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A dozen companies that won controversial tax breaks from the state of New Jersey have had their credits put on hold and are under investigation, according to the final report of a task force created by Gov. Phil Murphy.
The Murphy administration has put a freeze on the continued disbursement of $578 million worth of tax breaks awarded by the New Jersey Economic Development Authority under former Gov. Chris Christie. The task force’s lead investigator, Jim Walden, said Thursday that he has referred several companies to law enforcement for making potentially fraudulent threats to move out of state in order to obtain tax breaks. He didn’t specify which ones or what possible charges the companies may face. He said the investigations are still active.
“All I can say is that they are — how can I put this? — amply resourced, heavily staffed and appear to be taking our reports very seriously,” Walden said.
Murphy created the Governor’s Task Force on EDA Tax Incentives last year after a state comptroller’s report found problems with the size of the tax breaks relative to the number of new jobs created, as well as a lack of oversight at the EDA. An investigation by WNYC and ProPublica last year found that more than a billion dollars worth of tax breaks went to companies in Camden connected to the powerful Democratic party boss, George E. Norcross III, as well as clients of the law and lobbying firms of his brother Philip.
Of the 12 companies whose awards are under review, five are connected to Norcross and represent the vast majority of the dollars — $540 million of the $578 million total.
The task force investigation found that these companies made dubious threats to move out of state and that the EDA had operated under political pressure to approve tax breaks, even when companies did not provide documents or answers to issues flagged by the EDA staff. It also found a cozy relationship existed between the leadership of the EDA and consultants who were hired by companies to get their tax breaks approved.
The program was created in 2013 under Christie, a Republican, and it was heavily influenced by Philip Norcross’ law firm, the report says. The program awarded $1.6 billion to companies that moved to Norcross’ home town of Camden, including George Norcross’ insurance company. Philip Norcross’ law firm, Parker McCay, represented many of the companies that received tax breaks.
Tim Sullivan, chief executive of the EDA, said in a statement that the task force “has been critical in identifying opportunities for NJEDA to improve its vital oversight and transparency responsibilities, as well as needed reforms to any future incentives regime.”
“We have no higher obligation than as stewards of taxpayer resources, and since I became CEO in 2018, the NJEDA has taken a number of steps to strengthen our processes and policies to improve our capabilities,” Sullivan said.
A spokesman for George Norcross said there was nothing in the final report that would justify withholding the tax break from his insurance company, Conner Strong & Buckelew.
“The firm has substantially exceeded the number of jobs it promised to bring to Camden, complied with every request and requirement of the EDA and looks forward to the ultimate approval of its incentives,” Norcross spokesman Dan Fee said.
A spokesman for Parker McCay did not respond to an email seeking comment.
The task force report also criticized another group of transactions that did not involve the Norcross brothers. Some companies provided the same out-of-state location where they claimed they would move if they didn’t get a tax break — Blue Hill Plaza in Rockland County, just over the border in New York. There were so many of these applications, according to the report, that EDA staff would refer to it as “the famous” Blue Hill Plaza or “Old Faithful.”
But the applications were approved, raising questions by the task force about whether companies falsified their claim that they would move out of state if they didn’t get a tax break.
The task force said lobbyists and politically connected lawyers had too much influence over the EDA. The Economic Opportunity Act of 2013 expired last year. The state Legislature passed an extension that was vetoed by Murphy, a Democrat, who has called on legislators to make changes to the program.
“The EDA has in some instances had a close relationship with incentives consultants who frequently represented companies that appeared before the EDA,” the report said.
As one example of the cozy relationship between the EDA and private lobbyists, the report says that shortly after the legislation was enacted in 2013, the EDA’s then president and chief operating officer, Tim Lizura, gave a presentation to a business development group with Kevin Sheehan, a lawyer at Parker McCay. The final slide of the presentation offered Sheehan’s contact info.
Lizura, like Parker McCay, did not respond to a request for comment.
The task force recommended that all consultants register as lobbyists, and it called for ethics guidelines to regulate the amount of influence they have within the EDA.
The report recommends the state put a limit on the size of all tax breaks, that the EDA put a standard fraud detection system in place and that any future tax break legislation be written to protect the staff from political corruption and influence.
“A lot of the defects that we found in the process stem from the fact that there was this overwhelming impetus, certainly after the Economic Opportunity Act of 2013, to get this money flowing,” said Ronald Chen, the chair of the task force and formerly the dean of Rutgers Law School. “We have to give the EDA the resources and robust systems to give the staff the ability to say no.”
The final report, released Thursday, came days after an appeals court upheld the dismissal of a lawsuit filed by George Norcross that argued the governor did not have the authority to create the task force and investigate the tax breaks.
“I had no idea of the ugly reality waiting to be uncovered,” Murphy said in a written statement. “This administration will not tolerate fraud or self-dealing and we will ensure that every dollar of taxpayer money is spent wisely and effectively. Moving forward any incentives offered must produce the number of promised jobs for our state.”
This article was initially published on ProPublica