Meet Watchdog editor John Bicknell: journalist, author, history buff

Tuesday, November 3rd, 2015

10.16.15 004Watchdog’s new executive editor, John Bicknell, has been a journalist for more than 30 years. He came to Washington, D.C. in 1999 as an editor at Congressional Quarterly, where he led the production team for CQ Today and was a team editor for the publication. When CQ merged with Roll Call, he continued as national security editor, co-editor of the 2012 edition of “Politics in America” and eventually became editor of the opinion pages.

Bicknell’s hiring marks the latest step in the Franklin Center’s plan to expand beyond its 16 state bureaus, while growing staff in key states. As executive editor of Watchdog, he will work closely with our extensive network of investigative journalists and develop relationships with other media outlets.

Bicknell recently took a break from working with reporters to answer a few questions about his path to journalism and the state of today’s media:

Franklin Center: How did you first become interested in journalism, and what has kept you working in the industry for 30 years? 

John Bicknell: I grew up in a family very interested in politics and the news. And I always knew I wanted to be some kind of writer. So, while I didn’t major in journalism in college, it was always in the back of my mind that I might go into journalism. I’ve survived for 30-plus years by always looking to do something new, something different every few years.

FC: In addition to journalism, you’ve written a book about the presidential campaign of 1844 and have another one in the works. Clearly you’re a history buff, so how does that inform your approach to journalism and today’s rapid-fire news cycle?

JB: Studying history helps provide a long-term view of issues. When somebody says “this is the dirtiest campaign ever run,” or “this is the most important election of our time,” knowing something about history can provide perspective, as well as a way to debunk such claims. My new book, for example, is about John C. Fremont’s 1856 presidential campaign, the first Republican campaign and the first in American history to involve women and blacks in a substantial way. It was contested in perhaps the most violent peacetime atmosphere of any U.S. election, and though Fremont lost, he set the template that Abraham Lincoln followed four years later in winning.

FC: What is one issue or story you wish more Americans were paying attention to?

JB: It’s hard to narrow it down to one, and I have a different answer every other day. I think people are generally paying attention to issues of national security, probably immigration, maybe even the debt. So today let’s say it’s the decline of the notion about what it means to be an American, the idea of citizenship with responsibility. That might have something to do with studying history closely and seeing how much progress we’ve made in 200 years. Too often, I think, people ignore progress because they benefit from the culture of complaint.

FC: What is the biggest obstacle or challenge facing journalists today? 

JB: The biggest challenge facing journalists today is a self-inflicted problem: too many activists with bylines posing as neutral observers, and they’ve been found out. Once you’ve destroyed your own credibility, it’s very difficult to get it back, and we see that in many, if not most, legacy newsrooms.

FC: What opportunities are you most excited about as you join Watchdog’s network of investigative journalists?

JB: As I said, our opportunity is to fill the wide, wide space left empty by legacy journalists who believe their job is to defend the status quo at the expense of reporting facts and explaining why things happened the way they happened.

The feds’ cash-for-visas foreign investor program: What could go wrong?

Wednesday, October 28th, 2015

Grassley EB-5 ss

Earlier this month, U.S. Senator Chuck Grassley (R-IA) took to the Senate Floor to call for reforms to a government program that most Americans probably haven’t even heard of: the EB-5 Regional Center Investment Program. Simply put, the program allows foreign investors to invest large sums of money in American projects in return for a green card, but as Grassley pointed out, the government hasn’t always followed the spirit of the rules for such investments.

The program is divided into two different investment thresholds. The lower level, requiring a minimum investment of $500,000 is supposed to help Targeted Employment Areas – poorer and rural regions – get a nice economic jolt, but gerrymandering of these regions has instead led to the EB-5 program funding lavish building projects in wealthy urban areas. The New York Times and The Wall Street Journal, Grassley said, have covered cases where wealthy areas like Midtown Manhattan had projects funded by EB-5.

“The EB-5 program is supposed to favor distressed economic areas,” said a Washington Post editorial, “but the definition of a needy zone has been stretched to include nearly the whole country, including hot downtown real estate markets.”

