The Star should be congratulated for breaking this story. Likewise Gov. Pence should be applauded for taking immediate action in response to the Star story. This happened under Governor Daniels' watch. While much of what Gov. Daniels did in office was commendable, he had a marked disinterest in overseeing the day-to-day operations of state government. As a result, agency chiefs and department heads often pushed the envelope in terms of ethical behavior, many times crossing the line. Gov. Pence needs to run a more hands-on administration to avoid this from happening. Unfortunately at this stage Governor Pence is cleaning up many of the messes left by Gov. Daniels' administration officials.
Gov. Mike Pence ordered a third-party review of Elevate Ventures’ investment decisions, a day after an Indianapolis Star investigation reported the nonprofit had invested taxpayer money in companies run by its chairman and son.
Gov. Mike Pence
The Star discovered that a company run by Elevate's founder and chairman — a well-connected businessman and Republican campaign donor named Howard Bates — received $500,000 in taxpayer money from an Elevate-run fund. A company run by Bates' son received $300,000 from the same fund.
By way of background, the story published in the Star on Sunday outlined what was going on that led to the Pence decision:
In 2011, the state of Indiana hired the private nonprofit Elevate Ventures to choose Hoosier startup companies worthy of taxpayer dollars.With even moderately aggressive administrative leadership and oversight this sort of thing would never have happened. Gov. Daniels failed to provide that leadership and oversight. Gov. Pence's cannot make the same mistake.
Officials promised the arrangement would bring new business investment and a new, “robust” environment for entrepreneurs.
But, two years into the contract, an Indianapolis Star investigation has uncovered a wholly different set of consequences — possible conflicts of interest and nepotism. The Star’s investigation triggered a federal probe.
The Star discovered that a company run by Elevate’s founder and chairman — a well-connected businessman and Republican campaign donor named Howard Bates — received $500,000 in taxpayer money from an Elevate-run fund. A company run by Bates’ son received $300,000 from the same fund.
At the same time, under Elevate, the state has significantly cut the amount of money going to other startups.
Elevate was authorized to distribute the money to the companies connected to Bates without state approval, despite the fact it was public money.
When The Star informed the U.S. Treasury Department about the situation, it launched an audit of Indiana’s handling of the federal program that Elevate used to make the investments.
Not only did Elevate officials agree to finance Smarter Remarketer, they invested $499,986, just $14 short of the maximum investment allowed under the Angel Network Fund’s rules.
The money came in November 2012. It nearly matched the amount the Angel Network Fund had spent that year on all other companies combined — six other startups had received a total of $625,000, according to Elevate’s 2012 annual report.
A few months later, Elevate also agreed to send $300,000 to MaxTradeIn, a company run by Bates’ son, Justin. Together, the two investments account for 35 percent of the money spent by the Angel Network Fund so far.