Thursday, October 07, 2010

Inside Job: "The story of a crime without punishment, of an outrage that has so far largely escaped legal sanction and societal stigma."

Who Maimed the Economy, and How


The New York Times
Copyright 2010

As I was watching “Inside Job,” Charles Ferguson’s meticulous and infuriating documentary about the causes and consequences of the financial crisis of 2008, an odd, archaic sentence kept popping into my head. The words come from the second chapter of “The Scarlet Letter” and are spoken in frustration and disgust by an old Puritan woman who watches Hester Prynne, publicly disgraced but without any sign of remorse, making her way from Salem’s prison to a scaffold in its market square. She “has brought shame upon us all ...” the anonymous woman remarks. “Is there not law for it?”

“Inside Job,” a sleek, briskly paced film whose title suggests a heist movie, is the story of a crime without punishment, of an outrage that has so far largely escaped legal sanction and societal stigma. The betrayal of public trust and collective values that Mr. Ferguson chronicles was far more brazen and damaging than the adultery in Nathaniel Hawthorne’s novel, which treated Hester more as scapegoat than villain.

The gist of this movie, which begins in a mood of calm reflection and grows angrier and more incredulous as it goes on, is unmistakably punitive. The density of information and the complexity of the subject matter make “Inside Job” feel like a classroom lecture at times, but by the end Mr. Ferguson has summoned the scourging moral force of a pulpit-shaking sermon. That he delivers it with rigor, restraint and good humor makes his case all the more devastating.

He is hardly alone in making it. Numerous journalists have published books and articles retracing the paths that led the world economy to the precipice two years ago. The deregulation of the financial services industry in the 1980s and ’90s; the growing popularity of complex and risky derivatives; the real estate bubble and the explosion of subprime lending — none of these developments were exactly secret. On the contrary, they were celebrated as vindications of the power and wisdom of markets. Accordingly, Mr. Ferguson recycles choice moments of triumphalism, courtesy of Lawrence H. Summers, George W. Bush, Alan Greenspan and various cable television ranters and squawkers.

Even as stock indexes soared and profits swelled, there were always at least a few investors, economists and government officials who warned that the frenzied speculation was leading to the abyss. Some of these prophets without honor show up in front of Mr. Ferguson’s camera, less to gloat than to present, once again, the analyses that were dismissed and ignored by their peers for so long.

Dozens of interviews — along with news clips and arresting aerial shots of New York, Iceland and other disaster areas — are folded into a clear and absorbing history, narrated by Matt Damon. The music (an opening song, “Big Time,” by Peter Gabriel, and a score by Alex Heffes) and the clean wide-screen cinematography provide an aesthetic polish that is welcome for its own sake and also important to the movie’s themes. The handsomely lighted and appointed interiors convey a sense of the rarefied, privileged worlds in which the Wall Street operators and their political enablers flourished, and the elegance of the presentation also subliminally bolsters the film’s authority. This is not a piece of ragged muckraking or breathless advocacy. It rests its outrage on reason, research and careful argument.

The same was true of Mr. Ferguson’s previous documentary, “No End in Sight,” which focused on catastrophic policies carried out in Iraq by President George W. Bush’s administration just after the overthrow of Saddam Hussein. But whereas that film concentrated on a narrow view of a complex subject — the conduct of the war rather than the at least equally controversial rationale for fighting it — “Inside Job” offers a sweeping synthesis, going as far back as the Reagan administration and as far afield as Iceland in its anatomy of the financial crisis.

Perhaps unsurprisingly, many of the highest-profile players declined to be interviewed. Mr. Summers appears only in news footage, and none of his predecessors or successors as Treasury secretary — not Robert E. Rubin or Henry M. Paulson Jr. or Timothy F. Geithner — submit to Mr. Ferguson’s questions. Nor do any of the top executives at Goldman Sachs or the other big banks. Most of the interviewees are, at least from the perspective of the filmmaker, friendly witnesses, adding fuel to the director’s comprehensive critique of the way business has been done in the United States and the other advanced capitalist countries for the past two decades.

Both American political parties are indicted; “Inside Job” is not simply another belated settling of accounts with Mr. Bush and his advisers, though they are hardly ignored. The scaling back of government oversight and the weakening of checks on speculative activity by banks began under Reagan and continued during the Clinton administration. And with each administration the market in derivatives expanded, and alarms about the dangers of this type of investment were ignored. Raghuram Rajan, chief economist at the International Monetary Fund, presented a paper in 2005 warning of a “catastrophic meltdown” and was mocked as a “Luddite” by Mr. Summers.

