Other States    1   |  2  |  3

"It's a scam," said Colorado state Treasurer Mike Coffman, when ask about the CAPCO program in Colorado.
66% of state guaranteed funding was skimmed for profits. Leaving only 34% for the business venture to succeed on. According to a Missouri state CAPCO study.

CAPCO was an economic development program sham politicians in several state fell for and committed their states without seeking advice for unbiased experts. CAPCO quickly turned controversial and was reversed once the program details reached the public. But, not until it cost states like Wisconsin, Florida, Rhode Island, Colorado, Iowa, Nebraska, Louisiana, Hawaii and Oklahoma 100's million each.

Here are some comments coming from experts and state officials from states who finally realized what was actually happening. Oklahoma's program has yet to be exposed because state officials a hiding all information on what the program is costing where the money is going.

State officials have claimed on two occassions, 2004 and 2006 to have closed the loopholes allowing the abuse, however here is one article revealing a September 2007 letter from Capital West Securities seeking $300 million in investments for a Foxborough fund, and promising investor $2 in tax credits for each $1 invested. Accompanied by a second letter describing a quick white wash involving a meaningless investigation by the Oklahoma securities department that apparently convinced the unwitting.

Key media news articles discussing this tax credit abuse scheme.

Learn more about the CAPCO scam

Solication letter verify loophole was still open in September 2007 - Whitewashing the solication letter.

In a nutshell the CAPCO group was described as venture funding managers who had insurance companies willing to provide financing for new business in states that would give the insurance companies 10% tax credits. The unfortunate assumption or misunderstanding was the state was taking no risks yet would benefit from new business growth. Once the program got rolling some folks started examining exactly how the program worked. Here is what they found.

  • The insurance were not investing, but only loaning the money.
  • The states were backing the loans, and had to pay back the loans if the businesses were not successful enough to payback the loans.
  • The 10% tax credits were only interest on the loans, until the business was successful or failed.
  • The CAPCOs were taking as much as 50% of the loan on the front end for its management fee. Leaving the business venture with only 50% of the loan as the investment.
  • The CAPCOs got to keep the 50% even if the business ventures failed.
  • The CAPCOs got all of the profit if the business was successful.

In summary the taxpayers funded the venture and took all of the risk yet never received one dime of the profit. The CAPCO invest no money, took no risk, was guaranteed a huge profit up front and got all of the profits.

Some folks in Oklahoma used the CACPO scheme and create their own version. If you can imagine, made it even better. Then they got state officials to wrap it in secrecy, to prevent what happened in the other states, the public learning what was going on. These folks were doing so well more wanted in and over time the program, become even better, and better and better.

We will show how the basic Okie scheme is the same as the CAPCO, with even more lucrative angles, and better protection from being discovered. Has now taken over $1 billion


Explain using OtherStates.cfm

Comparing economic development programs
Program Traditional
Venture Capitalist
Other states
Who provides funding Investors Lenders Taxpayers
Who assumes the risks Investors Taxpayers Taxpayers
Who gets any Profits Investors Capco Capco

Comments on Oklahoma's sister scams

"It's a scam," said Colorado state Treasurer Mike Coffman.(1)
66% skimmed for profits. Leaving only 34% going to the intended purpose. A state study in Missouri. (1)
"It's a crummy deal for the taxpayers," said Julia Sass Rubin, a Rutgers University professor of public policy. (1)
The CAPCO program is fatally flawed. Daniel Sandler, Faculty at Law, University of Western Ontario. (2)
"We don't know who is getting the credits, what they're doing, or how much money they're getting." Paul Brewbaker Chief economist at the Bank of Hawaii.(3)
"Expensive and inefficient" A study commissioned by the state of Louisiana. (1)
"I think this state would be hard pressed to design a program that cost the taxpayers more and delivered less" Bob Lee, the head of Colorado's Office of Economic Development. (4)
"They're feeding at the public trough." Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i. (3)
There is nothing to prevent a company which meets the requirement for the funding in Colorado from using that money to leave the state and build elsewhere. Rocky Mountain News. (4)

References:    1   2   3   4


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