State inquiry under fire

Missouri officials defend the claim that they ‘took quick action’ to investigate a possible tax scam.
Tuesday, December 9, 2003 | 12:00 a.m. CST; updated 4:46 p.m. CDT, Monday, July 21, 2008

JEFFERSON CITY — The Department of Economic Development reacted immediately to a report that a tax credit program under its supervision is being abused, director Joe Driskill told the Joint Committee on Tax Policy on Monday.

Rick Russell of Steelville testified last month that the department displayed no interest when he told one of its employees that a St. Louis business might be abusing state tax breaks.

“The truth is, we took quick action based on the information we had at the time,” Driskill said.

A St. Louis Post-Dispatch investigation found that “phantom businesses” have received $2 million worth of tax credits through the Rebuilding Communities program, which is administered by the Missouri Department of Economic Development. The state Attorney General’s office is investigating the program.

Russell has testified that the department was slow to react when he reported on May 21 that a St. Louis business was abusing the Rebuilding Communities Program. He has also said the department did not notify him of the progress of its internal investigation after he contacted Sean Burge, the program administrator.

That is an inaccurate assessment, Driskill said. In fact, Burge told his supervisor of the matter the day after he heard from Russell, Driskill said. Russell was not told about the investigation that followed because department officials knew nothing about him, Driskill said.

Russell said a St. Louis computer store owner offered to help him cheat the Rebuilding Communities Program, which offers tax credits for Missouri companies purchasing technical equipment such as computers and medical devices. Rather than take part in the scheme, Russell contacted Burge.

Burge has since been suspended by the Department of Economic Development while the state investigation is under way.

Driskill said Monday that he has seen several cases of tax credit fraud at the department. He recommended to the legislative committee that resources be made available so the department can conduct regular evaluations of its tax credit programs to ensure they are being run correctly.

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