My what a difference two months can make. There is this October press release taken from the New Mexico Economic Development site:
Governor Bill Richardson today applauded American Utilicraft Corporation’s announcement today that it is seeking to build its cargo plane assembly plant at the Double Eagle II Aviation Park in Albuquerque.
Compared to this excerpt from a Sunday Daily Herald article:
While state economic development officials introduced [American Utilicraft] and its plans to the tribe last year, Secretary Rick Homans said in a December letter to a Navajo official that the state never vouched for the company.
Secretary Homans, the state may never have vouched for them, but the Governor sure gave them a glowing endorsement: “We welcome entrepreneurial companies like American Utilicraft, and we will do everything we can to help them open their businesses in our state.”
Luckily, the Navajo Nation seems to be smarter than the State of New Mexico when it comes to sniffing out a scam.
At the tribe’s request, the state Finance Authority hired a consultant to review the deal in December. A copy of the review was delivered to the tribe Jan. 3.
The review found that the $34 million investment by the Navajo Nation would only buy the tribe a 25 percent ownership stake despite a total company valuation of $8 million to $10 million.
It also found a low likelihood that two key aircraft sales contracts would materialize due to a history of bankruptcies accompanying the CEO of one purchaser and the lack of available information for the other.
As part of the proposal, Utilicraft CEO John Dupont would get a nearly $100 million severance package should problems with the deal develop.
According to the Finance Authority, company rules allow Dupont to initiate his own severance package by terminating himself if his responsibilities are changed, his pay is cut or the geographic location of his job is moved by more than 20 miles.
Now, you would think that Land of Enchantment officials might have learned from their lack of due diligence in the past. Two investment fiascos in the first term of one administration sure does support the case of those who feel that governments do not belong in the venture capital business. I’m thinking Governor Richardson and Secretary Homans would be wise to reconsider their whole plan for creating economic prosperity in New Mexico. There are much simpler ways than gambling with taxpayer dollars.
Update: My use of the word scam may have been a bit harsh. The facts I am basing my “analysis” on came straight out of the newspaper. Reading about a CEO being guaranteed a $100 million golden parachute from an eight million dollar company, just does not seem right.
If someone has some other information that would shed more light on this issue, I would be happy to update my blog with the corrected information. I’m about as pro-business as you can get, and hate to see any business unjustly get a black eye.