"The deal that U.S. Rep. Virgil H. Goode Jr. helped broker in Martinsville no doubt made his biggest political contributors happy, at least until the roof collapsed on their company in a national corruption scandal.

But the people of Martinsville are still pleased as can be, bad news or not.

The deal, dubbed Project Goode by state officials, ultimately handed a $1 million building to a defense contractor for $400,000 with no strings attached. It also brought dozens of jobs to the distressed city. And not just any jobs, but jobs carrying secret security clearances, jobs in an industry not likely to fade away, jobs that pay twice the local prevailing wage.

But because the company took advantage of the city's hard times to obtain a sweetheart deal and wouldn't commit in writing to its promises for jobs and spending, Martinsville may be holding a big bag, critics said.

The company was MZM Inc. It was founded by Mitchell Wade, who along with employees, their spouses and the company's political-action committee handed more than $90,000 in campaign contributions to Goode, R-5th, with most of the money donated since March 2003.

MZM was riding high then. It had a $250 million Defense Department contract and was seeding business sites in multiple small communities, such as Martinsville.

But more recently, the bubble exploded.

The federal government ended its contract with MZM in July, though the company had by then been paid $165 million, according to news reports. Wade left the company. In August, Veritas Capital bought MZM Inc. for an undisclosed amount and formed a new company, Athena Innovative Solutions Inc.

U.S. Rep. Randy 'Duke' Cunningham, R-Calif., pleaded guilty on Nov. 28 to criminal charges and acknowledged accepting $2.4 million in bribes, and he implicated Wade and others. He also resigned from Congress. And Goode last week said he was giving $90,500 in MZM-linked contributions to charity, an amount revised upward from a Goode statement earlier in the week. He had earlier returned $600 to donors.

Goode, a member of the House Appropriations Committee, vigorously defended his seeking money in Congress to establish the Foreign Supplier Assessment Center, which assesses potential foreign suppliers of products and services to the Defense Department. MZM was selected to run the center in Martinsville.

Congress agreed in 2003 to spend $3.6 million to set up the center, which was not sought by the Defense Department. In written answers to questions from The Times-Dispatch, Goode said he had hoped the center would be located in his district and would be awarded to 'MZM or any other company' that would bring the project and good-paying jobs there.

It is not unusual for Congress to approve spending items not requested by the Pentagon. Goode said there was no link between his requesting the spending in March 2003 and getting $30,000 in donations tied to MZM in March and April of that year. He declined to comment when asked his opinion of Wade.

City supportive
So far, things are working out in Martinsville, where the business MZM started last year is doing well.

Across the city, responses to the political issues surrounding Goode, his contributors and MZM range from indifferent to positive.

Standing in front of Liberty Fair Mall, Karen Fountain, a 53-year-old seamstress at Martinsville's Diversified Distribution Inc., said she has not paid attention. 'They are going to do what they want to do anyway.'

Bonnie Hodnett, 53 and disabled, said that 'as far as I know, it is a good company.'

And she said, 'I like Virgil. I don't think he did anything underhanded. He's a good fellow.'

Downtown on Church Street, social worker Tia Stone said Martinsville has to do what it can to attract industry and jobs.

'We need to have businesses here in Martinsville,' she said. 'I'm not going to get into the campaign part. [But] any company that would come here and help families make a good living and can get them on their feet is worthwhile to me.'

Nyako Pharr, an aspiring writer, agreed that there is nothing wrong with companies seeking incentive packages.

'If I [had] a big company, I'd want to do the same thing.'

A speedy deal
Project Goode was done in record speed, by government standards.

And though the Virginia Economic Development Partnership, a state agency that works to bring business to Virginia, was asked to help out with money, it virtually was cut out of the negotiations in Martinsville.

An internal e-mail from the state agency's project manager noted, 'Goode was the major player in this deal. Community has purposefully limited our contact with the company.'

John B. Sternlicht, general counsel and legislative director for the economic development agency, said, 'There was not much access or contact at all with the company and that was unusual.'

He also said that though it is not without precedent, 'congressmen are not usually involved in our projects.'

Still, he said, the project seems to be working out for Martinsville.

