FOX19 NOW Investigates: Former IN governor on Carbon Motors fail - Cincinnati News, FOX19-WXIX TV

FOX19 NOW Investigates: Former IN governor on Carbon Motors failure ‘major disappointment’ of governorship

Former Indiana Governor Mitch Daniels had his staff at Purdue University issue a statement. In it, Daniels said Carbon Motors was “one of the major disappointments of my time in office.” (Photo: FOX19 NOW/Jody Barr) Former Indiana Governor Mitch Daniels had his staff at Purdue University issue a statement. In it, Daniels said Carbon Motors was “one of the major disappointments of my time in office.” (Photo: FOX19 NOW/Jody Barr)
Years after a failed economic development project that was billed to turn Connersville's economy around, the governor who ushered the deal through tells FOX19 he has “regrets” that Carbon Motors failed. (Photo: FOX19 NOW/Jody Barr) Years after a failed economic development project that was billed to turn Connersville's economy around, the governor who ushered the deal through tells FOX19 he has “regrets” that Carbon Motors failed. (Photo: FOX19 NOW/Jody Barr)
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CONNERSVILLE, IN (FOX19) -

Years after a failed economic development project that was billed to turn Connersville's economy around, the governor who ushered the deal through tells FOX19 he has “regrets” that Carbon Motors failed.

Former Indiana Governor Mitch Daniels declined multiple requests from FOX19 for an interview related to this report, but had his staff at Purdue University issue a statement. In it, Daniels said Carbon Motors was “one of the major disappointments of my time in office.”

In May 2010, Lawrenceburg handed over $5 million in taxpayer-funded grants to Connersville to fund a project known as Carbon Motors. The agreement required Connersville to maintain strict accounting on how Carbon Motors agents spent the grant and to report that back to Lawrenceburg every six months.

The project picked up another $2 million from the state of Indiana.

The project ended up in Indiana after months of lobbying by former Governor Mitch Daniels' administration. The project was supposed to produce energy efficient, purpose-built police cars. The deal would have provided 1,311 jobs and garnered $79.3 million in local and state taxes.

The Lawrenceburg tax grants, as well as state tax dollars was supposed to pay for design, development and engineering to lead to the production of the company's E7 police car. The company shopped a prototype car around the country, looking for a home for Carbon Motors before settling on Connersville.

Spending started on March 6, 2010 and ended on June 29, 2011, according to Connersville records provided to FOX19. By the end, Carbon Motors spent every dime of the $7 million given to the company from taxpayers.

Connersville records show Carbon Motors spent $490,986.89 on “Loan Application Expenses,” to pay for lawyers and the preparation of the $310 million Department of Energy Loan the company hinged its existence on. Without the loan, Carbon Motors knew it would fail, according to Connersville Mayor Leonard Urban.

“We were like little kids. We wanted to believe it because we needed it so bad,” Urban told FOX19 during a March interview. Urban said he knew the future of Carbon Motors hinged on a federal loan, but had every reassurance the loan was a done deal.

“When you're told by United States Senators, Congressmen, the Governor this is going to happen and they're putting all this money in it, what would you think?,” Urban said. The DOE loan was denied in 2011, ultimately leading to Carbon Motors filing for bankruptcy protection.

“It was a bigger gamble than we realized. I don't think we ever realized the gamble,” Urban said.

Spending records show Carbon Motors spent $5.7 million in “product engineering” and another $564,390.33 on renovations and internet technology upgrades to the Connersville building the company planned to move in to.

Connersville records also showed spending on Carbon Motors' employee cell phones, consultants and public relations opportunities with Congressional leaders in Washington, DC. Those records show a $94,736.48 invoice for a “tour stop” with a Congressional delegation.

Our analysis of Carbon Motors' spending shows at least $214,605.68 spent on meals, travel, hotels and entertainment between May 2010 and July 2010.

All spending, according to Urban, was approved through an attorney inside Mitch Daniels' administration before Connersville cut any checks to Carbon Motors. Several of the checks Connersville cut to reimburse Carbon Motors under the grant, Urban said, he would have never approved had the state not taken that authority from the town.

“It was flights here. It was flights there. Flights across the ocean, thousands of dollars like this and I would say—I wouldn't approve those these,” Urban said.

“I mean, they flew all over the world and it was airplane after airplane and hotel after hotel. It wasn't cheap hotels and meals and food. I didn't think that was necessary,” Urban told FOX19.

By 2013, Carbon Motors closed its doors and left Connersville.

Carbon Motors CEO, William Santana Li, was the head of the company when the $7 million in grants were handed out. Li, who is back in California promoting fundraising efforts for his new company, Knightscope, did not respond to FOX19 requests for an interview for this report.

Li's Knightscope Web site describes his company as a “startup” manufacturing “autonomous data machines” to help reduce crime. The machine is a robot that performs security guard duties.

When we reached out via Twitter for comment from Li, we received a call from an Atlanta, Georgia phone number. The call came from Stacy Stephens, a former Carbon Motors spokesman. Stephens told FOX19 Li “was busy” and unable to respond. When questioned about the report we were preparing on the failed project, Stephens said, “The company is bankrupt and we are no longer part of that. We don't do interviews on it anymore.”

Stephens is now listed as the Vice President of Marketing and Sales for Li's Knightscope company.

Daniels stood by Li's side in 2009 when the men announced the Carbon Motors deal to a crowd in Connersville. Daniels made a speech during the announcement, telling the crowd, “I dreamed about a day like this for this town and this county and this part of our state.”

Daniels left office in 2013, right after Carbon Motors shut its doors.

On March 24, FOX19 emailed Daniels to his personal AOL address, asking for an interview on the failed Carbon Motors project. Daniels, who is now president of Purdue University, had a Purdue University employee reply to our request. In the initial reply, Purdue's Assistant VP of Strategic Communications, Julie Rosa, wrote that Daniels would not be available for an interview, and instead referred us to the Indiana Economic Development Commission.

In a follow up email, again requesting an interview with Daniels, Rosa sent us this statement:

"That Carbon Motors didn't succeed was one of the major disappointments of my time in office. We had hopes of a 'second Honda' breakthrough in southeastern Indiana. I will recall it as another reminder that relying on the word of the federal government is always a dangerous thing to do. Our administration's central objective was to bring more jobs and opportunity to Hoosiers, especially in hard-hit towns like Connersville, and we went after many such possibilities with no apologies. There is always a degree of uncertainty in major business investments, but I'll always regret that this particular project didn't go the distance."

It was, in fact, Daniels' administration that caused the Carbon Motors deal to ever happen, according to Lawrenceburg Mayor Dennis Carr, “The money was spent. I'd like to have that money back.”

When asked whether any of the grant could be recouped, Carr said no.

Carr said without pressure from Daniels' administration, Lawrenceburg would have never approved the Carbon Motors project, citing too few details on a long term plan from Li in the early stages of the Carbon Motors discussion.

Urban said there's unfinished business in Connersville that William Santana Li needs to finish up, “I don't suppose he'll ever be back here and I don't suppose I'll ever hear from him again. I've tried to contact him—twice—and I got no response.”

Carbon Motors is in the middle of bankruptcy proceedings and the company's creditor list does not include Lawrenceburg, Connersville or the state of Indiana.

Urban said there was at least one positive to come from the failed Carbon Motors project—a refurbished plant in Connersville where the car company was supposed to go. It's now home to a cabinet maker.

Related:

FOX19 NOW Investigates: Lawrenceburg gave away $100 million in gambling grants

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