INDEPENDENT INVESTIGATION OF BUSINESS ENERGY TAX CREDIT PROGRAM CONFIRMS INADEQUATE FINANCIAL CONTROLS
Files forwarded to Oregon Department of Justice for review and possible legal action
SALEM – In a letter to Legislators today, Secretary of State Jeanne P. Atkins shared the findings and recommendations from an independent investigation of the Business Energy Tax Credit (BETC) program, which was sunseted by the Legislature in 2014 following concerns about huge cost overruns and possible criminal activity.
“By the time the BETC program ended in 2014, over $1 billion in BETC credits were issued by the Oregon Department of Energy for over 14,400 projects,” said Atkins. “Struggles within this program are already well-documented. However, in a meeting with my office earlier this year, leadership at the Department of Energy was candid that the state of the BETC project files did not inspire confidence that there were no further instances of fraud or other problems. In order to determine whether additional steps should be taken to investigate BETC projects, I immediately commissioned a third-party forensic investigation of the program’s records.”
The investigation was conducted by Marsh Minick P.C., an independent financial crime consulting firm. Key findings related to BETC projects outlined in the independent report include:
Through a forensic data analysis performed on all 14,494 BETC projects, the investigators found that out of the $1 billion in tax credits issued, there are $347 million worth of tax credits where records contain evidence of risk factors that were “concerning.” Areas of concern discovered by the investigators included: direct conflicts of interest; projects that were never operational; businesses that closed or went out of business; indistinguishable, missing or suspicious eligible cost documents; projects with unaccounted for equipment; brokering conflicts and intermediary issues; and illogical projects.
More than 25 percent of large projects – those involving project costs over $1,000,000 – exhibited at least one characteristic of concern for the investigators. About 97 percent of files available for projects of this size were reviewed individually; this consisted of 311 project files and accounted for $773 million in tax credits issued of which $340 million were of concern.
In contrast, of 3,150 smaller project files that were reviewed, only 2.7 percent (86 projects) exhibited at least one characteristic of concern for the investigators. Extrapolating this sample to the overall population of smaller BETC projects estimates a total of $7.2 million in tax credits of concern for these smaller projects.
The examination identified no direct evidence of fraud. However, out of the 14,494 total BETC projects, this statistical and direct examination of records identified 79 projects where there was circumstantial evidence of suspicious behavior. The evidence was sufficient to warrant referral to the Oregon Department of Justice for further review.
“The report released today confirms what has already been widely reported: there were many financial risks in this program and there were inadequate controls in place to protect taxpayers,” said Atkins. “It is my hope that both the Executive Branch and legislative leadership will use the recommendations of this investigation to evaluate future legislative proposals establishing tax credit programs and will make financial controls an essential part of program design and implementation in the future.”