Goode provides lead
On Oct. 1, 2003, Tom Harned, who was then Martinsville's director of economic development, sent an e-mail to the Virginia Economic Development Partnership saying that a company was interested in the vacant, city-owned Clearview Shell Building. 'The lead was provided to us by Congressman Virgil Goode,' he wrote.

A later note in the economic organization's files states that 'Congressman Virgil Goode . . . put a line item in the recent budget to allow [Defense Secretary Donald H.] Rumsfeld to do this project with MZM.' The statement is attributed to Bill Rich, MZM's vice president in Martinsville.

The e-mails and other documents are in a 2-inch pile The Times-Dispatch obtained from the Virginia Economic Development Partnership under the Freedom of Information Act.

Goode said last week that MZM officials had told him they were thinking of expanding, and he urged them to look 'at the high unemployment areas in Southside Virginia.' Harned provided information about the city and its high-tech building, and MZM officials and Martinsville officials met, he said.

Just 33 days after MZM's offer landed, Goode stood on a stage in Martinsville with Gov. Mark R. Warner, a Democrat, and Wade to announce that MZM was coming to town.

In between was a flurry of e-mails and notes that detailed the hard-nosed tack the company took, and revealed the tough spot the city was in.

Incentives necessary
The city had built a shell building, an unfinished structure with fiber optics, in its Clearview office park in 2001 to attract a business to town. By October 2003, the city still owed about $1 million on the building.

When MZM said it was interested, Harned sent an e-mail offering the building to the company at cost, $1 million. The city would throw in the land, improvements and utilities for free.

Mitchell sent a letter offering $400,000 and demanding a five-year tax abatement.

'We offered; they counter-offered,' Harned said in an interview. The company never moved from that position, and it got what it wanted. But did the city feel it was over a barrel? 'No,' Harned said.

'We are in a very difficult transition' from furniture and textiles to whatever comes next, he said. Harned is now vice president of the Martinsville-Henry County Economic Development Corp., which was created after MZM came to the city.

'Incentives and program enticements are necessary. . . . They are not unique to us. Everybody uses them.'

Bern Ewert, a former Roanoke city manager who is seeking the Democratic nomination to run against Goode next year, agreed that incentives are routine. But this one was different because it leaves the city responsible for the company's promises.

'The [center] in Martinsville was not requested by the Defense Department, and without preferential earmarks, it may not have a future. There is a real chance that the MZM house of cards could completely collapse and leave the city and the citizens of Martinsville in the lurch,' Ewert said last week.

Sternlicht, with the economic development partnership, said it was a business deal and the company negotiated the best deal it could get. 'They are not there to do the Southside of Virginia or the city of Martinsville a favor. They are there to make a buck.'

Wade and MZM also refused to apply for state grants totaling $500,000 to help offset Martinsville's losses on the building. Those grants, one from the Governor's Opportunity Fund and the other from the Tobacco Region Opportunity Fund, come with strings attached. If the company took the money, it would have to live up to promises that it would employ 150 people in three years and make $4.4 million in improvements.

Instead, the city signed for the grants, effectively putting itself on the hook for MZM's performance.

If the company doesn't perform as advertised, the city would have to return the money. 'The state offers incentives to entice businesses to locate in Virginia and rural communities and we take advantage of those to help create jobs, provide jobs for our citizens,' Harned said.

Sternlicht acknowledged that Project Goode went outside normal procedures. Why? 'Because it was Martinsville,' which needs the jobs.

'We're happy they are here'
Toward the end of the discussions over Project Goode, the state decided that MZM was obligated to have only 75 employees by mid-2007 because their salaries would be twice the prevailing wage in Martinsville.

The company employs 30 people. 'They are showing . . . progress toward meeting their goal,' Harned said.

Just as important as the number of jobs is the expectation that many of them will be in the salary range of $40,000 to $50,000, Harned said.

In fact, the company's employees are already contributing to the city's civic life, he said. 'They are doing what they said they will do at every level. It's been a positive experience for us and we're very pleased they chose Martinsville. We're happy they are here.'

He said the new manager at Athena is the president-elect of the Martinsville/Henry County Chamber of Commerce." (Gordon Hickey, Peter Hardin and Jamie C. Ruff, Richmond Times-Dispatch, December 18, 2005)