Auditors: State agency doled out $37M while violating public notice law

A state economic development agency that approved nearly $37 million in total aid to businesses in 2011 and 2012 failed to give public notice of its meetings during that time as required by law, the state auditors disclosed Wednesday.

The quasi-public Connecticut Development Authority also did not submit an annual schedule of its meetings with the Secretary of the State’s Office – another violation of Connecticut’s right-to-know laws.

The legislature merged the CDA with a second quasi-public state development group, Connecticut Innovations Inc., in 2012, even as the meeting notice violations were happening.

And while the new merged entity retains the name Connecticut Innovations Inc., its 17-member Board of Directors includes several officials who served on the CDA oversight panel.

State Auditors John C. Geragosian and Robert M. Ward reported that the former authority failed to meet two of its meeting notice obligations under Connecticut’s Freedom of Information statutes:

  • Meeting agendas were not filed with the Secretary of the State’s Office in 2011 and 2012.
  • An annual schedule of meetings was not filed with the secretary’s office in 2012.

“Members of the public wishing to attend meetings may not have been aware of the meetings and the business to be discussed,” the auditors wrote.

Armed with public funding, the CDA made and guaranteed business loans and provided other forms of financing for business projects.

During the two-year audit period, the CDA approved a wide range of business assistance including:

  • $15.2 million in loans and $750,000 in loan guarantees for manufacturing projects that add jobs, enhance exports and support new uses for defense technology;
  • $8 million to insure loans to help companies acquire industrial land, buildings, machinery and equipment;
  • $5.6 million in loans to businesses to add machinery and equipment;
  • $1 million in guarantees for business loans deemed riskier than convention business financing.

In addition, the CDA wrote off $6.7 million in loan payments owed to the state during the audit period.

According to the auditors’ report, “CDA staff informed us that it maintained meeting agendas in its office during the audited period. Agendas were sent to the public when requested.”

CDA staff also indicated they believed incorrectly that agendas did not have to be filed with the secretary’s office because the authority was a political subdivision of the state. Also according to the auditors, the new agency agrees that all meeting posting requirements must be met.

Connecticut Innovations issued a written statement Wednesday afternoon.

“Historically the CDA has approved the schedule of  meetings in December, posted them on our website and sent the information to the Secretary of (the) State’s Office,” the statement read. “Through a clerical oversight we did not send the schedule to the Secretary of (the) State’s office this year even though the information was posted to our website. We have taken the necessary steps to ensure this oversight will not occur again.”

Connecticut Innovations before the merger had invested public dollars primarily in early stage technology businesses and provided other forms of venture financing. The merged entity assumes all of these roles plus those of the former CDA.

The merger statute increased Connecticut Innovations’ oversight panel from 15 to 17 members – and four of those 17 also served on the CDA’s Board of Directors.

They are:

  • Michael A. Cantor, who is chairman of the new Connecticut Innovations board and co-managing partner of Cantor Colburn LLP, a national law firm with offices in Hartford;
  • Former state Rep. Richard T. Mulready, who is chairman and chief executive officer of RM Bradley Management Corp. in Hartford;
  • State Treasurer Denise L. Nappier, who is an ex-officio member;
  • Department of Economic and Community Development Commissioner Catherine H. Smith, who also is an ex-officio member.

Gov. Dannel P. Malloy, who signed the merger statute into law, has said repeatedly since before he took office in January 2011 that transparency and accountability would be hallmarks of his administration.

“It’s the auditors’ job to point out oversights such as this, and we’re glad they have,” Malloy spokesman Andrew Doba said. “Every effort must be made to comply with these important rules, especially when they are designed to increase transparency. We’re glad to hear CDA agrees as well, and that they are committed to addressing the problem.”

 

 

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