Lembo calls for more oversight of state business incentive programs

Lembo calls for more oversight of state business incentive programs

Record-Journal


Comptroller Kevin Lembo has joined open government advocates in calling for lawmakers to enact changes that would give the legislature more oversight of business incentive programs administered by the state.

A Vernon man was charged early this month in federal court for reportedly fraudulently receiving $3 million from various lenders, including $400,000 from the state Department of Economic and Community Development, for a pita company he never started.

Mohsen Youssef, 26, was arrested in Canada in March on the strength of a 14-count indictment and pleaded not guilty during his first appearance in U.S. District Court in Hartford on April 6.

Youssef’s arrest comes as open government advocates and critics of some of the state’s business investment programs are both calling for more transparency.

The Finance, Revenue, and Bonding Committee has reintroduced a bill from Lembo that would expand the role of the auditor of public accounts by requiring it review all programs offering incentives. It would expand the scope of the auditors’ role to include programs offering tax credits, grants and other benefits.

The legislature would also be required to hold public hearings to discuss the contents of any auditors’ report.

“These incentive programs reduce tax revenue at both the state and local level, and increase state borrowing,” Lembo said. “It is essential that the legislature review their impact and make informed decisions about the continuation, expansion or elimination of each program.”

He also said the increased reporting would allow the state to make more “data-driven decisions” about programs.

The legislature unanimously approved a similar bill last year, but Gov. Dannel P. Malloy vetoed it on the grounds that it was “unwarranted and unnecessary.” Chris McClure, a spokesman for Malloy’s budget office, said the governor remains critical.

“We are pleased the comptroller and DECD were able to take steps toward a final bill, but it still has several more steps in the process before it is in front of the governor for signature, and the bill language may change during the iterative process,” McClure said in a statement. “We look forward to seeing the final piece of legislation.”

The bill also has the backing of Pew Charitable Trusts, open government groups like Common Cause and the Connecticut Council on Freedom of Information, employee unions, and Yankee Institute, a conservative-leaning think tank.

It also seems to once again have support from lawmakers on both sides of the aisle.

Sen. Len Suzio, R-Meriden, suggested the state find ways to help businesses secure loans from private lenders, as opposed to giving loans themselves, a goal of his proposed First 5,000 program.

“My perspective is let bankers be bankers, let them do the credit assessment,” he said. “The state doesn’t belong in that business.”

House Speaker Joe Aresimowicz, D-Berlin, said “a lot of our caucus members” also support the bill, although caucus leaders have yet to attempt a vote count.

“Anytime that there’s misuse of public funds we draw pause, and we think of the steps that we need to take necessary to ensure that the money that comes to the state is spent in an appropriate manner,” he said.

Youssef’s arrest is just the latest in a string of events this year that have raised questions about whether the state’s investments and incentive programs are achieving the desired results.

Youssef received $400,000 in 2011 through the Small Business Express program, and a total of $3 million from several lenders, to help start Amoun Pita, according to an affidavit supporting the charges. The document states Youssef inflated his assets and income, as well as those of other businesses he owned.

This included making fraudulent invoices for equipment purchases, as well as fake marketing materials and websites to convince lenders that the transactions were legitimate. In actuality, Youssef only had $33.62 in his bank account at the time DECD dispersed his loan. A spokesman for the agency declined to comment because the case is ongoing.

Last month Alexion Pharmaceuticals, which accepted a $51 million state loan under the First Five Initiative to move its Cheshire headquarters to New Haven, announced it will be laying off 210 employees. ESPN, another recipient under the program, also recently laid off staff.

msavino@record-journal.com
203-317-2266
Twitter: @reporter_savino


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