Why did OTC allow Scissortail to take as much as 540% profit in tax credits?
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$5.40 in tax credits Scissortail received for investing $1 of the $5.40 in a business venture.

An analogy of Scissortails financial shell game. -

Say you own a building worth $100,000 free and clear. You decide to start a business but need another $100,000 for start up.

Someone comes along offering to invest the $100,000 for one-half interest in your business. You agree and the investor only having $5,000 goes to the bank and mortgages your property to borrow the other $95,000. Then brings you the $100,000. The investor then goes to the state and claims they invested $100,000 at risk and receives 30% or $30,000 in tax credits, which they keep.

Within a few days the entire business is destroyed. The $100,000 was in inventory and in the safe that was destroyed. You lost everything, including the $5,000. The bank is left with the value of the land. The "so called investor" walked away with a $25,000 profit. There was no way for the investor to lose but was guaranteed a $25,000 in profit. Courtesy of being allowed to misrepresent the amount of their risk exposure and anyone gullible enough to take the deal.

You had to give away one half of your $100,000 in assets and in return received $5,000 and are left with a $95,000 loan. Technically you and your new partner, but you are the only one with your remaining assets at risk. The investor partner has already received their original $5,000 back and a $25,000 profit.

So how do state officials justify this is ok? Hang on, because you will love this.

Here is what those profiting are trying to pass off as risk and is not illegal, and state officials are accepting.

The new investor partner is now at risk of losing that 50% of your business that they wrangled out of you for a mere $5,000, which they have already received back the $5,000 plus a $25,000 profit.

Another analogy is someone robs a bank and hides out. Another robber hears about the robbery, finds the original robbers. Holds them up and steals their entire haul. The original robber calls the police demanding they catch the second robber and return their money.

2006 CAPCO Tax Credits Report. Claimed investing $89,540,000 View

Note: The Rural Small Business "Investing Entities" and "Target Companies" were left off this report. This is a key part of the information the Taxpayer Transparency Act was created to force OTC to reveal. After nearly two years since the act was signed into law OTC is still withholding this information and defying the law.

Copy of Scissortail's tax credit scheme provided by an unidentified source. Click to download.

Were Oklahoma officials involved in Scissortail?

Why did OTC ok Scissortail taking as much as 540% profit in tax credits for an investment before investing in the business?

Recently uncovered OK Tax Commission documents reveals Scissortail was allowed $27 million ($26,862,000) in tax credits, for a plan describing investing as little as $5 million at risk. Scissortail was allowed to receive the $27 million first and use $5 million of the public's $27 million to pay its investment. Leaving $22 million in profit.

The lists of violations include but are not limited to, Scissortail being allowed to:

  1. use the 2006 Grandfather clause when evidence suggests Scissortail was not qualified.
  2. claim tax credits on funds that again evidence suggests did not qualify.

For those who may not be familiar with venture capital investing it is "the risk" that distinguishes venture capital investing from other forms of business investing. The heightened risk is the basis for offering much higher incentives to attract investors.

The Scissortail scheme (a different twist than Altus Venture used) involves claiming a secured loan as money at risk. Meaning if business fails the business assets are used to satisfy the loan, relieving the so called investors of repaying the loan and the risk.

The damage goes far beyond the monetary damage. The Scissortail plan specifically calls for restricting investments to business with sufficient unencumbered assets to secure loans. This is in direct conflict with the purpose of the program and eliminates the very business ventures, venture capital and this program exist to help. This is clear evidence the program is being used to reap huge profits selling unearned tax credits to others to avoid paying taxes.

Another equally significant key difference between the way some are allowed to abuse Oklahoma's program and venture capital (or any legitimate investment) is the timing. Legitimate investments return profits based on and after success.

Those using the Oklahoma program are allowed to take their rewards immediately before the investment capital is put to work. Scissortail was allowed to 540% in unearned profits immediately. This allowed Scissortail to use public money to pay the investment cost. And, for that they were allowed to pocket a $22 million profit.

How can this happen? It is the secrecy, and the fact that state officials are legally allowed to own and invest in these deals and shared in that $22 million, in return for nothing. The secrecy prevents the public from learning what is occurring and who is involved.



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