DENR: Nothing improper in way Chip Hagan's stimulus grant was handled

by Craig Jarvis, News and Observer, October 17, 2014.

U.S. Sen. Kay Hagan is taking heat over money that her husband’s company received as part of the federal economic stimulus grant in 2010.

Thom Tillis, Hagan’s Republican challenger in the U.S. Senate race, and his supporters on Friday launched television ads raising concerns about stimulus money received by her husband, Charles “Chip” Hagan III. The ads follow an article in the conservative Carolina Journal questioning why Chip Hagan did not repay the federal government when his company’s grant-funded project came in under budget.

But officials from the State Energy office said that Chip Hagan did nothing improper or out of the ordinary.

And a review of documents from Chip Hagan’s company and the State Energy Office show there never were any savings to refund, and that the project went over budget not under.

The issue first arose last month when Politico reported that Chip Hagan’s company, JDC Manufacturing, had received $390,000 in stimulus money and tax credits. Then this week, The Carolina Journal, based in Raleigh, reported that JDC’s project came in under budget and said that the company kept the savings rather than pay it back.

But Bridget Munger with the State Energy office, which is part of the N.C. Department of Environment and Natural Resources, said that could not have happened because of the way the stimulus program worked.

“Payments are not made unless a grantee can show invoices for actual expenditures,” she said. “No funding was given to grantees in advance.”

According to records provided to The News & Observer, JDC Manufacturing, the company co-owned by the senator’s husband, submitted a list of invoices for its project that reflected work done in the fall and winter of 2010.

The project ended up costing $500,000, which was more than the company had projected. Stimulus money paid for a little over half of that.

Stimulus to create jobs 

Congress passed the $800 billion federal economic American Recovery and Reinvestment Act of 2009 to save and create jobs and spur the economy through tax breaks, contracts, grants and loans. It brought a surge of money to North Carolina to spend over the course of three years on about 400 projects. A total of $75 million was spent in the state in the first round, which included projects that would make buildings more energy efficient.

JDC Manufacturing operates commercial buildings. It owns a 48-year-old, 300,000-square-foot warehouse occupied by Plastic Revolutions, a large plastics recycling operation that is owned by Chip Hagan’s brother, John Hagan. Both men and another brother, David Hagan, own JDC.

Chip Hagan is the founding member of a prominent Greensboro law firm. In 2010, Roll Call listed Kay Hagan No. 44 on its list of the richest members of Congress and noted that her husband reported multiple investments in commercial warehouses in Florida, valued at $5.2 million. That year, Hagan’s net worth was $6.67 million, according to the publication. This year, she ranked 41st with a net worth at $9.12 million.

JDC Manufacturing applied for and in September 2010 received a grant for a little more than $250,000, and in its application indicated it would borrow about $188,000 to improve heating and lighting and install solar panels at its warehouse in Reidsville.

The company’s application received from outside evaluators the highest score of all 68 grants in the first round for industrial-commercial projects and was monitored closely by independent examiners, records show. Sixteen projects were funded in that round.

Owners names unknown

Munger said State Energy Office staff didn’t know the names of any managers, owners or stakeholders for any of the projects while they were evaluating their proposals.

By the end of 2010, the State Energy Office was trying to close the books on the first round of projects.

“By closing out the first round in December 2010, the program was able to offer a second round of commercial/industrial grant funding,” Munger said. “The end result was more stimulus projects on the ground.”

Email and other records reviewed by The News & Observer show the State Energy Office in December 2010, informed JDC that since it had spent all of its grant the state had prepared a revised budget to close the paperwork. The revision indicated the company had spent about $73,000 of its own money, a reduction of about $114,000 from what it originally proposed.

That $73,000 was just a preliminary figure, according to the state and the company. Munger said that the budgets filed at the time a grant is closed out don’t necessarily reflect the final cost of the project.

“In some instances, grant recipients may have spent additional private funds in the final stages of a project,” Munger said.

Invoices required 

JDC Manufacturing had to provide invoices adding up to the amount of the grant, which it did. A list of invoices the company provided to The N&O show subsequent invoices stretched into February 2011, mostly for work on the solar panels, and brought the total cost of the project to more than $500,000 – nearly $65,000 over what it had projected. State Energy Office records confirm that amount.

The company received the $250,000 grant money in February 2011.

After an article raising questions about the stimulus grant ran in the Carolina Journal, a publication of the conservative John Locke Foundation, Tillis launched an ad on the issue. Hagan, in turn, released an ad answering the charges.

On Friday, a super PAC announced it plans to launch a $1 million ad campaign claiming Hagan’s family profited from the grant, citing the Carolina Journal.

Caitlin Legacki, a spokeswoman for the company, said Friday that the company never profited from the grants.

“JDC was required to pay for the entirety of these projects up front, and only upon completion and inspection were a portion of those funds reimbursed by energy efficiency grants,” Legacki said. “Each phase of the project was closely monitored and evaluated with a critical eye from inspectors and auditors to ensure taxpayer funds were spent appropriately and for their intended purpose.”

State GOP leader critical

Claude Pope Jr., chairman of the North Carolina Republican Party, said he still is bothered by other issues raised in the articles, including potential conflict of interest. The Carolina Journal reported that JDC Manufacturing hired a company formed by Hagan’s husband and their son, Tilden, to install the solar panels. Although that company’s website takes credit for the work, JDC says Tilden Hagan’s involvement was minimal.

The list of JDC invoices does not show any payments to Tilden Hagan’s company. A letter from the electrical contractor who did install the solar panels, provided to The N&O by JDC, said Tilden Hagen was one of several people hired as hourly workers on the project.

Earlier this month, Pope asked the U.S. Senate Select Committee on Ethics to investigate whether Hagan improperly influenced the grant award and energy tax credits the company also received. Politico reported that JDC Manufacturing later received an additional $137,000 in federal energy tax credits from the stimulus program, and $50,000 from a federal farm program, which the company confirms.

Hagan has said she was not involved in her husband’s business and had nothing to do with the grant.

“Kay’s only involvement was to seek the opinion of an ethics attorney who found it would be appropriate for her husband’s company to receive these grants just like hundreds of other North Carolina companies did,” Hagan’s campaign spokeswoman, Sadie Weiner, said Thursday.

Pope says Hagan has not been as transparent as she should have been.

“It just smells,” Pope said Thursday. “It calls into question the advice she got and the judgment she used in the process.”

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