Meanwhile, some investment bankers — at Goldman Sachs in particular — were betting against the positions they were pushing on their customers. An elaborate house of cards had been constructed in which bad consumer loans were bundled into securities, which, were certified as sound by rating agencies paid by the banks and then insured via credit-default swaps. One risky bet was stacked on top of another, and in retrospect the collapse of the whole edifice, along with the loss of jobs, homes, pensions and political confidence, seems inevitable.

How did this happen? Mr. Ferguson is no conspiracy theorist; nor is he inclined toward structural or systemic explanations. Markets are not like tectonic plates, shifting on their own. Visible hands write laws and make deals, and in this case a combination of warped values and groupthink seems to have driven very intelligent men (and they were mostly men) toward folly. In addition to business and government, Mr. Ferguson aims his critique at academia, suggesting that the discipline of economics and more than a few prominent economists were corrupted by consulting fees, seats on boards of directors and membership in the masters of the universe club.

When he challenges some of these professors, in particular those who held positions of responsibility in the White House or in the Federal Reserve, they are reduced to stammering obfuscation — Markets are complicated! Who could have predicted? I don’t see any conflict of interest — and occasionally provoked to testiness. Mr. Ferguson, for his part, cannot always contain his incredulity or rein in his sarcasm. Occasionally his voice pipes up from off camera, saying things like, “You can’t be serious!”

But it is hard to imagine a movie more serious, and more urgent, than “Inside Job.” There are a few avenues that might have been explored more thoroughly, in particular the effects of the crisis on ordinary, non-Wall-Street-connected workers and homeowners. The end of the film raises a disturbing question, as Mr. Damon exhorts viewers to demand changes in the status quo so that the trends associated with unchecked speculation of the kind that caused the last crisis — rising inequality, neglect of productive capacity, endless cycles of boom and bust — might be reversed.

This call to arms makes you wonder why anger of the kind so eloquently expressed in “Inside Job” has been so inchoate. And through no fault of its own, the film may leave you dispirited as well as enraged. Its fate is likely to be that of other documentaries: praised in some quarters, nitpicked in others and shrugged off by those who need its message most. Which is a shame.

“Inside Job” is rated PG-13. Some drug and sex references and pervasive obscenity, though not the verbal kind.


Opens on Friday in New York and Los Angeles.

Directed by Charles Ferguson; written by Mr. Ferguson, Chad Beck and Adam Bolt; narrated by Matt Damon; directors of photography, Svetlana Cvetko and Kalyanee Mam; edited by Mr. Beck and Mr. Bolt; music by Alex Heffes; produced by Mr. Ferguson and Audrey Marrs; released by Sony Pictures Classics. Running time: 1 hour 45 minutes.

© 2010 The New York Times:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Monday, October 04, 2010

Will the Texas 'Tea Party' drink Rick Perry's Kool-Aid?

Texas Tea Partiers should disown Rick Perry

Kool aid Party

By Brent Budowsky
The Hill
Copyright 2010

The Dallas Morning News has just published the results of a sweeping investigation of the Texas Emerging Technology Fund that suggests that taxpayer-financed grants were awarded to a long list of firms that made very large campaign donations to Gov. Rick Perry (R).

These are not isolated cases. The Morning News investigation yields a significant number of major Perry campaign donors receiving a significant number of large grants. This is a direct contrast with the integrity and sound management shown by former Houston Mayor Bill White, Perry's opponent for governor, who has long been a favorite of business leaders, political independents and many moderate Republicans during his landslide victories in Houston.

There should be a formal investigation of these monies that were given to Perry donors. Going forward, Perry should be stripped of all authority to choose which firms receive the grants. All future governors should be removed from any role choosing specific firms.

This growing scandal illustrates why the Texas gubernatorial campaign is garnering national attention and why White is proving to be a strong and tenacious competitor.

It is time for the Texas Tea Party leaders to reject Perry's campaign and consider supporting Bill White for governor. The Tea Party movements claims it is not partisan, and claims fiscal responsibility and fiscal integrity are at the heart of their movement.

Whether Texas Tea Partiers honor what they say about fiscal responsibility, more political independents and moderate Republicans will move to White as this scandal unfolds.

In 2010, Bill White is exactly the kind of independent can-do candidate voters are moving toward, while Rick Perry is exactly the kind of insider incumbent who has been in office too long, whom voters are moving against.

