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The U.S. Department of Labor is suing two companies owned by Cleveland businessman C. David Snyder for more than $123,000 following the publication of a Blade investigation that revealed the firms might have misappropriated tens of thousands of dollars in employee retirement contributions and compensation.
A lawsuit filed in U.S. District Court in Cleveland this month states Attevo Inc. and Ruralogic Inc. purposefully withheld retirement contributions and compensation from employees for use by the companies or their executives.
Those actions violate the Employee Retirement Income Security Act, which lays out guidelines for how private employers should manage retirement contributions.
“People entrusted with workers’ retirement plans must be held accountable when they fail to uphold that trust,” Joe Rivers, who conducted the Department of Labor’s investigation, said in a statement. “We at the department are committed to helping workers obtain their rightful benefits when plan fiduciaries violate the law.”
Mr. Snyder has not to responded to repeated requests from The Blade for an interview.
This marks the third time in nearly a month that a government agency has taken action against a business included in The Blade’s investigation, which probed the use of taxpayer-funded loans and grants at Ohio companies.
The investigation showed that the Ohio Development Services Agency routinely awards loans or grants to businesses it knows little about. The agency’s employees rarely, if ever, visit companies that receive state funding and monitor whether firms create jobs through paperwork that’s filed over the Internet.
Ohio’s development issues span the administrations of former Democratic Gov. Ted Strickland and Republican Gov. John Kasich.
Many of the state’s development procedures now are performed by JobsOhio, a nonprofit organization whose activities are shielded by law from public view.
JobsOhio does not answer to the state auditor, attorney general, or even the Republican-controlled legislature that created it. It was the brainchild of Governor Kasich.
Although state development officials said they overhauled how they award and monitor loans and grants, The Blade found the system still has significant lapses in oversight.
For instance, the state awarded grants and tax credits to Mr. Snyder’s companies after Attevo owed $2.9 million to various Ohio agencies and the Internal Revenue Service. And, according to the Department of Labor’s lawsuit, the state awarded Attevo and Ruralogic $3.45 million in incentives while the executives were misappropriating employee retirement contributions and compensation.
The state only placed a $1.1 million loan that was granted to Attevo — the company failed to make payments to the Development Services Agency for more than a year — in default after questions were raised by The Blade about the firm’s financial and legal troubles.
Attevo’s former chief operating officer said that most of the work related to the state loan was done in Europe; the loan was supposed to create 35 jobs in Ohio.
An internal financial document obtained by The Blade after the investigation was published revealed Attevo planned to use the state loan for mergers and acquisitions. State loan documents show the proceeds of Attevo’s loan were supposed to be used for software development in Ohio.
An Oct. 25 letter sent from the Development Services Agency to Attevo that demanded full and immediate repayment of the loan’s more than $1 million balance was mailed to a Cleveland address where Attevo no longer resides, The Blade discovered.
Lyn Tolan, deputy director of communications and policy for the state’s Development Services Agency, declined to comment.
Governor Kasich would not comment for The Blade’s investigation, and his office has not responded to repeated interview requests. It has, however, continued to tout job-creation successes in email blasts and news releases.
Ohio Attorney General Mike DeWine is trying to collect Attevo’s loan funds.
Recouping loans or grants that were awarded to troubled businesses is an arduous process because these businesses typically don’t have any cash or holdings, he said.
Pursuing criminal charges against executives who might have committed fraud with state money also is extremely difficult because of the way Ohio’s laws are structured, Mr. DeWine, a Republican, said.
“This really comes down to an obligation of the executive branch and the administration who is loaning this money,” he said, adding that more transparency and better accountability would help ensure taxpayer funding isn’t wasted.
The state also is trying to recover about $3 million it loaned to Toledo’s Buckeye Silicon. Like Attevo, the Development Services Agency declared Buckeye Silicon’s loan in default after The Blade raised questions about the firm’s financial activities.
Fixing problems with the way Ohio manages taxpayer-funded loans and grants would require a willingness from elected officials — something that isn’t likely under Governor Kasich, said Rep. Chris Redfern (D., Catawba Island), who also is the Ohio Democratic Party chairman. The state’s attempt to keep its economic development efforts a secret under JobsOhio is not in the best interest of taxpayers, he said.
“Until we have a fundamental change in policy, we’re going to see more of the same,” Mr. Redfern said. “Instead of moving toward reform and transparency, we’ve taken a much different route. ... We’re closing the door to public input and public questioning.”
Contact Kris Turner at: email@example.com or 419-724-6103.