Category Archives: Other

Schaaf v. Nixon – Plaintiffs’ Legal Memo on Why the New Proposed Stadium Plan is Illegal

Schaaf v. Nixon – Plaintiffs Suggestions in Support of Motion for Preliminary Injunction

Hearing on Tuesday

In response to the plaintiff Missouri taxpayers and legislators motion for preliminary injunction and request for an order regarding collateral estoppel and the litigation in St. Louis City this morning, the Attorney General quickly filed a motion for change of judge on behalf of Gov. Nixon. The plaintiff Missouri taxpayers and legislators in Schaaf v. Nixon filed the following response:

Schaaf v. Nixon – Plaintiffs’ Response to Nixon Change of Judge and Renewed Notice

Stadium Lawsuit Documents

Schaaf v. Nixon – Plaintiff Jay Barnes Motion for Preliminary Injunction

Schaaf v. Nixon – Motion on Collateral Estoppel

Schaaf, et. al. v. Nixon, et. al. – Plaintiffs First Amended Petition for Declaratory Judgment and Injunctive Relief

Schaaf, et. al. v. Nixon, et. al. – Plaintiffs Response to Def. Nixons MTD

Schaaf v. Nixon – Nixon MTD

Moberly’s Mamtek Microcosm

Bruce Cole plopped into Missouri five years ago with a baited line. Through a “site consultant,” Bruce Cole contacted several Midwestern states promising jobs if Mamtek could secure some economic development incentives. In March, Missouri’s Department of Economic Development and Moberly bit – hard. 

Cole claimed Mamtek had a fully operational sweetener plan in Wuyishan City, China. They were looking to expand to the Midwest to take advantage of new contracts.

On April 8, 2010, DED asked Edward Li, a contractor in Shanghai, China employed by Armstrong Teasdale, to investigate Mamtek’s China operations. What Li found should have stopped the project immediately. On April 13, he explained, “We found (Mamtek’s) plant in Fujian Province, China, never started to manufacture.” On May 17, Li followed up that he still had not found a Mamtek manufacturing plant in China.

In mid-May 2010, Morgan Keegan was hired to underwrite bonds for Mamtek’s new taxpayer-financed plant in Moberly. Armstrong Teasdale was then hired as counsel for the bonds. (Yes, the same firm whose employee found Mamtek didn’t have a China plant.) 

On June 3, 2010, DED and Moberly received “due diligence” documents from Mamtek – a business plan, purported letters of interest from sweetener customers, and a financial statement claiming $7.2 million in cash or equivalents. Neither DED nor Moberly followed up on the documents. If they had, they would have quickly discovered that the letters of interest were boilerplate and the $7.2 million did not exist.

If Moberly or DED had simply run a background check on Bruce Cole, they would have learned that, around the same time, a previous investor had sued him for $250,000, American Express had filed a lien against him for $135,000 for credit card debt, and he had defaulted on the $3.7 million mortgage on his Beverly Hills home.

On July 9, Gov. Nixon visited Moberly and announced that, with the help of DED and Moberly area leaders, Mamtek would create 612 new jobs. The “incentive” package offered by the state included $17.6 million in so-called jobs tax credits and block grants. An additional $37 million would be provided through bond sales “initiated, structured, and committed by the city of Moberly.”

The project collapsed by winter. In the summer of 2011, I led an investigation into the Mamtek fiasco. We issued a bi-partisan and unanimous report. Many parties were to blame – most obviously Bruce Cole and Mamtek. Nevertheless, the fraud should have been caught by DED, Moberly, and the financial professionals hired to conduct due diligence. It wasn’t particularly sophisticated and the scheme could have been unraveled just by a few background checks.

At the time of our hearings, DED and Gov. Nixon’s office claimed no real harm was done in Moberly because the state tax credits were never actually issued.  They were dead wrong. There were Missouri small business owners who had contracted with Mamtek believing that, since the company had the backing of the state and Moberly, it would be good for its word. After all, Gov. Nixon dropped in for a huge event calling Mamtek the future of Moberly’s economy.

Two of those small business owners were Denice Burks and her brother Darrell Kolb. They own Stockman Construction in Jefferson City. In 2010, they’d only owned it for five years. The Mamtek contract was a big deal for them. They completed $800,000 worth of work in infrastructure improvements around the plant – and waited for full payment. It never arrived. When the sweet turned sour, Stockman hired a lawyer to get paid for their work. They were told to wait in line. By this summer, they had spent nearly $100,000 in legal fees chasing payment for the project both Gov. Nixon and Moberly touted.

