Monday, October 10, 2011

Coasting in Noblesville III: Ditslear's Corporate Welfare

This past July Noblesville Mayor John Ditslear and his handpicked city council members approved a $7 million corporate welfare package for a company called Positron. It’s possible this may turn out to be the most foolhardy waste of taxpayer dollars in Noblesville history.

It’s what happens when you’re coasting, not paying attention to details, enjoying calling the shots and living the VIP treatment, rather than doing the hard work of actually managing a city like Noblesville.

Note: The Positron deal is not a tax abatement. It’s a $7 million handout.

Positron is an often troubled, Fishers, Indiana company that specializes in nuclear-related medical products. They asked Fishers for the same sweet deal to simply stay put, but Fishers wisely refused. Ditslear said yes, so Positron will move across 146th St and into our corporate campus. Considering we start out $7 million in the hole, it’s hard to figure out what the value is for Noblesville.

Positron’s employees already live in the area, so it’s unlikely they’ll sell their homes and move a few miles to Noblesville. So this isn’t likely to have much impact on Noblesville’s employment rate. And Positron will be locating in the new Corporate Campus, where the city will create a special TIF district just for them. A TIF district is an area where, for a decade or more into the future, property taxes from new development DON’T help pay for schools, roads, libraries, police or the fire department. Those new tax dollars are skimmed off to help pay for the infrastructure in the district. In this case it will be skimmed off to pay the debt on the bond being floated to create the handout to Positron in the first place. So any taxing benefit for Noblesville won’t be realized for many, many years. In the meantime the rest of us will subsidize the cost of the city services Positron uses.

But there are even more reasons to wonder what Mayor Ditslear was thinking when he put Noblesville taxpayers on the hook for $7 million on behalf of Positron.

I’ve been corresponding with a former Positron stockholder from Michigan. He asked that I not use his name, so I’ll call him Jeff. In May of 2010 Jeff says he lost $22,000 of his retirement fund in what he says may have been stock value manipulation of Positron stock. He’s asked the Securities and Exchange Commission to investigate.

Jeff says there was more stock value shenanigans this past May in what appeared to be a “pump-and-dump” operation involving Positron stock. Pump-and-dump is a scheme in which a company’s stock is artificially inflated through false or misleading statements by company leaders or others in related positions of influence, and then when the value goes up, those with large stock holdings sell their stock at great profit. This causes the stock to fall dramatically, usually destroying value for innocent investors not aware of the scheme. That’s why it’s illegal.

Jeff told me, “I wasn't able to turn up any proof that Patrick Rooney (Positron’s Chairman) or anyone with Positron was directly involved with a pump-and-dump. Yet, he (Rooney) was front-and-center during all these events. His words and actions caused the stock to crash.”

The result of the “crash” in stock value: Mayor Ditslear is giving a $7 million handout to a company with a stock value of just pennies - literally, pennies.

And stockholders like Jeff have good circumstantial reasons to worry who might have been involved in the stock value games. According to research by Wall Street guru and blogger Timothy Sykes, Positron’s Chairman, Patrick G. Rooney has faced accusations of securities fraud and insider trading. Rooney’s father was convicted of an income tax charge and paid a $1 million fine to settle an insider trading charge. What’s more, according to Sykes, Rooney’s brother, John was, “an investor in Positron and until they were accused of securities fraud, their hedge fund was a 10%+ owner of Positron.”

Timothy Sykes wrote this about Positron on his blog in April of last year, “The Company’s current financial condition raises doubt as to its ability to continue as a going concern.” That’s because Positron doesn’t have a very good track record of earning a profit or staying out of debt.

Positron’s trading abbreviation is POSC. Some stock traders who follow Positron have mocked its abbreviation as meaning, “Piece of Shit Company.”

But thanks to Mayor John Ditslear, Noblesville will borrow money on behalf of taxpayers like you and me and give it – not loan – but GIVE IT! to Positron.

This is the sort of thing that makes more sense to Mayor Ditslear than investing in a meaningful way in redevelopment in downtown Noblesville. He’s not floating a bond issue to build a theater or a desperately needed parking garage, seed redevelopment just west of the river, or execute the Downtown Strategic Development Plan (that currently sits on a shelf gathering dust), all things that would nurture small business owners who live right here and keep their profits right here.

What’s more, it sets a precedent. Every company planning to locate in central Indiana no doubt now has hopes of strong-arming Noblesville into a corporate welfare package of their own.

This raises other questions about how Noblesville’s Economic Development Departments operates. In August 2008 Ditslear hired Judi Johnson to be Assistant Economic Development Director. She is, coincidentally, the Mayor’s wife’s good friend, and the wife of City Councilman (and Ditslear’s close friend) Roy Johnson. Just a year later, Ditslear fired Kevin Kelly, the department’s director and Judi Johnson’s boss. Since that time, the Mayor has never filled the director’s position, leaving Johnson the de-facto leader.

Who knows if this “nepotism-lite” and/or the empty director position is responsible for the bad Positron deal, but both are certainly signs of hubris on the Mayor’s part, giving the impression that he feels he can do pretty much whatever he wants to do. And in truth is, he can. Voters have rewarded him by allowing him to pack the City Council with his friends and favored candidates. The 4 yes votes for Positron were Ditslear’s handpicked candidates. Next January, 2 more Ditslear-favored candidates will take office, giving him a vise-grip lock on power.

Noblesville can’t even claim to have a good ‘ol boys network running the town anymore. Instead we’ve got a private, exclusive men’s club running things and the Mayor is their BMOC.

But there is another candidate for Mayor of Noblesville. His name is Mike Corbett and I believe he has the energy and intellectual curiosity required to see past the foolishness of schemes like the Positron handout and instead focus Noblesville’s dollars and energy behind efforts that will actually improve our quality of life.

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