Embedded in the heart of Grassley’s speech was Watchdog’s coverage of the program. Specifically, Grassley cited reporter Kenric Ward’s investigation into the program’s abuse in Dallas, where a luxury apartment project in uptown Dallas, one of the most affluent parts of the city, cashed in on funding from 100 overseas investors who each provided $500,000. Acquiring visas through investments of that size is supposed to be reserved for ventures in federally designated Targeted Employment Areas: usually rural or impoverished areas in need of jobs. The fact that EB-5 was used in this way to help develop an area with 0.8 percent unemployment indicates the areas designate by federal regulators as in need of improvement have been badly gerrymandered.

The EB-5 Immigration Investment program was originally established by the Immigration Act of 1990. It took more than a decade for it to gain traction, spiked in use during the Great Recession and now has achieved its full capacity of 10,000 immigrant investors (which includes family members of investors, so the total number of spots for individual investors is more like 3,000). Initially it required a minimum investment of either $500,000 or $1 million, depending on the affluence of the area being invested in, and was required to create at least 10 solid jobs for every investor. In return, investors would receive green cards for themselves and qualifying family members. To stimulate interest, however, the jobs requirement was changed to include “indirect” jobs created, a figured calculated by complex equations.

shutterstock_331350053Grassley’s speech only covers one area of the problems associated with EB-5. The complicated calculations and debatable economic assumptions used to determine the number of indirect jobs created by investments make it difficult to evaluate the true economic impact of the program. The agency also has yet to adequately address questions and concerns over national security. About 85-90 percent of EB-5 investors come from China.

As is often the case, concerns about the effectiveness and integrity of the EB-5 program run all the way to the top. Last spring an Inspector General’s audit accused Alejandro Mayorkas, former director of U.S. Citizenships and Immigration Services, which administers the program, of improper conduct in his handling of EB-5. After the audit, Mayorkas testified before a House Committee on Homeland Security hearing about the program. His answers were curt and evasive, and they did little to bring any much-needed transparency to the program. He described himself as a “hands-on manager,” for example, yet admitted he had significant gaps in operational knowledge. He was unable (or refused) to say how many jobs had been created or whether the thousands of visas issued led to any breaches in national security. When House Homeland Security Committee Chairman Michael McCaul asked whether Chinese nationals who acquired visas through EB-5 were properly vetted on national security grounds, Mayorkas simply answered “I would hope so.”

That’s hardly a ringing statement of confidence.

With critics of EB-5 resigned to its inevitable renewable, many are pinning their hopes on Grassley’s proposed reforms in the American Job Creation and Investment Promotion Reform Act, which would focus on ensuring smaller investments go to high-unemployment zones and rural regions, raise the investment thresholds by several hundred thousand dollars, and require foreign investors to actually prove the creation of direct jobs before receiving permanent residence.

In addition to the abuse of gerrymandered targeted employment districts, however, EB-5 has seen its fair share of woes elsewhere across the country. In South Dakota last year, a meatpacking plant funded by Chinese investors through EB-5 went bankrupt, leaving investors without their promised visas (their investments likely won’t be recovered either). And U.S. Sen. Harry Reid once infamously pressured the feds to expedite more than 200 visa applications through a Las Vegas casino project funded by EB-5.

Neither of these cases, unfortunately, are all that surprising in light of a recent Government Accountability Office report on the program, which found that USCIS does not properly track the economic effects of the program. The agency, the report showed, rarely conducts site visits to verify claims of economic activity, never interviews investors before issuing them green cards, and has left itself open to fraud and abuse through its reliance on “paper-based documentation.”

Mayorkas has been gone from USCIS for almost two years now, but it remains to be seen if the agency can take steps to improve the effectiveness and security of the program – or if Congress will act to prevent future abuse.

Is all that public data actually helping us keep government accountable?

Wednesday, October 14th, 2015


Earlier this year, the Pew Research Center released a report that attempts to gauge public sentiment concerning open government data. It suggests there are two major factors paving the way for new ways in which people engage with government today.

“The first is data,” say authors. “There is more of it than ever before and there are more effective tools for sharing it. This creates new service-delivery possibilities for government through use of data that government agencies themselves collect and generate.

“The second is public desire to make government more responsive, transparent and effective in serving citizens — an impulse driven by tight budgets and declining citizens’ trust in government.”