Then, last year, Moberly decided it would take advantage of the work Stockman Construction had done around the site. Moberly wanted another contractor to finish the job Stockman had stopped when it became clear they’d never be paid. So it bid-out the add-on project.

Burks and Kolb were hopeful. Since Moberly was now going to obviously benefit from the improvements Stockman had made, maybe Moberly would pay them for their work. They set out to exercise their First Amendment right to petition the government. In this case, they merely sought fairness, to be paid for the work for which they were stiffed because Moberly was asleep at the wheel. Last week, Moberly, clearly disconnected from reality, released a statement saying it “cannot use taxpayer dollars to bail out a private business to whom it has no responsibility.”

Stockman and other contractors who were stiffed in this fiasco bear far less blame than anyone else involved. Stockman did nothing wrong other than reasonably rely on Moberly and Gov. Nixon’s enthusiastic endorsements. If Moberly had merely checked Mamtek’s bank account before touting it as their economic savior, Stockman and the other contractors would not have been ripped off. If DED had just shared the information about the China plant, no one would have been harmed. If any of the financial professionals had done their job, no one would have been harmed.

Now, five years later, it’s the small business owners and taxpayers who are left holding the empty bag. The financial professionals settled a lawsuit against them for just over $8 million. Nothing happened to Standard & Poor’s. Gov. Nixon was re-elected. So was Moberly’s Mayor Bob Riley. Denice Burks, Darrell Kolb and dozens of other contractors — the innocents in this tragedy — are the ones paying for Moberly’s mistakes. 

Moberly could’ve pled poverty. Instead, they insulted Stockman and the intelligence of all those involved, including their citizens. Moberly’s leaders prefer the public to ignore what actually happened in 2010. To date, Moberly’s leaders have  proven proficient at deflecting blame, but otherwise incompetent. But now it’s obviously gone too far. Mayor Riley and Moberly’s City Council should be ashamed for attacking the very small business owners whose work they enjoy but refuse to pay. 

Endorsing Eric Greitens

Last Monday, I met with Eric Greitens, a likely candidate for governor. Eric is a Navy SEAL, Rhodes Scholar, author, and a leader of philanthropic organizations helping veterans. I was still skeptical going into the meeting.  I’ve grown a bit cynical serving in the legislature.

Eric and I discussed general governing philosophies, the keys to good decision-making, and policy ideas. Over the course of a campaign, Eric’s philosophy of leadership and government will be laid out, and it’s not my place to discuss them here. Nevertheless, with direct and thoughtful answers to my questions, Eric chipped my cynicism away. In my decade or so in Missouri politics, Eric Greitens is the most impressive candidate I’ve met. The other potential Republican candidates’ resumes, albeit impressive, cannot compare to Eric’s history of leadership. Like Tom Schweich in the Auditor’s office, he may even be overqualified for the office. But he’s chosen to serve his entire life, and he has my support for governor. 

“One Doesn’t Trust or Distrust a Raccoon.” Who Said It?

Reading old newspaper reports on the Rams stadium and ran across this awesome quote from a name you will know if you’re active in Mo. politics.

Quiz: Who said it?

“It would be like trusting a raccoon,” said QUOTABLE QUIPSTER, in a recent interview. “One doesn’t trust or distrust a raccoon.  The concept of trust and major sports entrepreneurs is inconsistent.

“They’re always going to be those sort of guys – showmen, salesmen, hustlers. Almost every great entrepreneur is some sort of con man. To build a stadium and get a football team, you don’t want an incredibly stable accountant.”

The $350 Million Question

Poll – Red Light Cameras

Should Missouri Raise the Speed Limit to 75 mph?

Philadelphia, Privacy and Government Ethics

On Thursday, I had the privilege to argue a case in front of the Third Circuit Court of Appeals in Philadelphia. I spent the afternoon visiting the historic sites surrounding the courthouse – Independence Hall and the Liberty Bell – and a museum on the Constitution. It was fitting that our case was argued in the heart of democracy and our Constitution.

The case was about Internet privacy – in particular, the biggest Internet hacking and tracking scheme in history. I was there as part of a group defending your (and every American’s) right to privacy on the Internet, in particular, your right to be free from computer hacking if you choose a web-browser that is specifically designed to block companies like Google from spying on you.