Will Texas Tea Partiers prove the integrity of their concern about fiscal responsibility and attack the abuses of public spending of Texas taxpayers' money suggested in the
Dallas Morning News investigation? Or will they reveal they are little more than an adjunct of the Republican Party and make excuses for these inexcusable abuses of taxpayer money that awarded substantial public monies to Perry campaign donors?

Bill White has held high office as a widely acclaimed mayor of Houston. He was an honorable steward of taxpayer money. He was an efficient, skilled and universally admired manager of the largest city in Texas.

Bill White was reelected by landslides and won more than 80 percent of all votes in his reelection campaigns. White was supported by moderate Republicans and political independents. He was strongly supported by the overwhelming majority of business leaders and small businesses in Houston, who respect White's honest, can-do, highly efficient management style.

This unfolding scandal will give a boost to Bill White's campaign, and convince even more Texans that Rick Perry is one of those insider incumbents who has simply been in office far too long, representing everything that voters resent in this election year.

This unfolding scandal suggests it is time for change in Texas. Texas voters are increasingly concluding that it is time to end the cronyism and insiderism that permeates Rick Perry's government, and bring in the honesty, efficiency and sound management that has been the hallmark of Bill White's career, and his campaign for governor.

© 2010 The Hill:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Sunday, October 03, 2010

"Abandoning the traditions of editorial boards and debates is an affront to the voters you are asking to keep you in this office."

Time For Respect: An appeal to Gov. Rick Perry



Tyler Courier Times Telegraph
Copyright 2010

We believe a tradition long held by political candidates and Texas newspapers has been abandoned in what we can only believe to be a decision of political expediency.

Your position to not visit with the editorial boards of Texas newspapers may be astute politically, but it demonstrates a disregard for newspaper readers and voters across the state, who deserve to hear substance rather than silence.

It is therefore with the greatest concern that we offer not only an editorial board meeting with us, but also an opportunity for a face-to-face debate between you and your opponent, former Houston Mayor Bill White, for the purposes of illustrating to Texas voters your positions on key issues.

We are facing what's rumored to be the largest budget deficit and crisis in the history of our state - informed estimates of the budget shortfall range from $18 billion to $20 billion. Newspaper readers, whether Republicans, Democrats or Independents - deserve to hear your solutions to the staggering problems we will be facing as the legislative session begins.

Instead, we're confronted with an unacceptable and undeserved silence.

This newspaper, which you have repeatedly called "your favorite paper in the state," has given you support in previous elections in the form of endorsements.

(To be sure, we have taken editorial positions against some of your actions, such as your executive order on the HPV vaccine in 2007.)

You also have characterized this as one of the most conservative newspapers in the state. We guarantee a level playing field.

So we appeal to you to come to Tyler, visit with our editorial board, and to debate Bill White.

No doubt, you have advisers who are counseling against this. Perhaps they point to the polls that show your comfortable lead over White. You're probably being told you don't need to do editorial boards because the results would be predictable, with many of the state's newspapers endorsing your opponent, as they did in the primary.

That's bad advice. It demonstrates a disconnect with the voters. Obviously, editorial board meetings in the past have not prevented you from being elected to office. You've never lost a race. Nor have debates hurt you politically. Even in a three-way primary in March, you won without a runoff, and you debated your opponents then.

The stakes are too high for politics to overshadow process. We invite you to re-engage with the many voters who rely on us for in-depth dialogue about the issues, rather than sound bites other media offer.

This newspaper did not endorse a candidate in the March Republican primary because only one of those candidates, Sen. Kay Bailey Hutchison, met with our board. We felt the process was incomplete. And it remains incomplete in this general election.

The advice you are receiving is perhaps from those who would have you run for another, higher office. But abandoning the traditions of editorial boards and debates is an affront to the voters you are asking to keep you in this office.

We are deeply disappointed in where things are. We urge you to accept our offer in the spirit in which is it extended, with sincerity and a respect for the traditional relationships between Texas public officials, the press and the public.


Signed by the editorial board and newsroom leadership of the Tyler Courier-Times--Telegraph.

Nelson Clyde, Publisher
Dave Berry, Editor
Brian Pearson, Managing Editor
Danny Mogle, Managing Editor
Richard Loomis, Senior Editor
Roy Maynard, Editorial Page Editor
Megan Middleton, City Editor

© 2010 Tyler Courier Times Telegraph:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Rick Perry's Emerging Technology Political Patronage Fund: "They don't want transparency. People might figure out what is going on."

