Tobacco commission grants can leave communities on the hook

  executive director of a Virginia ecomic development commission bent rules to forgive a six-figure grant to a politically connected developer whose planned biofuel project didn’t pan out, documents obtained by Associated Press show.

Tobacco Region Revitalization Commission's Evan Feinman did t recoup $210,000 Chuck Lessin owed state, according to a report from Office of State Inspector General. Feinman inste allowed Lessin's unrelated work as a member of Virginia Israel visory Board, which also promotes ecomic development, to count toward money he owed when his Appalachian Biofuels project fell through.

In an interview, Feinman defended decision, saying Lessin took an “versarial approach” to repayment and, ultimately, beleaguered Russell County where project was supposed to locate would have been on hook or facing litigation if grant wasn't forgiven.

Lessin, who runs a bingo hall in suburban Richmond and is a Republican political dor, did t respond to requests for comment.

episode is latest in a series of questionable business deals me by commission created more than two deces ago to spend Virginia’s portion of national tobacco settlement. Infrequent state reviews have found persistent problems with how money is spent and tracked. And AP's review of program that funded Lessin’s venture found tangled repayment situations have played out time and again across poorest parts of state.

commission gives performance-based grant or loan money to local governments through Tobacco Region Opportunity Fund . money n flows to developers at beginning of a project. But if project doesn’t meet its promised goals, localities can be left holding bag if private companies don't repay m.

Since inception of program, commission has sought to recoup about $22.9 million through places it's meant to help, with about $1.6 million currently outstanding from 14 localities, records provided to AP in September show. commission does t track how much of that money was effectively repaid by developers or locality, likely with taxpayer money.

“Since our primary focus is supporting and growing ecomies of localities we serve, we work with m on a repayment plan when necessary and try to be as flexible as possible so that we don’t impact often tight local budgets,” commission spokesman Jordan Butler said.

Multiple state audits have found commission's efforts to recover opportunity fund money have been inconsistent. An investigation published earlier this month by legislature's watchdog ncy also found program has t met job creation and capital investment goals, and "a high percent of projects did t materialize.”

Examples from across Virginia show difficulty localities can face when a project falls through or fails to meet required goals.

In 2014, Danville h to sue two companies and ir executives in an effort to recoup two grants. city has been subject to clawbacks of nearly $7 million from 14 projects, according to records provided to AP.

In Martinsville, one clawback triggered a complicated fight after a medical school venture fell apart. In 2017, commission ordered that grant be repaid. When developer said he didn’t have money, it became city’s problem, Martinsville Bulletin reported .

city conducted an investigation into project and how money was spent, and n asked authorities to consider legal charges.

Commonwealth’s Attorney Andrew Hall, who reviewed city’s files, said he found evidence of criminal intent. But he said it was clear project was a stretch.

“I don’t see how this was ever going to work,” he said.

Martinsville still owes $312,000, according to commission records.

Tracy Gee, ministrator of rural Lunenburg County, said board of supervisors h “learned some lessons” after having to repay at least one grant in past and w requires strict performance agreements with developers.

program’s money is often doled after discussion that takes place out of public view — as was recently case with a $4 million grant and $4 million loan approved for a code-named Project Red in Pittsylvania County — and AP's reporting also raised questions about commission's bookkeeping.

Documents initially showed that biggest single outstanding recall was $1.4 million for a call center in Wise County. When AP asked for details, commission backtracked, saying project h met its goals and repayment was due after all. commission also lists $341,000 due from Grayson County Ecomic Development Authority for two projects approved in 2015, but Deputy County ministrator Mitch Smith said he's never heard from commission about it.

In case of Lessin’s project, documents show commission was tified in 2016 that project wasn’t vancing, but negotiations over repayment dragged on for years.

Appalachian Biofuels spent $210,000 on project-related costs but stopped using grant money after a drop in oil prices, according to commission documents and watchdog report. company provided a list of expenses to tobacco commission that show significant spending on travel or lack much detail.

inspector general's report said re were valid business reasons for t taking legal action to pursue repayment from Lessin. But it said Feinman's compromise agreement lacked required approvals.

Previous activities of commission, which has doled out more than $1 billion on a wide range of projects since its inception, have attracted law enforcement attention, including arrest of a former commissioner who stole millions. At least one grantee is currently under criminal investigation, according to inspector general’s office.

Democrats, in charge of legislature this year for first time in a generation, recently replaced many longtime Republican commission members and have pledged to institute changes in how it operates. One proposal: more loans inste of grants.