Oct 04 2011
Flaws in awarding of grants extended to state level
The Tennessean (Tennessee) - by Brandon Gee
In July, Tennessee’s transportation commissioner applauded the opening of the state’s first truck- stop electrification terminal at TR Auto Truck Plaza in Dandridge, a project taxpayers paid for with a $424,000 federal stimulus fund grant.
Thursday, the shiny new equipment languished uselessly as U.S. Bank took possession of the bankrupt business after an auction at the Jefferson County Courthouse failed to solicit a single bid.
While not as spectacular a flop as Solyndra — the California solar panel manufacturer that filed for bankruptcy last month after receiving a $535 million guarantee from the federal government — the truck stop’s collapse further illustrates flaws in the way stimulus projects were evaluated that extended to the state level.
The Environmental Protection Agency and the Tennessee Department of Transportation approved the stimulus grant to Mountain Plaza Inc., the truck stop’s owner, despite many red flags. The company, whose creditors included the state and federal governments, filed for bankruptcy protection in the middle of the process. A review of public records shows evidence of the company and its owner’s past and present financial troubles was readily available.
TDOT officials stress that the department was simply passing along the federal grant funds it had applied for and that no state money was involved.
“EPA did not require financial or criminal background checks or information to be disclosed on grant applications,” TDOT spokeswoman B.J. Doughty said.
On July 22, 2010, a state tax lien was filed against the company, but it wasn’t until October 2010, four months after the filing, that TDOT learned about Mountain Plaza’s bankruptcy. After that discovery, TDOT changed subsequent application packages and included language requiring applicants to certify that they “have no outstanding government debt.”
Mountain Plaza’s grant was part of $2 million that TDOT received from the EPA as part of the American Recovery and Reinvestment Act of 2009. The money was doled out to truck-stop electrification projects along Tennessee interstate corridors. The systems reduce diesel emissions and improve air quality by allowing truckers to hook up to air conditioning and electricity so they can shut down their engines.
“It’s all installed. It was up and running for several months up until the mortgage company decided to foreclose,” Mountain Plaza owner Ricky Hugo Lewis said Thursday. “We had been working with them, but I had to shut it down two weeks ago because I couldn’t operate it.
“It’s a helluva good system, and it will clean up the air. We just need another buyer to come in there and step up. All they’ll have to do is take the plywood down and turn it on.”
The chance of that happening anytime soon appears slim, judging by the lack of interest at Thursday’s auction and the fact that Lewis already has seen one prospective buyer back out. Lewis said it was the prospective buyer who encouraged him to apply for the stimulus grant and prepared the application to TDOT. Despite the fact that the business had been struggling financially for years, Lewis said he agreed.
“I signed it,” he said.
Owner had a record
The first round of grant applications was due September 2009. Mountain Plaza’s was one of two applications TDOT received, and its location in Jefferson County was a plus because the area had been designated by the EPA as one where air quality is not always healthy. The other application was withdrawn, and Mountain Plaza received an award letter in December 2009.
On May 18, contracts were executed, and TDOT sent them to the Tennessee Department of Finance & Administration.
On May 24, 2010, U.S. Bank sued Mountain Plaza, Lewis and his wife for failing to repay a $2 million loan the Lewises had taken out to refinance the truck stop. Mountain Plaza filed for bankruptcy on June 3, 2010. Its debts included $18,000 owed to the Internal Revenue Service, $5,000 owed to the Tennessee Department of Labor and Workforce Development, $35,000 owed to the Tennessee Department of Revenue and $17,312 owed to the Jefferson County Trustee, according to the bankruptcy petition.
The stimulus award to Mountain Plaza was officially awarded 12 days later despite the bank lawsuit, the bankruptcy and several other problems that began years earlier.
In 2002, Lewis was convicted of 31 counts of theft stemming from flawed sales tax returns he filed for a previous business in the 1990s. He was placed on probation for eight years and ordered to reimburse the state nearly $70,000, which Lewis says he did.
In 2003, Mountain Plaza and the Lewises filed for bankruptcy separately. Their debts included local, state and federal taxes then, too. They emerged from those bankruptcies in 2005.
While he was still on probation early last year, Lewis was indicted for writing worthless checks, including several of more than $10,000. Lewis was still on probation, and his worthless check charges were still pending, when TDOT approved the grant to his company.
Lewis is due in court next week on the worthless check charges, which he disputes. Lewis said he owes a fuel supplier money that he can’t pay, but denies writing bad checks.
“I’m going to fight it all the way,” said Lewis, who, at 68 years old, says the business that was his dream is gone and that he has nothing, not even retirement savings, left.
TDOT Commissioner John Schroer celebrated the truck-stop electrification system’s opening in July and Doughty, like Lewis, noted that it operated for a few months and could be resurrected by a new owner.
“TDOT, along with the Tennessee Attorney General’s Office, is certainly following the developments related to the bankruptcy,” Doughty said, “but it is too early to determine the future of the property.”