Failed Moberly economic development project to be investigated
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Failed Moberly economic development project to be investigated

Date: September 26, 2011
By: Stephanie Ebbs
State Capitol Bureau
Links: Moberly economic development press release

JEFFERSON CITY - The Missouri Senate Governmental Accountability Committee has been approved to investigate the China-based company Mamtek's failed economic development project in Moberly.

The committee will examine the process used to determine which programs the government chooses as investments for the taxpayer's money, said Sen. Jim Lembke, R-St. Louis County, the committee's chairman.

Kurt Schaefer, R-Columbia, was appointed to the committee after he requested to be involved in investigating the possibility that state officials misled local leaders when they presented the deal to city leaders. Schaefer's district includes Moberly.

"Each day more and more information is unfolding when it comes to how this deal started and how it failed," Schaefer said in a press release. "It is extremely important for everyone across our state to learn what happened here so we may prevent other communities from falling victim to similar scenarios."

The company has been under a magnifying glass recently; legislative leaders said Mamtek's failure was one of the reasons the General Assembly has prevented the bill to create a trade hub with China in St. Louis from moving forward during the special session. Last year, Gov. Jay Nixon touted the benefits of the deal between Moberly and Mamtek, which was finalized in 73 days rather than the usual six months. Questions have been raised regarding Nixon's support of the Mamtek project, accusing the governor of announcing the project before doing the necessary research.

"We've got to find out: Why the fast track? What shortcuts did we take?" Lembke said. "And did that have any effect on not being able to find out everything we needed to know about this deal and why it was a bad deal for the citizens of Moberly and the taxpayers of Missouri?"

Mamtek's missed payment was for $3.2 million, the Columbia Daily Tribune reported. Industrial development bonds totaling $39 million were purchased in Mamtek's property. Standard & Poor's Rating Service downgraded the credit rating on the Moberly bonds from "A-" to "CC" on Friday and indicated they are likely to further lower the rating.

A criminal investigation separate from the governmental investigation was announced last week by Randolph County Prosecuting Attorney Mike Fusselman, with the assistance of Attorney General Chris Koster.

"What it comes down to is we're looking at the types of representations that were made to people to convince them to part with the money to invest in the project and whether the representations made were accurate or whether they were misleading," Fusselman said. Fusselman said the media attention surrounding Mamtek, which promised to create 600 jobs in the Moberly area, prompted his investigation.

Two other cities considered a deal with Mamtek, but the company left after the cities insisted it provide documents such as its financial information. Officials from Marshall, Mo., and Bismark, S.D., said the deals ended after Mamtek's lack of transparency.

"They have to prove who they are and what they say they're going to do is possible; this is case for getting it done, and they did none of that," said Russel Staiger, president of the Bismark-based economic development group that was coordinating the deal with Mamtek.

Money was taken from Moberly's reserve fund after Mamtek, a China-based sucralose manufacturing company, defaulted on its first bond payment, according to a press release from the Moberly Area Economic Development Corporation. A new company, American Sucralose Manufacturing Inc., has promised to repay the City of Moberly for manufacturer Mamtek's missed payments. The company is made up of former Mamtek executives and is not registered with the Secretary of State's office as of the end of business on Monday.

"The City and the Trustee have since been advised that Mamtek will not be able to resolve these deficiencies within a time frame and in a manner which is satisfactory to the City and to the Trustee," the press release said. The City of Moberly and the United Missouri Bank are pursuing alternatives to complete the project.

The debt service reserve fund has adequate funds to pay the next scheduled payment to bondholders, and alternatives are being considered to account for the rest of the money, according to the press release. The agreement with American Sucralose Manufacturers Inc. is meant to restore the money paid out of the reserve fund and cure Mamtek's deficiencies, the press release said. The Columbia Daily Tribune reported that the company already laid off the few employees they had hired and abandoned the construction of their facility in Moberly.

Moberly city administrators and economic development officials were unavailable for comment.

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