Not surprisingly, Democrats have a more upbeat view of open data than Republicans, but that appears to be a reflection of their more optimistic view of government in general. Overall, Americans are divided or ambivalent about the prospect of more open government data, but they lean toward optimism. Fifty six percent said government data allows journalists to cover government activities more thoroughly, and 53 percent said it makes government officials more accountable to the public.

Americans are split right down the middle, however, on the question of whether more open data improves the quality of government services and whether it allows average citizens to have more of an impact on government affairs. And 53 percent of respondents don’t believe that open data results in better decisions by government officials.

For the Franklin Center’s Watchdog journalists and citizen contributors, those first two figures are evidence that success in our mission to bring greater accountability to government is possible. The last two figures, however, indicate that we still have a long way to go. As the report says, “most Americans have yet to delve too deeply into government data and its possibilities to closely monitor government performance.” This is what needs to change.

It’s easy for one’s eyes to glaze over in the face of government data, but a government transparency movement has been at work in recent years trying to help us make sense of all the information available to the public. In a Q&A with Watchdog, open data guru Waldo Jaquith, who works with government and private sector groups to make government data available for public consumption, points to a number of tools and organizations that help make government data more accessible and transparent, including the Sunlight Foundation and FederalRegister.gov, which helps citizens track proposed changes to legislation that could affect them.

As an example of how far the transparency movement has come, Jaquith points to OpenFDA, which takes the raw medical data driving decisions by the U.S. Food and Drug Administration, and makes it accessible to everyone.

“You the public are paying for this medical data,” he says. “You’re already paying us to do this research. Instead of leaving it on a private server somewhere, we’re going to put it up for anybody to access. It’s yours. We should give you access to it.”

Access to government data has allowed Watchdog to break a number of significant stories exposing questionable uses of taxpayer funds. Reporter Arthur Kane’s investigation into questionable loans dealt out by the Small Business Administration was featured in Forbes earlier this year. Kane has partnered with the Washington Times for an front-page exclusive look into how the Export-Import bank was shipping U.S. jobs overseas and allowing companies to keep profits offshore to avoid taxes.

Access to digital public records has also allowed Watchdog reporters to uncover patterns of welfare abuse and sparked reform legislation in several of their respective statehouses.

Strangely, the Pew study seems to leave little room for those who are both innately distrustful of government and those who believe open data initiatives can improve government services and performance. Holding both of those positions simultaneously, after all, is the key to reform. It requires skepticism and sharp eye to find areas of improvement, but also trust that through bringing the truth to light, the government can indeed serve its people better. We believe such change is possible.

U.S. Senator Grassley credits Watchdog’s coverage of EB-5

Friday, October 9th, 2015

U.S. Senator Chuck Grassley, R-Iowa, singled out Watchdog.org as he spoke on the Senate floor Wednesday for its great work on the controversial EB-5 program.

“Watchdog.org, a national watchdog group that has followed abuses of the program closely over many years, has also identified another problematic, gerrymandered targeted employment area,” said Sen. Grassley. “They reported that a 21-story residential building project, which included trendy restaurants and shops, was built with foreign investments despite its location in an upscale neighborhood with only 0.8 percent unemployment. These are just a few examples, yet they point to a clear problem with this program.”

Watch Sen. Grassley’s statement below:

Steve Forbes cites Watchdog reporting in Fox News Opinion

Tuesday, October 6th, 2015

In a column for Fox News, Steve Forbes, editor-in-chief of the business magazine Forbes, cited Watchdog reporting in his call for Congress to hold the EPA responsible for the environmental disaster the agency created in Colorado.

“If President Obama could play golf as well as his administration practices hypocrisy, he would easily win every major tournament,” Forbes wrote. “Take the way Obama’s pet regulatory agency, the EPA treats its own environmental accidents with those that occur in the private sector.”

According to Watchdog, he noted, “the EPA offered conflicting statements, even denying involvement, before finally admitting that it triggered the catastrophic spill.”

Click here to read the full column

Alyssa Viscomi, Executive Assistant

Thursday, September 24th, 2015

Alyssa is the Executive Assistant to Franklin Center’s President, Erik Telford managing daily tasks and coordinating alyssa vall travel and meeting requests on his behalf. She comes bearing previous legal administrative experience within the law firm capacity and was former Executive Assistant to Fox News contributor, Laura Ingraham. Having been a native Floridian, she received her Bachelor’s degree from Saint Leo University, in Tampa dual majoring in Political Science and International Studies.