Perry's tech fund aided firms with ties to his donors

Graphic: Campaign contributions and tech fund awards


The Dallas Morning News
Copyright 2010

When Gov. Rick Perry announces that a company will get money from the Texas Emerging Technology Fund, he often describes it as an important investment in the state's future.

Behind the scenes, some of the governor's biggest political supporters have been making investments of their own – in Perry and in companies getting money from the tech fund.

An investigation by The Dallas Morning News found that more than $16 million from the Emerging Technology Fund has been awarded to companies with investors or officers who are large campaign donors to Perry.

The governor denied that politics influence his decisions on tech fund awards.

The fund gives taxpayers' dollars to promising high-tech startups. It is a key part of Perry's economic development program, which he has touted in his re-election campaign against Democrat Bill White.

The governor's office administers the tech fund, and the governor must approve each award – a system that most other states with tech funds avoid to guard against political influence.

The News found that tech fund money has been awarded to companies with which at least eight significant Perry donors are affiliated. Among them:

  • $2.75 million to Terrabon Inc., a Houston company. Its backers have included Phil Adams, a college friend of Perry's who has given his campaign at least $314,000.

  • $1.75 million to Gradalis Inc., a Carrollton firm. Among its investors has been Dr. James R. Leininger, who has contributed more than $264,000 to Perry's campaigns.

  • $1.5 million to ThromboVision Inc., a Houston company. One of its investors was Charles W. Tate, who has donated more than $424,000 to Perry.

  • $4.5 million to Convergen Lifesciences Inc. of Austin. The company was founded by David G. Nance, a former Perry appointee who has given the governor $80,000.

  • $2 million to Seno Medical Instruments Inc. of San Antonio. Its investors have included Southwest Business Corp. and its subsidiaries, whose chairman, Charles Amato, gave Perry more than $32,000.

  • $975,000 to Carbon Nanotechnologies Inc. of Houston. At the time of the award, one investor was William A. McMinn, who has contributed $152,000 to Perry.

In an interview with The News, Perry said he usually does not know if his campaign supporters have financial interests in the companies that get tech fund money. "From time to time, I may know someone who has an interest in a project. That is a pretty rare occurrence," he said.

However, Perry spokeswoman Katherine Cesinger said in an e-mail that applicants for technology funding must provide full financial disclosure to the governor's staff, including the names of investors.

The governor said he does not look at these disclosures when deciding whether to approve an award. He added: "Whether they contribute to my campaign or not has nothing to do with whether or not the project is appropriate" for funding.

Mark Ellison, a former director of the tech fund, called the involvement of Perry's contributors incidental. "Decisions were based on the quality of the deal, the market and character of the people running the company or the project," he said.

SEC documents

The News reviewed thousands of pages of U.S. Securities and Exchange Commission documents, personal financial disclosures, court filings, contracts and other public records to determine who has invested in companies that were tech fund recipients. Campaign contribution amounts were taken from Texas Ethics Commission filings.

Gauging the degree to which Perry contributors benefit from the tech fund is difficult because most of the applicants are privately held companies, and the fund's proceedings are shrouded in secrecy.

Perry said confidentiality protects companies that "really aren't interested in opening up their books so their competitors can stroll in and write down all of the different business practices, their cash on hand, or even more detailed descriptions of their technology."

Not every state's program is as closed. In Pennsylvania, meetings of the decision-making boards are open and proprietary information is still protected, said Walter Plosila, an architect of that state's Ben Franklin Partnership.

"You can keep intellectual property issues confidential and proprietary while still providing information on what the partnership projects are about and what the public money is being used for," said Plosila, a former Pennsylvania deputy secretary of commerce.

The Texas approach is not the best public policy, he said. "How are citizens supposed to make sure their elected officials are accountable, not just for ideas but their implementation, if they don't know what's going on?"

The lack of transparency fuels the perception among some applicants that politics affects decisions, said the head of a nonprofit group that works with companies seeking tech fund money.

"There's a lot of suspicion that there's more political influence than meets the eye," said Russ Peterman, executive director for the Texas Life-Sciences Collaboration Center in Georgetown. "The process leaves the state open to some cynicism about how it is working."

State Rep. Mark Strama, D-Austin, chairs the House committee that has oversight of the tech fund. If money is going to companies backed by political donors, he said, "it certainly is something that should be investigated."

