Foundation’s report wrongly characterizes $9 million investment as a loan, State Investment Council spokesman says
A spokesman for the State Investment Council (SIC) takes issue with a libertarian-leaning foundation’s report trashing a $9 million investment made in a company whose use of the cash didn’t work out as planned.
The most egregious inaccuracy in the Rio Grande Foundation’s report about the $9 million investment in Earthstone International is that it repeatedly characterizes the investment as a loan, said SIC spokesman Charles Wollmann. He provided a copy of a 2004 news release to back up the assertion that this was an investment.
There’s a big difference between an investment and a loan, he said. The latter has to be repaid, while the first gives the state a stake in the company and is never expected to be repaid.
The foundation’s report, by investigative journalist Jim Scarantino (a former columnist for this site), details how the state’s $9 million was to be used to help create 200 jobs by building a new plant in southern Doña Ana County but, according to the foundation, that money has instead “exported jobs to Mexico.”
The Doña Ana County facility was never built, and the money was instead used for research and development and marketing. Meanwhile, while some of the company’s work is done in Santa Fe, some is done in Mexico and Arkansas.
“Not one dime” of the “loan” has been repaid, Scarantino wrote on the foundation’s blog, New Mexico Liberty.
Wollman said the use of the word “loan” is one of many factors that leads him to believe the foundation’s report is “a politically motivated smear piece aimed at distorting the facts.” He said the investment has since been converted into equity in the company.
The Earthstone investment was part of the state’s thinking outside the Wall Street box in 2004 by investing money in state companies. Wollman said such investing comes with more risk, but also comes with a potentially higher reward.
He defended the investment in Earthstone, saying the company made money last year and a spinoff company — Growstones — should open a factory in Albuquerque by October. He said, because Earthstone is a startup company, it could take a long time to know whether it succeeds or fails.
“If we make a bad investment, and that happens sometimes, we can take a hit for it,” Wollman said. “But on this one, it’s not right.”