Alyssa may be reached at Alyssa.Viscomi [at] FranklinCenterHQ.org


Showdown in the Show-Me State: Missouri unions vs. right-to-work

Tuesday, September 15th, 2015


It’s been years in the making, but the right-to-work wave that swept into the statehouses of Michigan and Wisconsin crashed into Missouri this year, when state lawmakers voted to pass legislation that would ban unions from making membership a condition for employment.

Right now, half of the Union’s 50 states have right-to-work laws, but that figure will rise if Missouri lawmakers can gather enough votes to override Democratic Governor Jay Nixon’s veto. The first time around, 92 state representatives and 21 state senators supported the right-to-work bill. They will need 109 and 23 votes, respectively, to overcome the veto. But it’s not as large of a jump as it might seem. The statehouse has already overridden Governor Jay Nixon about two dozen times. Democrats are staunchly united against right-to-work, but a number of Republicans also opposed it.

What’s in a name?

Not surprisingly, union opposition to right-to-work has been staunch, but it has also been subtle and potentially deceptive at times. One of the groups fighting against the state’s right-to-work bill, for example, is The Committee to Protect MO Families. On paper, the group has a lot going for it – a name that resonates with voters, the support of Gov. Nixon, and a “broad-based coalition” that it says includes hundreds of supporting businesses and individuals.

In reality, however, Watchdog reporter Jason Hart found that 98 percent of the funding for The Committee to Protect MO Families last year came from just one source, Carpenters Help In the Political Process. CHIPP is a political action committee run by the Carpenters’ District Council of St. Louis & Vicinity and operates out of the union’s St. Louis headquarters. So, essentially, Hart explains, the group is a carpenters’ union front.

Hart found a similar case in a group called Preserve Middle Class Missouri. Like The Committee to Protect MO Families, its name doesn’t suggest union involvement,and it is the state-focused branch of Preserve Middle Class America, a nonprofit that bills itself as “a grassroots coalition of citizens and organizations.” What it doesn’t advertise, however, is that it is run by the Teamsters union.

Yet another organization, We Are Missouri, is even more shadowy about the groups behind it. Its website lists no union affiliation, no leaders’ names and no mailing address, but Hart found leads that point to its union backing. In 2013, for example, Missouri AFL-CIO president Hugh McVey was quoted in a news story as one of several spokespeople for We Are Missouri. Furthermore, in 2012 the group was paid $45,861 by AFL-CIO headquarters in Washington, D.C. for “state legislative advocacy,” and the AFL-CIO hosts a number of call-to-action forms on We Are Missouri’s website.

The “solidarity” of the bosses

It’s popular to harp on the problem of inequality these days (a concern often raised by opponents of right-to-work), but there’s still one place where huge pay gaps are apparently acceptable: in organized labor. As Hart found in his investigations into Missouri unions, executives and staffers of the state’s carpenters union earn nearly twice as much, on average, as the workers they represent. The average employee of the Carpenters’ District Council of Greater St. Louis & Vicinity earns $88,680 (50 of whom earned more than $125,000), compared to $50,120 for the average Missouri carpenter.

The trend holds true for many other Missouri union leaders. For example, Jim Kabell, the primary Missouri contact for the aforementioned Preserve Middle Class America, was paid a total of $177,081 by Teamsters headquarters and Teamsters affiliates in 2014 – that’s more than three times as much as the average Missouri family.

The hypocrisy also extends to the national level. AFL-CIO president Richard Trumka, for instance, is a fiery critic of CEO salaries, but Trumka himself earned $322,000 last year – all taken from union dues.

Union supporters argue workers shouldn’t care that union bosses are paid six figures because, they claim, executives at huge corporations are paid more. But according to data from the U.S. Bureau of Labor Statistics, average corporate CEO pay last year was $216,100. Not only does Trumka’s hefty salary top that by more than $100,000, but he is not even one of the 100 highest-paid union bosses in America.

