The state's "flagship" economic development program may have doled out an estimated $150 million in tax credits erroneously in the last five years to companies that didn't meet the criteria due to a lack of oversight, according to State Rep. Tom McMillin, R-Rochester Hills.

McMillin met with the state Auditor General's office Tuesday after it released a report this week that said the state didn't follow up on company job projections that often fell short of required triggers to receive tax credits but still received the money.

The report comes a little more than a month after it was learned that the Michigan Economic Growth Authority (MEGA) board approved a $9.1 million tax credit to Richard Short, a convicted embezzler who was CEO of a company named Renewable and Sustainable Companies LLC (RASCO). The Flint Journal reported that at the same time he was working on the MEGA deal, Short was scamming thousands of dollars from an 86-year-old neighbor with dementia.

The Auditor General report found several problems with the Michigan Strategic Fund's oversight of the MEGA tax credit program. The audit concluded that the MSF's procedures were "moderately effective."

McMillin said he was considering calling for legislative hearings to get more information and wouldn't rule out getting the companies to return the unearned tax credits.

The Michigan Economic Development Corp. didn't dispute many of the findings and vowed to fix the oversights.

"MEDC has implemented enhanced pre- and post-audit procedures, which include conducting onsite visits and validating individual payroll records, such as W-2s," MEDC spokeswoman Bridget Beckham wrote in an e-mail.

But critics were skeptical.

"The MEDC is failing in administrating the MEGA program," said James Hohman, a fiscal policy analyst with the Mackinac Center for Public Policy.

Hohman said the MEDC failed to verify the jobs claims made by companies and still gave out tax credits that were not justified by the agreements.

"Here's the state's flagship economic development program, the Auditor General is showing clearly the MEDC is not a good administrator, and are likely to have wasted taxpayers money," he noted.

McMillin called the Auditor General report "extremely troublesome."

"There was certainly a level of willful neglect," he said. "They certainly celebrated when people said they created jobs, whether they were actually created or not."

McMillin said he realized some of the errors may not have been on the scale of RASCO, but said he was concerned that there were similar attempts to defraud the state of money.

Beckham stated in an e-mail that the MEDC awarded about 600 MEGA tax credits and never encountered a situation like RASCO.

But McMillin said the Auditor General report shows that the state wasn't even looking for fraud.

"If you don't actually look at the documents, then you are not going to find anything," McMillin said. "When you turn a blind eye, anything can happen. They haven't seen it, but they weren't looking. ... It was the fox guarding the hen house."

Among the findings in the Auditor General's report:

• One company didn't meet the wage requirement to qualify for the tax credit. Instead, the company used its own projections to boost the average wage high enough to qualify and was awarded a tax credit of $185,675. The audit found that this happened with 3 of the 40 tax credit certificates reviewed. The Michigan Strategic Fund didn't dispute the finding in the Auditor General's report. Instead, they said they would amend their policy to allow projections to be used. (McMillin states that a single quarter's worth of higher wages were being extrapolated out as if the wage payments had been maintained for a full year.)
• The MSF didn't get the detailed data necessary to validate tax credit certificates given to companies. The audit found 10 of the 15 companies reviewed didn't submit required information.
• The MSF didn't always check data provided by companies through a third party or by requesting detailed employee records. The audit found that as many as 26 percent of the employees were potentially ineligible for the tax credits in the 15 audits reviewed. The audit states that the MSF approved $2.6 million in tax credits for potentially ineligible employees. The MSF didn't dispute the finding.

Just two members of Michigan's delegation to Congress have signed a national pledge to repeal and replace ObamaCare with "real reforms that lower health care costs without growing government."

At the beginning of this year, as the president and Congress began pushing toward the finish line with their effort to federalize control of the U.S. health care system, the Washington D.C.-based Club for Growth began retargeting its opposition toward the 2010 election by creating the "Repeal It" pledge. It asks 2010 candidates for Congress to pledge to strike down the federalized health care law. As of Monday afternoon, 72 current members of Congress and 307 candidates have signed on. This includes just two current members from Michigan and twelve challengers.

