JEFFERSON CITY - The head of the Department of Economic Development said his department fulfilled its standard of due diligence into a failed Chinese company's investment in Moberly.
"Where there is no risk to taxpayers, it is an inefficient use of taxpayer dollars for DED to double check or second guess anything that a company says," said David Kerr, the head of the department.
Members of the Interim Committee on Government Oversight and Accountability questioned whether the state Department of Economic Development or local economic development officials could have prevented Mamtek, the Chinese company, from defaulting by looking more thoroughly into the company's background before the deal was even made.
"What we also took heavily into consideration was that a national rating agency, Standard and Poor's, had evaluated the process, had evaluated this company, had evaluated their business plan and rated it as an A-, and I certainly think that they probably have the wherewithal and the professional people that do this as a living," Kerr said. "Likewise, the underwriters and the bond issuers have a tremendous amount at stake."
However, the attorney representing the underwriter, who compiles information for potential investors, testified that he was only concerned with the credit rating of the city, not the company financially backing the bonds.
"I continue to be concerned that nobody is looking after the interests of the buyers of the bonds," said Rep. Chris Kelly, D-Columbia.
Mamtek promised to create up to 600 jobs in Moberly, and the state offered it incentives to build a plant there. However, the company was revealed to have no operations and only five employees in Missouri. It recently defaulted on a $39 million bond payment to Moberly.
The economic development department was never able to verify that Mamtek had any facilities in China. Emails from department consultants in Shanghai indicate that Mamtek's manufacturing facility was never operational. The department relied on the eyewitness account of Mamtek's attorney, Chris Wise, to prove that the factory actually exists. Missouri's department never asked its own representative in China or a third party for verification of the factory's authenticity.
Committee member Rep. Ryan Silvey, R-Kansas City, criticized the department for not seeking third-party verification of the factory's existence.
"I liken this to, on my resume, or anybody's resume, you never put down the guy that's going to say, 'Don't hire him, he's a chump.' Right?" Silvey said. "I mean, you put down the people that are going to say the best things about you because you're the one providing the information."
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