The political reality

Regardless of how the votes in Jefferson City pan out, the fact remains that unions are on the decline nationally, having dropped from around 30 percent of all workers in the 1960s to around 11 percent last year. Missouri itself has seen a drop in union membership from 27 percent to 8 percent of workers in that span. But the most recent right-to-work progress has happened in union-heavy states like Wisconsin and Michigan.

In his report on how labor unions’ dwindling muscle in Missouri mirrors their national decline, Watchdog reporter Eric Boehm sums it up like this: “Right-to-work laws aren’t causing this trend, they’re a result of it.”

What opponents seem to fail to grasp is that right-to-work is not inherently destructive to unions. All it says is that workers in any given industry should have a choice whether they want to join a union or not. If the worker believes the cost of their dues outweighs the benefits of being part of a union, he or she should not be compelled to join. There’s even an argument to be made that right-to-work will help strengthen unions because it will foster competition, forcing them to improve their services. As Jason Hart found, it turns out that a majority of Missourians (and a majority of Americans, more broadly) do not believe that union membership should be a condition for employment.

As a result, it has become a losing issue politically. The fact that a veto-proof majority in favor of right-to-work is even a possibility speaks for itself. In the long run, it likely won’t matter whether the state legislature can pull together the two-thirds majority. Come 2016, Missouri politicians who threw their hat in with the unions are going to face a tough battle.

Meet Jillian Melchior: Franklin Center journalism fellow

Tuesday, September 8th, 2015

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For the past three years, Jillian Melchior has been honing her reporting skills as the Thomas L. Rhodes journalism fellow at the Franklin Center. She is housed at National Review, where her investigative reports and frequent appearances in national media outlets like Fox News have been critical in propelling Watchdog stories to national prominence.

Jillian’s investigative reporting focuses on domestic issues like government waste, fraud and abuse; energy and environmental issues; and organized labor. In special reports for Watchdog this year, Jillian has exposed Senator Elizabeth Warren’s real estate profiteering before the 2008 financial crisis, investigated massive taxpayer-backed loans to “green” supporters of President Obama, and reported how the Obama administration’s fracking regulations hurt Native Americans.

Jillian recently took a break from covering the next big story to answer a few questions about her path to journalism and the state of today’s media:

Franklin Center: How did you first become interested in journalism, and what led you to where you are today?

Jillian Melchior: I’ve loved journalism ever since high school, when I used to sign out of classes to go hang out at the local TV news channel. I helped pay my way through college freelancing, writing mostly about state-level health-care and education policy—an experience that’s been directly relatable to my Franklin Center work. Good mentors, both in academia and in the professional world, have helped me stay focused and make good career choices. And reporting in the U.S. and also abroad, I’ve gotten a better sense of the baser natures of people in political power—something that’s definitely fueled the fire for investigative reporting.

FC: What has your fellowship with Franklin Center enabled you to accomplish as a journalist?

JM: Partnering with National Review, I’ve had an incredible opportunity to grow as an investigative reporter. From corrupt unions to Obamacare problems, I’ve been encouraged to spend the time to really dig into records and statistics and develop high-impact stories. And thanks to a great PR team, I’ve had the chance to become better at TV and radio reporting, too.

FC: What is the most important story you’ve covered this year?

JM: I’ve done an investigative series on Al Sharpton and his questionable financial and political dealings, from millions in back-taxes owed to two suspicious fires that burnt down his offices amid his campaigns.

FC: What is one issue or story you wish more Americans were paying attention to?

JM: Domestically, I wish people were paying more attention to the pervasive waste, fraud and abuse in government. Some stories tend to get little focus, either because they’re a relatively small-dollar amount, or because they’re a small percentage of a big number. But such misappropriation adds up, at significant cost to taxpayers—and it’s often indicative of a bigger, more expensive problem.

Internationally, I’m sad to see few people following the crisis in Ukraine anymore. The U.S. committed to protecting Ukraine’s territorial integrity when we convinced Kiev to give up its nuclear weapons, and our lack of follow-through will have major repercussions for denuclearization. Also, there are a lot of brave young people there who want Western-style liberal democracy, and their plight is being largely ignored.

FC: What is the biggest challenge facing journalists today?

