The special task force impaneled by Gov. Phil Murphy to investigate New Jersey’s corporate tax-incentive programs met in a tense, six-hour hearing yesterday, in what seemed like a trial of the programs and their relationship to the state’s most powerful Democrats.
A big part of the task force’s mission is to review how tax incentives were distributed during the tenure of former Gov. Chris Christie, a two-term Republican who has staunchly defended his administration’s work even as it has come under fire by Murphy, his Democratic successor. During Christie’s tenure $8 billion in tax incentives were awarded by the Economic Development Authority. A report by the state comptroller and testimony from whistleblowers has revealed what appears to be suspect oversight by the EDA and possibly fraud by some companies that received tax breaks.
The EDA’s award of especially generous tax incentives of more than $1.5 billion to projects in Camden, one of the nation’s poorest cities, and the 2013 law that was written to specifically provide for these breaks and others, is particularly under the microscope.
That’s because $1.1 billion of the incentives were awarded to businesses, business partners, allies and others with ties to Democratic South Jersey boss George Norcross or his brother Philip. Norcross, often allied with Christie, a Republican, is a longtime friend and supporter of Senate President Steve Sweeney (D-Gloucester).
The individual applications for tax incentives submitted by companies with ties to Norcross were reviewed at length at yesterday’s hearing. These included Norcross’s own insurance company, which received a tax break in 2017 as it moved to Camden from nearby Marlton. The hearing also cast doubt on assertions made by these companies that they were seriously considering relocating out of state, a key factor when qualifying for the tax incentives.
Norcross has pushed back
Norcross has already pushed back strongly against such criticism after much of it came out in the days leading up to yesterday’s hearing in separate reports published by The New York Times and by ProPublica in partnership with WNYC. In fact, in a statement Norcross praised the media reports for highlighting the ongoing economic-development efforts in Camden. Other officials from Camden, including state Sen. Nilsa Cruz Perez (D-Camden), issued a joint statement yesterday that defended the efforts to revitalize the city that have involved the tax incentives.
And later in the day, Christie issued a statement to reporters in which he took issue with the investigation, calling Murphy’s task force a “show trial commission.”
At times during yesterday’s hearing — which took place in a courtroom on the campus of the Rutgers Law School in Newark — it felt like an actual trial was underway, as witnesses were sworn in and a court reporter struggled to keep up with the testimony. A former New York mafia prosecutor, task force special counsel Jim Walden, led some of the more intense questioning of current and former officials of the EDA. Dramatic pieces of paper evidence were projected onto a screen in the courtroom, and reporters joked that all that was missing was the signature sound effect of the long-running courtroom drama “Law & Order.”
Murphy formed the investigative panel by executive order in January, granting it subpoena power and assigning New York-based law firm Walden Macht & Haran as special counsel. Those actions came in the wake of a troubling audit released by the Office of the State Comptroller, also in January, which raised serious concerns about the state’s tax-incentive law and the EDA’s oversight policies.
To receive tax breaks, companies are supposed to generate a “net benefit” for the state through job creation and investment. And firms aren’t supposed to be able to claim their tax incentives until those standards are met. But for Camden, projects simply have to break even, meaning the state wouldn’t lose any money after providing the tax incentives.
Connection to another Norcross, Philip
The test used by the EDA to check for a “net benefit” was among the policies scrutinized during yesterday’s hearing. At one point, Walden pressed former EDA chief operating officer Tim Lizura to explain how the assessment worked. He also questioned why in some cases companies could get credit as part of the test for paying taxes they didn’t actually have to pay due to the awarding of other tax breaks. Lizura stressed in response that the state Attorney General’s Office worked closely with his agency at the time the law was being written and signed off on that provision of the law.
Walden also highlighted features of the law that he said computer records indicate were inserted by a lawyer with Mount Laurel-based law firm Parker McCay as the law went through the legislative process in Trenton. Philip Norcross, George Norcross’s brother, is the chief executive officer of Parker McCay. The lawyer was identified as Kevin Sheehan.
Walden asked Lizura if he had any reason to believe changes were made to the legislation to benefit specific legal clients, and Lizura responded by saying, “I don’t.” (The firm denied doing anything inappropriate in a statement provided to The Times for its recent story.)
Lizura defended the actions of his former agency, saying it helped to generate $33 billion in new investment in New Jersey.
“We ran the EDA in a responsible and professional manner,” Lizura said. “I am proud of the work that we did.”
Earlier, Walden asked a current EDA official to go over specific elements of the applications for tax incentives that were submitted for Norcross’s insurance company, Conner Strong & Buckelew, and for other companies he’s affiliated with, including Camden’s Cooper Health System. Some of the paperwork indicated the companies were looking at properties in Philadelphia as potential landing places, but a review of letters of intent and other documentation led by Walden yesterday cast doubt on how serious an option moving operations to those properties was.
A ’criminal referral’ already has been made
After Walden highlighted how a move to one of the sites in Philadelphia would have meant employees from the same company working in separate spaces on four different floors, ranging from the basement to the 12th floor, current EDA underwriting manager David Lawyer testified that such a scenario would cause him to look at the potential move more closely.
“Yes, I would ask more questions,” Lawyer said.
Later, one email that was projected onto a screen in the courtroom suggested high-level officials at Cooper had already determined well before a tax break was sought that their best deal would be to move back-office jobs to a site in Camden and not out of state.
The task force has already revealed that it has made a “criminal referral” to an unnamed law-enforcement agency regarding potentially unregistered lobbying related to the drafting of the 2013 law. Yesterday, Pablo Quinones, a former deputy chief of the fraud section of the U.S. Department of Justice who is also working with the task force, added to the drama by saying the stakes are high for anyone who may have come by their tax incentives dishonestly.
“There is real criminal exposure for companies that lie to the EDA,” he said.
Yesterday’s hearing was the second to be held by the task force, which is also planning to issue a report on the tax incentives at some point. The review comes at a critical time as the tax-incentive programs are due to expire at the end of June.
Murphy has already proposed major changes that would make the incentives more targeted toward specific policy goals, such as historic-site preservation and brownfield redevelopment. The governor is also insisting that lawmakers cap the size of the incentives to lessen their impact on the already-strained state budget.
But some lawmakers have come to the defense of the existing programs, arguing they played an important role in the state’s recovery from the Great Recession. It’s unclear whether Murphy will be able to strike a deal with lawmakers to remake the programs before June 30.
Before the hearing began, task force chair Ronald Chen, a Rutgers law professor, cautioned those in the gallery not to view it as an actual court proceeding and that it was still part of a lengthy fact-finding mission.
“This is a hearing,” he said. “It’s not a trial.”