Whistleblower Says Her Former Company Lied in EDA Tax-Incentive Application

Testimony before task force adds to concerns that state’s economic-development programs were loosely administered and prone to abuse

Credit: NJTV News
Gulsen Kama
A woman who filed a whistleblower lawsuit against her former employer said top executives lied on a state tax-break application that landed the company an economic-development incentive worth nearly $2.7 million.

The woman, Gulsen Kama, was a high-ranking financial official at the Jackson Hewitt tax-preparation firm in 2015, when she said she was instructed to prepare an analysis comparing the costs of relocating from Parsippany to Florida or New York as a part of the company’s effort to obtain the tax break. Meanwhile, she said a site in Jersey City had been chosen and was already a “done deal.”

“The locations that were being considered, they were all in New Jersey,” she said. The incentive program is designed to benefit companies that would otherwise move out of state.

Her testimony yesterday before an anti-fraud task force empaneled by Gov. Phil Murphy served to confirm some of the worst fears of critics of the state Economic Development Authority’s incentive programs — namely that they are loosely administered and prone to being abused by well-resourced organizations.

Murphy, a first-term Democrat, has made revamping the tax incentives — which were inherited from former Republican Gov. Chris Christie and are up for renewal later this year — one of his administration’s top policy goals. The incentive programs were also the subject of a troubling audit issued earlier this year by the Office of the State Comptroller.

Compelling testimony

Kama, appearing in Trenton in response to a subpoena, provided the most compelling moments of a daylong hearing by the five-member task force, which was created by executive order last month.

Kama raised similar allegations in her whistleblower lawsuit, which was ultimately settled.

A spokeswoman for the EDA responded by saying the agency was working with the task force and would pursue “all legal options” if any fraud occurred. A statement from Jackson Hewitt said the company believes it provided the state with an “accurate and comprehensive” application for the tax break.

The state has been offering some form of economic-development incentives for over two decades, but the programs were significantly overhauled in 2013 by Christie in the wake of the Great Recession. He negotiated agreements with Democrats who control the Legislature to try to jumpstart job growth, allowing companies and developers to get more generous tax breaks, while also reducing requirements for investment and job creation.

This was especially true in places like Camden, where Senate President Steve Sweeney, who controls most of the votes in South Jersey, originally hails from.

The pace of the incentive awards was also ramped up after the recession, helping to fuel criticism that the programs had become too generous and too difficult to monitor. More than $8 billion in tax breaks were awarded during Christie’s tenure.

Doubts raised over claims about 3,000 jobs

To receive them, companies are supposed to generate a “net benefit” for the state through job creation and investment. Firms aren’t supposed to be able to claim their tax incentives until those standards are met.

The first official sign of trouble was raised in a 2017 analysis released by the State Auditor that called on the EDA to “strengthen procedures to verify recipient compliance.”

Credit: NJTV News
State Comptroller Philip Degnan
And then earlier this year, State Comptroller Philip Degnan released his agency’s audit of the incentive programs. That review found that, within a sample group of a few dozen companies, there wasn’t enough documentation to prove all of the promised jobs had been created, even though the companies had been allowed to redeem their tax breaks. In all, the audit brought into question roughly 3,000 jobs, and it also raised troubling concerns about EDA oversight procedures and standards written into the 2013 tax-incentive law.

Last week, another whistleblower case made headlines as a former EDA staffer’s 2015 lawsuit drew new attention to claims about pressure being applied on agency officials to approve applications for tax incentives under dubious circumstances. Depositions also described staffers being flooded with applications that relied heavily on claims made by company officials.

Without identifying Jackson Hewitt by name during her testimony yesterday, Kama said her former company had once before qualified for over $2.5 million in state tax breaks through a prior incentive program. She said it was during the application process for the second tax break that the company disclosed it wasn’t fully living up to the hiring terms of the first tax break.

Jackson Hewitt was allowed to settle with the EDA and move forward in the application process for a Grow New Jersey incentive, she said. When asked by task-force member Milton Williams if the company then lied about jobs being “at risk of leaving New Jersey,” Kama eventually responded “correct.” And she said she was ultimately fired after she raised concerns about the information being provided to the EDA.

Company: Application was ‘accurate and comprehensive’

Jackson Hewitt defended its actions in a statement issued after the hearing ended, but did not get into any of the specifics.

“Jackson Hewitt values its relationship with the state of New Jersey and intends to cooperate with the Task Force, as we would with any government inquiry,” the statement said. “Jackson Hewitt believes it provided an accurate and comprehensive application to the EDA and is in compliance with all applicable provisions of the Grow NJ and Economic Redevelopment and Growth programs.”

EDA spokeswoman Erin Gold said her agency is working with the task force to get to the bottom of Kama’s allegations.

“We take the allegations raised today seriously and we will work with the Task Force to address these matters swiftly,” Gold said. “If a company did commit fraud and willfully provided inaccurate information to receive an approval, the EDA is committed to pursuing all legal options, and referring potential criminal action to the Office of the Attorney General.”

Degnan was among the other witnesses who appeared yesterday before the task force, which also has the authority to refer cases to the state Attorney General if it finds instances of wrongdoing. Ronald Chen, a Rutgers Law School professor who is chairing the panel, said the task force has been seeking full documentation from other companies that have received tax breaks and is offering them a chance to come clean. One firm is already in the process of paying back $1.5 million.

Murphy has already proposed a host of changes to the current incentive programs and has insisted that caps be placed on them in the future. A spokesman for the governor, Darryl Isherwood, said yesterday that the task force was impaneled to “ensure that every dollar of taxpayer money that has been awarded by the EDA is accounted for and every promised job created or retained.

“Based on the findings so far it seems the task force is doing that job admirably,” Isherwood said.

Meanwhile, Sweeney, the Senate leader, cautioned against drawing too many broad conclusions from the testimony taken yesterday.

“In making any needed improvements we should be careful not to demonize all of the businesses and workers who have acted in good faith,” Sweeney said. “The great majority of them have contributed to greater economic opportunities for their home communities and the state.”

We’re in this together
For a better-informed future. Support our nonprofit newsroom.
Donate to NJ Spotlight