The Legislature created the Emerging Technology Fund in 2005 at Perry's urging. Since then, the state has awarded $173 million under the tech fund to 120 companies, according to the governor's office. An additional $161 million has gone to Texas universities, primarily for research.

At a time when private investment capital is tight, the tech fund has helped many companies get their ideas off the ground, supporters say.

"It's been a real game-changer," said Thomas Kowalski, president of the Texas Healthcare & Bioscience Institute, a nonprofit group in Austin.

There have been about 1,600 applications for funding since 2005, according to testimony at a state Senate hearing in July. Only about 7 percent receive funding.

Under the law, companies that receive tech fund money must have approval from the governor, the lieutenant governor and the House speaker. However, the speaker and lieutenant governor don't act until Perry decides to back an applicant or gives them detailed information prepared by his staff about the recommended firms, aides said.

Max Sherman, former dean of the LBJ School of Public Affairs at the University of Texas, said such decisions should be in the hands of an independent body, not the state's three top elected officials.

"If you were advising those three people that make that ultimate decision," he said, "you would almost say you ought to try to distance yourself from any kind of flak you might get that might be perceived as an improper relationship."

State Sen. Florence Shapiro, R-Plano, was the Senate sponsor of the bill the created the tech fund. She said last week that she would be willing to eliminate the governor, lieutenant governor and House speaker from the decision-making process if politics has infected the tech fund.

"It would be preferable to getting rid of the program as a result of what is being uncovered," she said.

Perry makes his decision on tech fund awards after receiving recommendations from a 17-member advisory committee that he appoints. The advisory committee meets in sessions closed to the public and does not take minutes of its meetings. Its recommendations to Perry are not made public, either.

Before the advisory committee considers applications, seven regional boards and one statewide life science board conduct their own reviews. The boards are private, nonprofit groups, and their meetings also are closed to the public.

Texas is one of more than 20 states that have established economic development funds to nurture start-up technology companies.

Dan Berglund, head of an Ohio-based nonprofit group that promotes technology development, said Texas is distinctive in its tech fund's organization.

Most states, he said, do not have their top political leaders as decision makers. Technical review, he said, is normally done by out-of-state experts.

"It's a safeguard against politics coming into play, and it's a safeguard against conflicts of interest," said Berglund, president and chief executive officer of the State Science & Technology Institute.

The tech fund's advisory committee is a mixture of private investors, entrepreneurs, scientists and academics. Some are also Perry donors.

Because their opinions are advisory and not binding, committee members are not required to file financial disclosures with the ethics commission.

On Friday afternoon, the governor's office gave The News an undated, six­page "ethics code" for the advisory committee.

The policy says a conflict of interest exists when a committee member has a business relationship that could "reasonably be expected to diminish" his judgment or objectivity.

If a member wants to invest in a company that has applied for tech fund money, he is required to disclose this. A separate committee that includes a member of the governor's staff is then formed to resolve the issue.

Bill Sproull of Richardson, an advisory committee member since the panel's inception, said the governor's staff has often given oral instructions about conflict of interest policies. He said he did not recall a written policy.

"The very first thing we talk about are those recusal policies and other things [related to conflicts of interest]," said Sproull, who was recently named chairman of the tech fund committee. "So that's pretty well engrained."

The regional boards also have conflict of interest policies.

Houston financier

Charles W. Tate, a noted Houston financier, is the head of one of those boards.

Tate was a partner in the investment firm led by Dallas businessman Tom Hicks, former owner of the Texas Rangers baseball team.

In 2006, Tate started the Texas Life Science Center for Innovation and Commercialization. It functions like a regional board, but it has statewide responsibilities for tech fund applicants involved in biotechnology, pharmaceuticals and medical devices.

ThromboVision brought its tech fund application before the board. The firm was developing technology to measure the effectiveness of anti-clotting drugs.

In November 2006, the life science board recommended that ThromboVision get money from the tech fund. Tate said he voted for it. The endorsement was forwarded to the advisory committee in Austin.

Four months later, ThromboVision's CEO, Edward Teitel, approached Tate with an "investment opportunity," Tate wrote in a letter to The News.

"At the time," he wrote, "the [state advisory committee] had already approved the ThromboVision application contingent upon the company's ability to raise matching funds from the private sector."

Tate made two investments in the company, he wrote, in May and August of 2007.

