NASHVILLE - Tennessee's top economic recruiter is defending the Haslam's administration's effort to make secret the actual owners of companies being considered for taxpayer incentives and subsidies.
Economic and Community Development Commissioner Bill Hagerty said Tuesday the state can obtain information about large publicly traded corporations to make wise decisions about whether to offer cash grants, tax incentives or tax credits.
But Hagerty said such information is often difficult to get on small and medium-sized companies. That's especially so when they file as a limited liability corporation and simply list a designated agent for the company and little else.
The Haslam administration's bill ran into trouble Monday night in the Senate when Sen. Roy Herron, D-Dresden, questioned the administration's effort to shut off to the public information the state would now seek, raising the specter of potential corruption.
The list of information that would be sought and kept off limits includes "business processes, organizational structure and ownership, financial statements, budgets, cash flow reports or similar materials."
Herron said "the idea that we're going to make the records secret where you cannot find, anytime in the future, who the owners were that somebody gave taxpayer dollars to is breathtaking."
"Quite frankly it seems to me irresponsible," Herron said. "The temptation for corruption is too great."
But, Hagerty argued Tuesday, "what this would allow us to do in general is get the names of the major shareholders and the owners and do a background check on it, which we cannot do right now.
"To the extent that there's a [bad] player, the executive branch and the legislative branch will know that," he said. "They don't know it today."
Hagerty said the state will keep information confidential.
"That's the comfort we need to provide us information so we can take a look at it," he said.
Asked by a reporter whether the taxpaying public who pays for incentives should trust companies unwilling to reveal information about ownership, Hagerty said that in Tennessee "historically, the public hasn't had the benefit of getting this information.
"You know my background," said Hagerty, whose business career included the founding of Hagerty Peterson LLC, a merchant bank and private equity firm. "I was just surprised that we couldn't get the information."
But Hagerty dismissed questions about whether Tennessee has been in effect flying blind in awarding hundreds of millions of dollars in taxpayer money in recent years for infrastructure and tax incentives to companies ranging from Volkswagen in Chattanooga to Wacker Chemical in Cleveland.
"There has been an inability to see the type of due diligence that I would think appropriate," Hagerty said.
"So this enhances our ability to do that due diligence, make us better stewards of the taxpayers' money, and I think that's a worthy goal," he added.
While the bill was delayed until Thursday in the Senate, it flew through a House committee with little comment.
Tennessee Common Cause Chairman Dick Williams said he initially was "worried" about keeping information about company owners secret.
But he said that after speaking to Hagerty aide Josh Helton and the bill's sponsors, he likes that once an award is made "at least the name of the company and anything publicly available will be available.
"So they are in fact trying to get additional information they couldn't get before and if they didn't guarantee it was confidential the business probably wouldn't deal with them."