High-Profile Lawyers Claim Tax-Incentive Investigation Is ‘Political Retribution’

John Reitmeyer | May 7, 2019 | Budget, Politics
Attorneys representing companies linked to South Jersey powerbroker George Norcross challenge legitimacy of Murphy task force; chair of task force rejects their claims

Credit: NJTV News
A task force chaired by Ronald Chen, left, is examining the state's tax incentive programs.
Several high-profile lawyers are challenging the legitimacy of the task force that’s probing the state’s corporate tax-incentive programs. The lawyers represent five South Jersey-based companies whose actions were put under the microscope by the gubernatorial task force in a hearing late last week.

The chair of the task force, Rutgers Law professor Ronald Chen, issued an immediate response defending its work and said its scrutiny involves the Economic Development Authority, an executive-branch agency Gov. Phil Murphy has “full constitutional and statutory authority to investigate.”

Chen said the task force is ready to “vigorously” defend its work in court if the lawyers decide to press the issue further.

The strongly worded letter was sent yesterday to the task force’s lead attorney Jim Walden by lawyers for Cooper University Health; Conner, Strong & Buckelew; Parker McCay, and several other companies which have drawn the task force’s scrutiny; it detailed a list of their concerns with the ongoing probe.

They include whether the task force, created earlier this year by an executive order issued by Murphy, has the legal authority to conduct such investigative work and whether it has given the companies ample opportunity to respond to issues the task force has uncovered and scrutinized during recent public hearings.

“This process has been tainted from the outset,” the lawyers wrote in the letter, a copy of which was also provided to reporters yesterday.

Former state Attorney General signs on

Former state Attorney General Christopher Porrino
The roster of lawyers assembled by the companies is noteworthy; the letter was signed by former state Attorney General Christopher Porrino, former U.S. Secretary of Homeland Security Michael Chertoff and former federal judge Herb Stern, among others.

Murphy created the investigative panel in January after an audit, whose results had just been released by the Office of the State Comptroller, raised serious concerns about the state’s tax-incentive law and the oversight policies of the Trenton-based EDA, the agency that administers the programs. Chen was named to lead the group, and the Murphy administration also hired New York-based law firm Walden Macht & Haran to serve as special counsel, with former New York Mafia prosecutor Jim Walden serving as the lead attorney.

The task force held an initial public hearing at the end of March, and also announced it had issued a criminal referral to an unnamed law-enforcement agency last month after uncovering alleged unregistered lobbying.

But it was the group’s latest public hearing, held last week in Newark, that generated the most attention as applications for tax incentives that were submitted by companies with ties to Democratic South Jersey powerbroker George Norcross or his brother, Philip, were scrutinized for hours by Chen, Walden and other task force attorneys.

Among the questions raised during the hearing were whether some of the companies, including Cooper, where Norcross is chairman of the board, and Conner, Strong & Buckelew, where he is executive chair, had seriously considered moving at least some employees to proposed new locations in Philadelphia. Relocation out of state can be a key factor for qualifying for a tax incentive.

Who had a hand in revising the programs?

The hearing also looked into the 2013 state law that resulted in a significant revision of the existing tax-incentive programs and questioned additions that were apparently made by an attorney with Parker McCay, the law firm where Philip Norcross is chief executive officer. The attorney was identified as Kevin Sheehan.

Among the issues raised in the letter sent by the lawyers yesterday was whether Walden has the credentials to practice law in New Jersey, which the letter suggests he is doing by issuing “document subpoenas” on behalf of Chen. The letter also argues the task force doesn’t have jurisdiction over the EDA, which it contends is an “independent authority” that legally falls outside direct gubernatorial oversight. It goes on to criticize the format of the hearings themselves and claims the task force isn’t allowing the companies or their attorneys an ample opportunity to respond to the information being highlighted by it.

“This one-side investigation smacks of political retribution and undermines the credibility of your exercise,” the letter said. “We reserve all rights to seek full remedies to the extent any of these false and defamatory accusations were directed at our clients.”

While the letter didn’t directly threaten a lawsuit, Chen’s response to it seemed to invite the lawyers to file one.

“The Governor has full constitutional and statutory authority to investigate any entity within the Executive Branch, including the EDA, either by himself or through a delegate,” Chen said. “If anyone wishes to challenge that authority, they should bring an appropriate action in court and we are ready to defend it vigorously.”

A representative of Walden’s law firm could not be reached for comment yesterday.

The task force’s investigation has come at a critical time as the tax-incentive programs are due to expire at the end of June. Murphy has long criticized the programs as being too generous and prone to abuse, and he has already proposed major changes. They include making the incentives more targeted toward specific policy goals, such as historic-site preservation and brownfield redevelopment. Murphy 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 programs, arguing they have 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.