Perry announced in October 2007 that ThromboVision would get $1.5 million in tech fund money.

Tate said his vote to recommend funding was proper. "There was no need to recuse myself from [life science board] discussions on ThromboVision as I was not an investor on the date of that meeting," Tate wrote.

Nothing in the rules of the tech fund's state advisory committee, he said, barred him from investing in companies receiving tech fund awards.

"Furthermore," he wrote, "the [life science] board received oral advice from legal counsel at Vinson & Elkins at its first board meeting that there was nothing to prohibit ... directors from investing in ETF-funded companies."

That soon changed, Tate said. "However," he wrote, "in the fall of 2007, Vinson & Elkins reversed its prior opinion and orally advised the ... Board that under federal IRS tax guidelines, [life science] directors should avoid investing in ETF-funded companies."

An attorney who advises the Internal Revenue Service on tax-exempt matters told The News he would counsel board members not to make investments in companies they review.

"You're benefiting from confidential information," said James P. Joseph, who heads the tax-exempt practice at Arnold & Porter LLP in Washington, D.C. "It's just a classic conflict of interest."

The ThromboVision investment was Tate's second in a company that received a tech fund award. In January 2007, Tate bought shares in OrthoAccel Technologies Inc., another Houston-based firm.

Five months later, the life science board recommended that OrthoAccel get money. This time, Tate said he did not vote.

Perry's office announced in early 2008 that OrthoAccel would receive $750,000 from the tech fund.

Records used by the state to monitor the award show that the governor's office was informed that Tate was an investor in OrthoAccel.

Tate said that ThromboVision and OrthoAccel were treated the same as other tech fund applicants.

"My campaign contributions [to Perry] had absolutely no effect on OrthoAccel or ThromboVision receiving funds," he wrote. "Both of these companies were subjected to the same rigorous review and approval process" as other applicants.

Tate's more than $424,000 in donations to Perry's campaigns since 2000 includes travel on Tate's private airplane, he said.

In May, he wrote a $100,000 check to Perry, and is a member of the governor's statewide re-election committee.

Despite support from the state, Tate and other investors, ThromboVision filed for bankruptcy on Sept. 2. Court filings show that Tate owned 200,000 shares of the company's preferred stock.

The filings also revealed that the company had an investment from another Perry supporter: Houston investor Charles Miller, who gave the governor $125,000.

Miller said he's had "virtually no contact" with Perry since resigning from the University of Texas System Board of Regents.

"I didn't support him in the primary," he said. "I supported Kay Hutchison. I don't have an argument or fight with him, but I don't have an ongoing relationship with him."

Multiple donors

Some other companies that have received tech fund awards have multiple investors who are big Perry donors.

The News obtained a capitalization table for Gradalis that showed James R. Leininger owning 390,000 shares.

Leininger, a former Army doctor in San Antonio who became one of the wealthiest Texans by developing specialty medical beds, has been a major contributor to Republican candidates for years.

The documents also showed that John McHale, an Austin high-tech millionaire who for several years has contributed to Democratic candidates, agreed to invest $2 million for 200,000 shares in Gradalis.

Perry announced a $1.75 million tech fund award to Gradalis on March 5, 2009. Four days later, McHale signed the stock purchase agreement. McHale made a $50,000 contribution to Perry's re-election campaign later that year.

Neither McHale nor Leininger returned messages seeking comment.

Terrabon is another with multiple Perry donors as investors. In 2008, Texas A&M System regent Adams made a $100,000 loan to the company. It was later converted to equity, Adams said.

Perry announced in July that Terrabon, which is trying to convert landfill waste into fuel, would receive $2.75 million from the tech fund.

One of its founders is Emil Ogden, father of state Sen. Steve Ogden, R-Bryan. The younger Ogden, chairman of the senate finance committee, said he has "no interest and no involvement with Terrabon."

Another of the company's founders is David S. Carrabba. The Carrabba family and their company have donated $23,000 to Perry.

"I never talked to the governor about the company [Terrabon]," Carrabba said. "The [tech fund] process is designed to take politics out of it."

The tech fund is structured so that the state gets the right to buy stock in each company that receives an award. The state can cash in when a company is sold or goes public.

That has happened at least once. CardioSpectra Inc., which was $1.35 million in 2006, was bought by Volcano Corp. in 2007. Perry spokeswoman Cesinger placed the return on the state's investment at $2.2 million.

The governor's office would not reveal how many shares the state owns in any other companies, how many shares the state can buy in each company, and the current value of its portfolio.