Just this summer, the Supreme Court ruled in a case called Riley v. California that Americans have a Fourth Amendment right to privacy in the data contained on a personal computing device, and went out of its way to explain the importance of keeping Internet search and browsing history private. You also have statutory rights to privacy under the Electronic Communications Privacy Act which, in many cases, are even stronger than your rights under the Constitution.

The Defendants in the case are Google and a handful of other data-tracking companies who hacked their way around the privacy settings of the Apple Safari and Microsoft Internet Explorer web-browsers. Of course they brought a phalanx of lawyers. This too was fitting. It is in America more than anywhere else that citizens enjoy equality before the law. And it is in our courts where this is most true.

Outside that courtroom, the Defendants include one of the most powerful companies in history. Inside the courtroom, the law and the facts are what drive the case. There’s nowhere else in American government where the average American would have an equal voice to defend their rights to privacy against hacking schemes concocted by companies like Google. In the legislative or executive branches, Google would secure meetings with top officials to persuade them to ignore the privacy interests of ordinary Americans. In the judicial branch, Google cannot plead their case without informing the other side of their arguments.

Unequal bargaining power between powerful interests and ordinary Americans is nothing new. Since the beginning of our Republic, the legislative and executive branches of the federal and state governments have been the target of financially and politically powerful groups and companies. These groups aren’t always the wealthy. It seems today that Washington is rigged in favor of both the poor and the powerful, and that it is the middle-class American who is ignored.

While there’s nothing new about this, I believe there’s a general feeling that it’s getting worse – particularly in state government. Also this week, on Monday, I chaired a committee that called on Attorney General Chris Koster to explain his actions in a series of cases detailed in the New York Times where his office either decided to take no action or to take lesser action after some interactions with companies that were the targets of civil investigations. We did not vote, but I believe it’s fair to say the committee agreed that Koster likely made the correct legal decisions. (All but two members of the committee were lawyers.) General Koster admitted that his office made a mistake in one case in not filing a case in time, but that it was not a purposeful error and they later attempted to make up for it the best they could.

The other prominent case involved 5 Hour Energy. A small group of states had started an investigation into the company for allegedly deceptive marketing. An attorney in Missouri’s AG’s office had apparently had some conversations with this group. An attorney for 5 Hour Energy sought General Koster out at a conference of the Democratic Attorney General’s Association at a swank hotel in California. After that conversation, Missouri’s investigation was soon dropped. The lawyer was neither a registered lobbyist in Missouri nor, to my knowledge, a Missouri licensed attorney.

General Koster presented our committee with a courtroom-style blowup of the allegedly deceptive advertising. He argued that it was not the type of matter with which an attorney general’s office should engage because it was not deceptive and very likely would not have even survived a motion to dismiss under Missouri law. I think he was right. But neither I, nor the committee, will endorse the process that led to that decision.

Like grade school math, it’s not always enough to reach the right result. Process matters. In this case, there was a deeply flawed process. Hotels in California after conversations with people who are not registered lobbyists or lawyers licensed in Missouri are not the appropriate places for policy or legal decisions to be made. And where you have a flawed decision-making process, you’ll eventually make bad decisions.

To his credit, General Koster reported to the committee that he has since changed the process for high-profile civil investigations in his office. There’s a team of experienced lawyers who meet before engaging a high-profile case, and before there’s any decision to settle or exit one. That is an improvement.

To be fair to General Koster, he is not alone. Every governor and attorney general in the country is feted and bombarded by special interests at events hosted by groups similar to the DAGA. There’s the Republican and Democratic Governor’s Associations, and there’s a Republican Attorney General’s Association. For big-time corporations, events hosted by these groups are like shooting fish in a barrel. They can make their pitch to leaders in dozens of states in just a few days. And can do so in an upscale atmosphere.

There’s also a legislative equivalent in the American Legislative Exchange Council. ALEC is a little different in that legislators are not “deciders” in the same way that governors or attorney generals are. Depending on the issue, a lobbyist who seeks particular action from a governor or attorney general does not need to rely on anyone other than the governor or AG to make it happen. Legislators must convince a majority of their colleagues to pass the bill (and sometimes a super-majority) which is oft easier said than done.

As the world has become more connected over the past 15 years, these various groups have grown in influence. There is little we can do in Missouri to change that. But I believe there are two things. First, we can pass legislation requiring more immediate reporting of out-of-state travel and perhaps reporting on lobbying at such events. At the very least the public should have a way to determine with whom their elected officials are meeting when they attend out-of-state conferences. Second, we can vote for candidates who best embody our views and who are not likely to have the opinions molded from lobbying in such rarified air.