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!
An invitation to fraud
Information provided here identifies LLC's acting as front entities claiming $236 million in investments, using the states tax credit incentive programs. Loopholes available in this program allow taking $2 in tax credits for every $1 claimed as an investment. Allowing these LLC's to take as much as $472 million in unearned tax credits in 2007 tax credits.
These are links to copies of documents obtained from reliable sources revealing the names of over 100 LLC's listed be the Oklahoma Tax Commission as praticipants in the tax credit incentive program for 2007. The list includes the size of investments claimed under the Small Business and Rural Small Business components of the Capital Formation Incentive Act.
Links:
- Summary of Rural Small Business Capital Company Activity for Calendar 2007
- Summary of Small Business Capital Company Activity for Calendar 2007
- MetaFund
It is significant to notice, only the claimed investment amounts are listed and no tax credits amounts are shown demonstrating states officials making a greater effort to prevent the public from learning of this scheme already costing $100's million.
The documents list approximately 70 LLC's (i.e. investing entities) investing a total of $236 million in 16 Small and Rural Small business Capital companies (i.e. LLC's functioning as pass-through entities). These 16 LLC's then invested the same money in 36 other LLC's (i.e. target entities). In the process the pass-through LLC's are authorize to take tax credits that can amount, in this case, to as much as $470 million.
A close examination of the list reveals identities and amount similarities between several investing and receiving entities, that raise several questions.
For example
Is the tax credit program simply being used in a money laundering* scheme that passes money between to commonly owned LLC's, by way of a pass-through LLC. The pass-through entity performs a financial paper shell game to claim tax credits. Tax credits which can be sold providing, as much as, 200% in unearned windfall profits.
- Lawmakers left the program void of accountability and oversight, pre-authorizing certain entities to automatically take unlimited tax credits while avoiding any review or authorization process.
- Those using the program are free to violate the law any way necessary to taking the tax credits. All because the law specifically prohibits the state from recapturing its losses. The possible worst punishment is to not be allowed further participation in this program, while allowed to keep the ill-gotten $100's million.
Note: The area of the law addressing the 200% limitations is ambiguous leaving it unclear, what, if anything, is in fact limited to 200%.
Note: There is insufficient information in these documents to determine how much if any of the above is connected with other investment program known to be abusing the same tax credit incentive program. Other known programs include, but are not limited to
- $330 million in tax credits taken in third quarter 2006.
- $300 million in tax credits advertised in the Capital West Securities September 2007 letter soliciting $300 million from investors. More
- tax credits taken before the 2006 failed attempt to close the loophole, which would include the $66.3 million taken by Altus Venture for the Quartz Mountain Aerospace project that ended up costing tax payers close to $1 million per job created. investors. More
*Note: Similar to the layering step in money laundering that involves transferring funds through a series of accounts or LLCs in an attempt to hide the funds' true origins.