In response to a question from The News about a 2009 financial report from the governor's office, a Perry spokeswoman said it referred to the state's right to buy 87,412 shares of Gradalis stock.

The governor's office also did not provide any figures on job creation, one of the stated goals of the tech fund.

"The information is simply not yet available," Perry spokeswoman Cesinger said. "If we had it, we would provide it." Those figures will be included in a report to the Legislature next year, she said.

Perry's office would not allow the tech fund's director, Jonathan Taylor, to be interviewed.

Legislators concerned

The tech fund has the same disclosure weaknesses as many other government programs that try to mirror the private sector, said James Nolen, a distinguished senior lecturer at the University of Texas at Austin business school.

"Transparency, accountability, measurement: that is what most of these programs lack," said Nolen. "They don't want transparency. People might figure out what is going on."

Strama, the Democratic state representative from Austin, said he questions whether the tech fund is being properly run from the governor's office.

"I think they weren't doing a good job of managing it from the beginning," he said. "They didn't have systems in place to monitor and measure the health of the companies they had invested in and the health of the overall portfolio."

Strama said budget shortfalls may force a cut in the tech fund when the legislature convenes next year. "I can't see any way it's not going to be downsized," he said.

And Republican Shapiro said some lawmakers remain incensed that Perry granted $50 million in tech fund money last year to his alma mater, Texas A&M. The governor transferred the money from the state's Enterprise Fund and largely bypassed the tech fund's advisory process.

"There were many in the legislature following that act that wanted to get rid of the whole program," Shapiro said.

Shapiro said she remains a supporter of the tech fund. But because of continuing resentment, budget shortfalls and the possibility of involvement by Perry donors, she said, the fund could be fighting for its survival next year.

"I would hope that if it is of value we will find a way to cure the ills that have transpired and continue the program at some level," she said.;;


July 18, 2005: ThromboVision Inc. is incorporated by Edward Teitel. It is based in Houston.

January 25, 2006: Houston investor Charles W. Tate starts Texas Life Science Center for Innovation and Commercialization. It vets applicants for the Texas Emerging Technology Fund.

Nov. 9, 2006: The life science center board recommends ThromboVision to the tech fund's state advisory board. Tate, who is chairman of the life science center's board, votes yes.

March 15, 2007: Teitel makes an investment presentation to Tate.

April 20, 2007: A letter from Gov. Rick Perry, Lt. Gov. David Dewhurst and then-House Speaker Tom Craddick tells Teitel that ThromboVision is the recipient of a $1.5 million award from the tech fund.

May 8, 2007: Tate makes his first investment in ThromboVision.

June 13, 2007: Teitel signs a contract with the governor's office to receive the ETF money.

July 5, 2007: Perry chief of staff Brian C. Newby signs the ETF contract.

Aug. 31, 2007: Tate makes his second investment in ThromboVision.

Oct. 9, 2007: Perry's office announces the ThromboVision award to the public.

Sept. 2, 2010: ThromboVision declares bankruptcy. It reveals that major Perry donors Tate and Houston investor Charles Miller own 200,000 and 250,000 preferred shares, respectively.

SOURCE: Dallas Morning News research


A statewide advisory committee of 17 members, appointed by the governor, must decide whether to recommend a company for Emerging Technology Fund money. The committee passes its recommendations to the governor.

Here are the current members. Two positions are vacant.

•Bill Sproull, Richardson Chamber of Commerce and advisory committee chair

•Aruna Viswanathan, Clear Spring Capital Group and advisory committee vice chair

•Bob Pearson, WeissComm Group

•C. Mauli Agrawal, dean of Engineering, University of Texas at San Antonio.

•Michael Bleyzer, president & CEO, SigmaBleyzer Investment Group LLC

•T. Randall Cain, managing partner, Ernst & Young

•Brett Gilbert, Texas A&M University

•Judy Hawley, Advanced Acoustic Concepts

•Bill Holmes, Datamark

•Rick Ledesma, DataLogic Software, Inc

•William E. Morrow, chairman & CEO, CSIdentity Corp.

•John Schrock Sr., Lifetime Industries

•Max Talbott, principal consultant and owner, Max Talbott LLC

•Richard Williams, head of renewable energy, Energy Future Holdings

•Enrique "Henry" R. Venta, Lamar University College of Business

SOURCE: Governor's office

© 2010 The Dallas Morning News:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE