Generations of reporters have been raised on that journalistic bromide, and now, after suffering an embarrassing mistake in full public view, Mike Kazmierski has come to embrace it, too.
Kazmierski, the head of the Colorado Springs Regional Economic Development Corp., got burned last month after an alternative-energy company from Iowa somehow neglected to mention a string of consumer complaints had been filed against it with the attorney general in its state.
The EDC had put together a $376,000 incentives package to convince Prevailing Power to open a wind-generator manufacturing plant in Colorado Springs. Reports of the company’s troubles surfaced within days of the EDC’s announcement that Prevailing Power was relocating, and so the deal to create as many as 140 jobs quickly fell apart.
The affair, as Kazmierski fairly points out, represented a rare instance in which the EDC found itself the victim of someone else’s misinformation campaign. That sort of thing just hasn’t happened much.
Which, sadly, only served to underscore the question of how the EDC had allowed itself to fall into such a trap? It’s fair to say that the reaction among many was of stunned disbelief.
Well, the answer, clearly, was that the EDC never had a very thorough vetting policy in place.
It has now taken steps to correct that. Kazmierski last week sent me a copy of a memo outlining the EDC’s new approach.
It begins by noting the EDC has to balance the needs of a company considering relocation and its desire for confidentiality with the EDC’s available resources. In that light, a “phased” vetting process will be used “to ensure that the company is viable and that the information they provide is factual.”
At first, the EDC will do little more than ask for some basic “non-invasive” information from its prospects and conduct an online search for any obvious signs of trouble. It also will place a call to the Better Business Bureau in that prospect’s town.
If things get serious with the prospect, the EDC may plan a visit to the company’s operations and schedule meetings in Colorado Springs between the company’s executives and people here in the same industry.
This is as far as the EDC went with Prevailing Power.
Moving forward, it will now request financial performance records and a business plan for smaller companies thinking of moving here.
If “disconnects” are discovered, more extensive research will be considered including background checks and other investigative reports that the EDC will pay to have done. A visit will now definitely be part of the process, with industry experts from here joining EDC representatives on such tours to help identify anything unusual.
The final phase of the vetting process will come after a company’s decision to relocate to the region but before the EDC takes further action.
Most critically, no incentives will be sought for any company that doesn’t share its financials.
And no company will get the EDC’s support — including, as it did for Prevailing Power, appearances by Kazmierski and other EDC officials at news conferences to announce a move here — unless it shares its financials.
“Financials” include sales information for three years, offering documents if the company is in the process of raising capital, audited statements, the name of the company’s bank for a reference check, a check with the attorney general in the prospect’s state and a review of the company’s Dun & Bradstreet record.
In some cases, credit checks on chief executives or owners and calls to customers could also be in order.
A deeper background check on the owners of Prevailing Power would have revealed they filed for Chapter 7 bankruptcy, which involves liquidation of nonexempt assets, in Branson, Mo., in 2005. Also, according to court records cited by the World-Herald newspaper in Omaha, Neb., the couple owed more than $813,000 on businesses they owned, including the Branson Pit Stop, Hilltop Food & Fuel, Flashbacks and Steven’s Auto.
As Kazmierski points out in a memo on the EDC’s new policy, the primary goal of the group is to “bring quality jobs to the community.”
“However, before the EDC commits to an announcement or the promotion of companies that intend to relocate or grow in our community, they will be fully vetted and EDC will confirm their viability.”
In the economic development game, pursuing prospects is everything. That sometimes means overlooking the shortcomings of a relocating company, in the way good mothers love their children unconditionally.
The EDC now realizes it can no longer play the non-judgmental parent role alone, and that certain thresholds will need to be met before it showers its affection on relocating companies.
Prevailing Power, by the way, has shut its Iowa plant.
Allen Greenberg is the editor of the Colorado Springs Business Journal. Reach him at email@example.com or 719-329-5206.