits
1.25 Million
Mgmt fees
20% profits come after the investment is paid off (1)
Investors $9.9 million
Loss
$9.9 million
Loss
  $9.9 million + profits None Recover investment plus 80% of venture profits (1)
CAPCO/Insurance funding program  
Public cost None $20 million
Loss
  None None The public takes all the risk, yet receives no profits
CAPCO None None   None None
Insurance company None (3) None (3)   $13.6 million
Gain
$13.6 million
Gain
$13.6 million is interest
Oklahoma Capital Funding Program  
Public cost $20 Million
Loss
$20 million
Loss
  None None The public takes all the risk, yet receives no profits
OK CAPCO
Investors
None None   $20 million plus
100% of venture profits
$10 million profit

In Summary, government subsidized CAPCO's lobbied for and received programs were they always make a profit, even when everyone else loses!




Copyright 2007 - 2020 ProwlingOwl.com   See disclosures   Email: taxwatch@prowlingowl.com