JM: The editorial tendency to judge a story’s value only by the number of clicks it receives, combined with the incredible deadline pressure of the Web. Together, these two forces undermine the value of quality in-depth reporting and encourage a focus on sensational stories that are actually pretty trivial. Thankfully, Watchdog balances content demands with an emphasis on good reporting, which is largely why it has managed to succeed in the digital era without succumbing to such a short-sighted strategy!

From Watchdog to Politico: How the Rural Utilities Service boondoggled broadband

Wednesday, August 19th, 2015


The best of intentions; the worst of plans

The stimulus package that Congress and President Obama passed in 2009 was supposed to be the gift that kept on giving, but too often it has proved to the gift that keeps on taking.

That is the conclusion, at least, of a recent Politico investigation into stimulus money that was intended to expand broadband coverage to America’s rural communities, which sorely lack quality Internet access. The story goes back to the creation of the Rural Utilities Service during the Great Depression. Originally the agency was tasked with bringing electricity to rural areas that weren’t being serviced by private companies. Through the stimulus package and in response to the “Great Recession,” the agency has attempted to pull off a similar feat in the digital age by bringing the modern advances of high-speed Internet access to America’s countryside.

A key part of President Barack Obama’s blueprint of recovery involved bringing quality broadband to farmers and remote businesses so that they could compete in a global, digital economy. In 2011 RUS was awarded $3.5 billion in aid to service sparsely populated, hard-to-reach areas.

Four years and four directors later, however, Politico concluded that “RUS never found its footing in the digital age.” The report points to misfires and cronyism at every turn: the agency funded networks in well-wired population centers, poor management led to project stumbles and failures, borrowers defaulted on loans, and all along lawmakers suppressed their doubts and gave the agency political cover.

The agency initially projected in 2011 that its “investments in broadband will connect nearly 7 million rural Americans.” It boasted of accomplishing this through nearly 300 projects that it approved through the stimulus package.

Many of those projects, however, have not come to fruition. RUS has quietly killed 42 of them, and with the agency required to “substantially complete” construction on the remaining projects before the end of September, 2015, it finds itself in a race against the clock. Politico found that about half of the infrastructure projects given the green light by RUS have not drawn their full funding. As a result, $277 million in potential investments could end up being returned to the Treasury, representing at best a huge waste of time for the stimulus funds. RUS gradually lowered its original estimate of how many homes will benefit from its projects from 7 million down to 728,000 in March of 2014, and now won’t even list a figure. Even worse, it is unclear how many people have received improved Internet access, because the agency can’t tell exactly who its stimulus dollars have served.

In short, the government’s attempts to invest in services in places neglected by private companies have been nothing short of a boondoggle.

Problems in the Land of 10,000 Lakes

shutterstock_270238202To drive this point home, the Politico report highlights the plight of Lake County, Minnesota, a story that had been covered by Minnesota Watchdog several months earlier. RUS’ attempts to bring greater broadband coverage to the rural county have turned out to be one of the most egregious examples of how federally-backed loans and grants, with inept management and all of their red tape, can suck the vitality out of a community rather than invigorating it.

As Minnesota Watchdog reported late last year, Lake County officials promised at the beginning of the project that it would not cost local taxpayers anything.

“Lake County is acting as a conduit to receive federal financing to build out the network. The taxpayers will not be responsible for any debt,” the county website said in a blurb that has since been scrubbed. An FAQ on the website was updated to say that the county has invested $3.5 million to bring greater broadband access, “a remarkably small amount given the scope of the project and benefits to the area.”

That $3.5 million represents the unexpected cost of RUS rejecting the project’s bond financing. Before the agency sent a single check to Lake County, it forced the county to pony up its own funds to keep the project on track.

But that was just the beginning. Minnesota Watchdog found that that figure soon ballooned to $6 million. And after RUS suspended payments amid concerns that the county could not pull off the project on time and on budget, local officials decided to authorize another $15 million in funding from local taxpayers to get the project back on track.

Just like that, the “remarkably small” amount covered by local taxpayers has become remarkably large for the sparsely populated county. It has left county officials feeling betrayed by the federal program, which originally approved and said it would fund Lake County’s proposal of $66 million for an ambitious plan to cover an area with about 16,000 residents.

Now time is running out. The broadband network is still under construction and behind schedule. At this point, Politico notes, the county probably won’t be able to draw all of its federal funding by the end of September and will thus end up losing another $6 million from RUS.