(The information that follows reflects the status of the "Repeal It" pledge, as of close of business on Monday.)

The only two current members listed as signing as of Monday are both Republicans: U.S. Reps. Fred Upton of St. Joseph and Candice Miller of Harrison Township.

There are no incumbent Democrats from Michigan shown as signatories. Also missing are the names of three incumbent Republicans: Thad McCotter of Livonia, Mike Rogers of Brighton, and Dave Camp of Midland.

(Democrat Bart Stupak and Republican incumbents Vern Ehlers of Grand Rapids and Pete Hoekstra of Holland have all announced that they will not be seeking re-election to Congress in 2010.)

The Club for Growth is an educational and political pressure group that promotes "prosperity and opportunity through economic freedom." They are famous for ranking members of Congress on a variety of measures related to their votes for or against free-market policies. Previous Michigan Capitol Confidential coverage of the Club's work has included their "RePork Card" (www.MichCapCon.com/12007) and their recent "Pro Growth" rankings of Congress members (www.MichCapCon.com/12284).

The Club also launches primary challenges against Republican lawmakers who fail to measure up to its free-market standards. In 2004, the group reportedly provided nearly $2 million worth of assistance to Republican Congressman Pat Toomey, R-PA, in an attempt to unseat then-Republican U.S. Sen. Arlen Specter.

Despite the support of President George W. Bush and virtually the entire GOP establishment, Specter barely won. Emboldened by this near miss, Toomey announced on April 15 of last year that he would again challenge Specter in the 2010 GOP primary.

Two weeks later, Specter announced that he was switching parties and would run as a Democrat instead. 

In 2006, the Club threw its financial support against Michigan Congressman Joe Schwarz, R-Battle Creek, in Michigan's 7th congressional district, due to the Club's opposition to Schwarz's fiscal record. The Club's support was benefitting Tim Walberg, R-Tipton, who defeated Schwarz in the primary and went on to serve one term in Congress before losing in the 2008 general election to Mark Schauer, D-Battle Creek.

Walberg hopes to return the favor by beating Schauer in 2010 and has signed the "Repeal It" pledge.

But Walberg is not alone, as three of his 7th district Republican primary opponents have signed: attorney Brian Rooney of Dexter, businessman Marvin Carlson of Manchester and pharmaceutical representative Greg Merle of Battle Creek.

Two other incumbent Democrats could be facing challenges from Republicans who have signed the pledge to repeal federalized health care:

• In Michigan's 9th congressional district, Republican Andrew "Rocky" Raczkowski of Farmington Hills is the only GOP candidate to have signed the pledge. He seeks to defeat Democrat U.S. Rep. Gary Peters of Bloomfield Township.

• In the 15th congressional district, Republican Robert Steele, a cardiologist from Superior Township, is the only Republican yet to sign the pledge. He hopes to knock off Democrat incumbent John Dingell of Dearborn, the longest-serving member of Congress from any state.

Pledge-signing Republicans have also entered the fray in each of the races where the incumbent member of Congress is leaving:

• Attorney Linda Goldthorpe of Curtis in the Upper Peninsula signed the pledge and hopes to succeed Democrat Bart Stupak in the 1st congressional district. Stupak is retiring from Congress.
• U.S. Rep. Pete Hoekstra of Holland is leaving his 2nd congressional district seat and hoping to become Michigan's next governor. Three of the Republicans who want to replace him have signed the pledge: businessman Bill Cooper of Fruitport, current state Sen. Wayne Kuipers of Holland, and former University of Michigan and professional football player Jay Riemersma of Holland.
• Likewise, U.S. Rep. Vern Ehlers is retiring from the 3rd congressional district seat. Pledge signers lining up to replace him include two current Republican members of the Michigan Legislature: state Rep. Justin Amash and state Sen. Bill Hardiman — both of Grand Rapids.