China Law Blog on Mamtek: “[T]here are some lessons to be learned”
Looks like the Mamtek story that Show-Me Institute Policy Analyst Audrey Spalding wrote about on Friday is already getting some play on the West Coast. If you’re unfamiliar with the Mamtek saga, a primer (Emphasis mine):
A company that promised 600 jobs and drew Gov. Jay Nixon to Moberly to announce $17.6 million in state aid is in financial trouble and could potentially stick the city with payments on a $39 million bond deal.
Mamtek International Ltd., a company with Chinese and American ownership, planned to make sucralose, a zero-calorie sweetener at the facility. The $65 million deal, ballyhooed at the start by former Gov. Bob Holden, chairman of the Midwest U.S.-China Association, was put together in 73 days last year and was supposed to include $8 million in private investment.
Moberly issued $39 million in bonds to build the Mamtek factory, buy and install the equipment and take care of other items necessary for the company to begin production. It was supposed to have put 116 people to work — perhaps as early as late last year, according to early reports — and double that employment within 18 months.
China Law Blog is a website operated by Harris & Moure, pllc, a law firm based out of Seattle, Wash., with a China law practice. China Law Blog’s Dan Harris highlighted Mamtek’s troubles on Thursday, telling readers that “[m]any many months ago, I got a quasi-anonymous email from someone in Moberly, Missouri” regarding the Mamtek project. After a series of back-and-forth emails with the tipster, Harris determined “that the odds were that this deal would prove disastrous.”
As it turned out, the deal did prove disastrous. So what happened? According to Harris (Emphasis mine):
First, it appears that got overly excited about the possibility of getting Chinese money. It appears it fell prey to the classic “China is rich. We want money. Therefore this is a good deal” syndrome. Second, it appears nobody conducted adequate due diligence. Were the very valid suspicions of my e-mailer ever checked out? I doubt it. I have no idea if my e-mailer ever raised her/his suspicions with City Hall, but having dealt with governments, I can only imagine how they were treated. Can you say groupthink? Third, the deal was rushed. The Columbia paper noted how it all went through in “73 days, far less than the six months or more usually needed to conclude such a deal.” Rushing a deal does not mean it will fail, but it certainly increases the chances.
Governments are responsible to the people for the public money they spend and the public credit they extend. Especially in a down economy, governments will oftentimes risk a little — or more likely, a lot — of both to get the “jobs, jobs, jobs” flowing. The problem, of course, is that governments have a terrible track record of picking economic winners and losers. Unfortunately for the city of Moberly, that’s a lesson residents now know all too well.
