Missouri treasurer denies financial aid for Show Me Ethanol plant

JEFFERSON CITY, Mo. -- The Missouri treasurer's office rejected financial incentives Thursday for an $82 million ethanol plant whose investors include the governor's brother, a congressman's wife and a state lawmaker.

Treasurer Sarah Steelman said Show Me Ethanol had failed to adequately document that it is abiding by a conflict of interest law and that its debt would be held by Missouri banks.

Board members of Show Me Ethanol expressed surprise and disappointment when they learned from The Associated Press about the decision.

"We worked very hard to comply with all the regulations that the treasurer put out there in front of us, and honestly we thought we had met all those in good faith and would qualify for the program," said board chairman Dave Durham, a northern Missouri farmer.

Show Me Ethanol had received conditional approval in October 2006 for up to $48 million in state bank deposits that would be used to finance a reduced-interest-rate loan. The program had the potential to save the ethanol plant nearly $6 million in interest payments over a decade.

But the big condition imposed by Steelman was that the ethanol plant could have no investors who were state officials or related to them.

Among the hundreds of investors in Show Me Ethanol are Andy Blunt, the brother of Republican Gov. Matt Blunt; Lesley Graves, the wife of U.S. Rep. Sam Graves, R-Mo.; and state Rep. John Quinn, R-Chillicothe, and his wife, Mary.

A Graves spokesman had said in January that she planned to sell her investment. But Durham said Thursday that the congressman's wife remains an investor.

Strict policy

Steelman tried to make ethanol a defining issue in her unsuccessful Aug. 5 gubernatorial primary against U.S. Rep. Kenny Hulshof. She had touted her strict conflict-of-interest policy and called for a repeal of Missouri's mandate to sell a 10 percent ethanol blend of gasoline whenever it is cheaper than traditional gas.

State lawmakers who claimed Steelman's conflict-of-interest policy was too harsh voted earlier this year to overturn it. A new law that took effect Aug. 28 instead allows ethanol plants and other entities to receive financial incentives so long as politicians and their families don't own more than 2 percent of the business.

Steelman said Thursday that Show Me Ethanol had failed to submit adequate proof that it complied either with her initial policy or the more lax new law.

"It's been a little frustrating," she said. "All we wanted to do was make sure that taxpayer money was being protected."

More specifically, Steelman said she never received the shareholder breakdown of Central Missouri Biofuels, which owns a 10 percent share of Show Me Ethanol.

Andy Blunt is among the investors in Central Missouri Biofuels. But his investment equates to just a fraction of a percent of the overall investment in Show Me Ethanol, said Tom Kolb, a friend of Andy Blunt's who is a manager of Central Missouri Biofuels and also on the board of Show Me Ethanol.

Affidavit of investors

By coincidence, Kolb said he had sent an affidavit Thursday to Show Me Ethanol detailing its investors -- one of the final items the ethanol plant needed to provide to the treasurer's office.

Durham and Kolb both said that none of the politically connected investors in Show Me Ethanol owned more than 2 percent of the business.

Because of just a few investors, "the treasurer's office has penalized a large investment made by Missourians in an ethanol plant, which is a major factor now in the Missouri economy," Kolb said.

Steelman said Thursday that Show Me Ethanol also had failed to come up with a mechanism to ensure that only Missouri banks participate in the loan, particularly if one of the banks in the consortium were to draw other banks into the loan in the future.

Show Me Ethanol could reapply for the treasurer's financial aid program. But it's unclear if that will happen. The ethanol plant needs to secure its loan by December, Durham said. Steelman's term as treasurer ends in January.

The treasurer's BIG Missouri program deposits state money in Missouri banks at interest rates up to 3 percentage points lower than the typical deposit rate. That reduced rate then must be passed on to the entity receiving the loan. The list of qualifying borrowers was expanded in 2005 to include ethanol plants and other value-added agriculture facilities. But Show Me Ethanol had been the only ethanol plant to apply.