Perhaps the Lake County should have taken a cue from the private sector before throwing its hat in with the federal government and putting every resident on the hook for $1,400 (the per-person cost of $15 million).

Kirk Lehman, a manager for a competing broadband provider, can’t see how the government intends to make the Lake Communications broadband economically viable.

“A lot of folks have looked at the numbers, and there’s not enough customer base to support the Lake County debt,” he told Minnesota Watchdog. “I don’t care how you slice and dice it, there’s just not enough of a customer base there.”

SolarCity: Elon Musk’s empire of government subsidies



Tech entrepreneur Elon Musk is not subtle about his business strategy: follow the government money.

That’s the conclusion, at least, of a recent article in the Los Angeles Times investigating how the businessman of SolarCity, Tesla, and SpaceX fame has built his multibillion-dollar fortune through companies that have benefited from an estimated $4.9 billion in government subsidies.

Politicians love latching on to the SolarCity, Tesla, and SpaceX brands, which promise to lead the way into a greener future. The result is dependence on a slew of government incentives, “including grants, tax breaks, factory construction, discounted loans and environmental credits,” reports the LA Times, adding that “it also includes tax credits and rebates to buyers of solar panels and electric cars.”

It’s gotten so egregious that states are actually competing to give Musk’s companies money, according to Musk biographer Ashlee Vance. “As his star has risen, every state wants a piece,” she said.

The story goes on to list some of the most egregious examples. The state of New York will spend $750 million to help SolarCity build a solar panel factory in Buffalo, which the company will lease for $1 a year and pay no property taxes on for a decade. And on the federal level, the Treasury Department has doled out almost half a billion dollars in direct grants to SolarCity.

Tesla, meanwhile, recently secured an agreement with Nevada to build a huge battery factory in Reno that includes $1.3 billion of incentives. In its home state of California, the company has made $517 million by selling environmental credits to other automakers, which must purchase credits from the state and federal government if they don’t sell enough zero-emission cars.

Hedge fund manager Mark Spiegel offers a devastating summary to the LA Times: “Government support is a theme of all three of these companies, and without it none of them would be around,” he said. Spiegel is betting that Tesla’s stock will fall, even though it has more than doubled over the last two years.

This raises a number of important questions for the taxpayer. How much longer will the public largesse continue? Will these companies survive without government subsidies? And even if they do, will the public ever recoup the value of the alleged benefits these green technologies will bring?

Readers who have been following SolarCity at Watchdog, however, shouldn’t be surprised by the LA Times’ findings. Watchdog reporter Tori Richards has written a series of stories over the past year that help fill in the picture of the Musk empire’s dependence on taxpayer funds.

In November of last year, for instance, she reported that SolarCity stock has soared since it went public, even though a company report admitted that business would be difficult to maintain without government help.

“If, for any reason, we are unable to finance solar energy systems through tax-advantaged structures … we may no longer be able to provide solar energy systems to new customers on an economically viable basis,” it said.

Even with the help of $244 million in federal grants , SolarCity posted losses of $55 million in 2013, and was running a $166 million deficit at the time. This year, it doesn’t appear much has changed as the government has continued to prop up the solar industry – most recently through an extra $32 million in funding from the Department of Energy.

More recently, Richards covered Congressional leaders’ calls to end the “potentially deceptive sales tactics” of companies like SolarCity that use a zero-down, 20-year lease business model. Congress’ attention was drawn to solar companies by consumer complaints that their solar panels weren’t bringing them their promised savings. As Richards reported, many customers, such as northern California resident Jeff Leeds, have found themselves locked into costly deals thanks to under-producing solar panels on top of their homes. Leeds later received a notice from his bank informing him that SolarCity had placed a lien on his home, which held him up from closing a loan to buy another house.

Richards’ coverage of SolarCity’s $750 million plant deal in Buffalo found that many of the details of the contract were confidential – even though public money is at stake and the contract was acquired through a Freedom of Information request. State officials claimed the redacted portions of the contract protected trade secrets.

For now, Musk’s companies have “a great strategy, but the government will cut you off one day,” warns Dan Dolev, an analyst at Jefferies Equity Research.

If and when those government funds dry up, don’t say we didn’t warn you.