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November 2005

2006 Fifth District Congressional Race: Goode Defends MZM Ties

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"Fifth District U.S. Rep. Virgil Goode said a front-page USA Today article that questioned the appropriateness of some of his dealings with defense contractor MZM Inc. and its contributions to his campaign was not entirely correct.

For one thing, he said he was not on a committee that wrote a classified budget that included funds for a Foreign Supplier Assessment Center that eventually was run by MZM in Martinsville.

He requested an appropriation to create the center, along with other requests for funds, as part of the routine process of asking for budget appropriations, Goode said, but he didn't ask for it to be classified and he didn't ask specifically for it to be awarded to MZM.

Also, he said, there was nothing inappropriate about the contributions he received from MZM, its employees and its former president, Mitchell Wade, and the timing of those donations.

Goode said any implication these donations were rewards for helping MZM get contracts was "not correct."

The USA Today article appeared Wednesday and focused on MZM, which had an operation in Martinsville that recently was bought by another company and renamed Athena Innovative Solutions Inc., as an example of how secret military spending has little oversight.

The article centered on two members of the House Appropriations Committee, Rep. Randy Cunningham, R-Calif., who became embroiled in a scandal after reports of a questionable real estate deal with Wade surfaced, and Goode.

The article stated that Goode, a Rocky Mount Republican whose district includes parts of Henry County and Martinsville, received campaign contributions totaling nearly $90,000 from MZM and some of its employees since 2002. That is nearly 10 percent of the money he raised, and some of it was donated within days of key decisions in Washington on MZM contracts and projects, the article stated.

Goode said his request to create the assessment center, which monitors foreign suppliers of military goods to make sure they are not harmful to U.S. interests, grew out of talking to Department of Defense contractors and others who questioned why no background checks were done on foreign companies selling to the military.

He said the Pentagon had not asked for the provision on the Foreign Supplier Assessment Center. Goode said he does not routinely ask the Pentagon or other agencies about programs he feels are needed before making requests.

He said he had asked MZM to bring any future expansion to Southside Virginia, but did not remember if that was before or after he asked for the creation of the Foreign Supplier Assessment Center.

"If they were going to have (a center), why not have a defense industry in Martinsville," he said.

He said he told MZM officials they would "be more welcome if they came to Southside Virginia." The area needs jobs, he said, and he does not regret the company locating here.

"City signed agreement for money to help MZM

When a defense contractor moved to Martinsville in 2003, company officials did not sign a performance agreement for state incentives, but city officials did.

MZM Inc. reportedly declined to take local or state incentive money directly. Instead, Martinsville received $627,000 in state and private funds to help the company buy a shell building in the Clearview Business Park from the city.

According to Wade Bartlett, current director of finance and then interim city manager, city officials signed the performance agreement after hearing that a company official would "rather not sign" the document.

The agreement between the Virginia Economic Development Partnership and Martinsville was signed in June 2004. It called for the city to receive a total of $500,000, or $250,000 each from the Governor's Opportunity Fund and the Virginia Tobacco Indemnification and Community Revitalization Commission, according to Bartlett. It also received $127,000 from the Chamber's Partner for Economic Growth (C-PEG).

The city used the funds to offset costs of the 50,000-square-foot building, reducing its $945,000 price to the $400,000 paid by MZM, which was recently purchased by another company and renamed Athena Innovative Solutions Inc.

The performance agreement also called for the creation of 75 jobs and capital investments of $4.4 million within 30 months, Bartlett said.

When announcing the company's move to Martinsville, company officials estimated hiring 150 workers within three years, according to published reports at the time.

If the company does not fulfill the job creation and capital investment requirements, the city -- not the company -- would be required to pay all or a portion of $500,000 back to the state, according to Bartlett.

With about 18 months left to fulfill the agreement, Bartlett said "we'll just have to wait and see," as with any other company.

However, Bartlett said he believes the company has met the capital investment requirement because the building "alone is valued at $3.2 million. That does not include any equipment" which would likely push the amount of the capital investment to $4 million.

Currently, Bartlett said he is not certain of the number of jobs created, but thinks it was 35 to 50.

Using the low end of 35 to base his calculations, Bartlett said that was 46.6 percent or nearly half the number of jobs specified in the performance agreement. Based on that, the city would be asked to repay about $133,000 of the state funds if the performance agreement ended now.

Although taxes on the company's business equipment were forgiven for the first year, the taxes must be paid at a reduced rate of 50 percent during years two through five of its operations, he said.

Using the $3.2 million value of the building as a base and the current $2.30 per $100 personal property rate, taxes on the building would amount to roughly $30,000 annually, Bartlett said. The city will receive half, or $15,000, during those years, he added.

"Then, assuming this will be an on-going outfit, after the fifth year we would start getting the whole $30,000," Bartlett said. City officials have no indication the company is less than it appears.

"Athena purchased the company thinking it had a value and it was brought to us by (5th District U.S. Rep.) Virgil Goode ... There is no reason for us to expect any problems," Bartlett said, adding that he hopes the company thrives and expands.

"We'll just have to wait and see," he said, adding that even "in a worst-case scenario" if the city was required to repay some of the incentive funds, considering the tax revenue and job creation "we'd still be pretty well satisfied" with the deal." (Debbie Hall, The Martinsville Bulletin, November 10, 2005)

Goode said he talked to MZM and Martinsville officials multiple times about the center to help bring it to Martinsville, but as far as he can remember he did not, as the USA Today article states, work with state officials on the project.

He also defended the contributions he has received from MZM and some of its employees, and the timing of those donations.

"I've had different fundraising events and MZM has contributed to those," he said. He suggested the timing of the fundraising events was responsible for the timing of the contributions, which a USA Today chart showed corresponded to months when MZM received multi-million dollar defense contracts.

As for why MZM made such significant contributions to his campaign, Goode said, "you'd have to ask them," but he said he thought it might be because company officials knew he supported the "philosophy" of the Foreign Supplier Assessment Center.

He said accepting contributions from companies Congress might have to make decisions about is a common practice.

"There's a number of members of Congress that's gotten more contributions than me from a number of different sources," he said.

Goode said he feels those contributions do not affect his objectivity.

"I've gotten contributions from tobacco interests, probably more than from (MZM)," he said.

Goode said he offered refunds to MZM contributors after reports surfaced that unnamed workers had complained that they had been pressured into contributing to his campaign. He said two MZM employees took him up on his offer and he refunded about $600.

Goode serves on the House Appropriations Committee and the Subcommittee on Agriculture and the Subcommittee on Science, State, Justice and Commerce, according to his Web site. He is not, and never has been, a member of the Defense Appropriations Subcommittee, according to Goode and a spokesman in his office." (Shawn Hopkins, The Martinsville Bulletin, November 10, 2005)

Comments? Questions? Write me at george@loper.org.