In June, former GOP gubernatorial candidate Fred Lampropoulos hired Utah House Speaker Marty Stephens as a top executive at Merit Medical Systems Inc. Two months later, the company received a $1 million state grant to create 600 new jobs at Merit's South Jordan production plant.
But Lampropoulos, Stephens and state officials who handle the taxpayer-funded Industrial Assistance Fund say Stephens did not lobby the Board of Business and Economic Development members, who approve IAF grants, on Merit's behalf.
In addition, Lampropoulos denounced as unjustified complaints that he's getting taxpayer money for jobs that he'd already publicly committed to last year.
The two apparent coincidences — Stephens' hiring two months before the grant was awarded last week and the question of grant money going for jobs that appeared to already be on the way — have raised some eyebrows on Capitol Hill.
In December 2004, Lampropoulos, Merit's CEO, board chairman and largest stockholder, announced that the firm was constructing a new 180,000-square-foot expansion to its current South Jordan company headquarters, creating "300 to 500" new jobs. At that time, Stephens and Lampropoulos were both vying for the GOP gubernatorial nomination. They were knocked out of the race in the May state GOP convention.
While the grant was primarily given to bring Merit jobs from California to Utah, Lampropoulos confirms that some new employees earmarked for the new facility, not transferred from a Santa Clara operation, could now qualify for the tax incentives.
"But who knows if those jobs were really coming?" Lampropoulos said Tuesday in a telephone interview from Atlanta, where he and Stephens, executive vice president of Merit's business development program, were scouting new business opportunities.
The December press release was accurate at the time, said Lampropoulos. But changing business opportunities have given Merit many alternatives, including moving current employees housed in a Murray facility to the new South Jordan building, he said.
Barbara Zimonja, chairwoman of the Board of Business and Economic Development's grant application review subcommittee, says the Merit grant was specifically written to provide more state money for the California-transfer jobs than for any other new jobs created by Merit in Utah. "We incentified them" to get the California jobs, she said.
Board member Dell Loy Hansen said, "Sixty to 70 percent of the jobs Merit has wouldn't qualify for the compensation" in any case because they don't pay at least 125 percent of Salt Lake County's medium income, a prime condition of the grant.
"Remember," said Lampropoulos, "we don't get paid a dime (from the state's grant) unless we really do create new jobs here — not just move existing jobs around within (Utah). I commend the (IAF) for providing these job creation grants to a growing Utah company. It's partly our money — Merit pays taxes in this state."
No one can promise jobs before they actually arrive, adds Lampropoulos. "What if I change my mind" about who goes into the new Merit building? "We could move this work to Ireland" where Merit has production facilities. "There we pay a 10 percent tax; here our effective tax rate is around 37 percent. How can I justify" to stockholders and employees "paying 27 percent more out of our bottom line" by moving jobs to Utah? He can, he said, with the grant's financial help.
"Merit Medical is a fabulous firm," said Zimonja. It has been listed by national business publications as one of America's best and fastest-growing high-tech, medical manufacturing firms. "It means a lot to us" and the state was glad to help get more jobs here, she said. -->
Lampropoulos, who as a gubernatorial candidate campaigned that he would require IAF funds go to in-state firms, said that businesses seeking state financial aid often play one state against another to get the best deal, and Utah should do more to help competing local businesses create jobs.
But Claire Geddes, a local government watchdog advocate who said she conducted a study of state economic development activities when she ran Ross Perot's United We Stand group in Utah in the 1990s, said more often than not states are the losers in such competitions.
"The real winners are the developers and business owners, in this case Mr. Lampropoulos," she said. "And the taxpayers are the losers — especially if the jobs were going to be created in Utah anyway."
Mark Renda, director of the state's incentives programs, told the Deseret Morning News last week that to get all of the $1 million grant, Merit will pay 600 new employees higher-than-average wages and thus generate in payroll, income, corporate and sales taxes around $7.4 million. So there is a net benefit to the state.
Stephens, R-Farr West, went to work for Lampropoulos well after Merit's IAF grant was under consideration. Stephens, who will retire in January from the House after a dozen-year career and six years as speaker, said he considered contacting economic development board members this summer to lobby on Merit's behalf. "But I decided not to, and didn't," he said.
Merit had been turned down twice before for IAF grants, Lampropoulos said Tuesday. But Hansen said that was inaccurate, because in 1991 and 1993 when Lampropoulos believed he'd applied, the "very limited" grants were going only to out-of-state firms. "There was no way he could have fit into any grant category back then, even if he did formally apply," said Hansen.
"I don't question that Marty didn't contact the board," said Geddes. "But it makes you wonder after Merit was turned down twice and then they hire the sitting speaker of the House and they get the grant. It makes the public question it; I do."
In any case, Merit did a good job on the application this time around. In January, Lampropoulos hired Greg Fredde, a well-known business lobbyist who had previously worked for the Utah Taxpayer Association and the Utah Mining Association, as Merit's government affairs director and assigned him the IAF application.
Lampropoulos and Fredde met with board members, put together an extensive proposal and "basically convinced the board this was a worthy project," said Stephens, who added that before Lampropoulos brought up the perceived out-of-state business bias toward IAF grants in the gubernatorial campaign, he as speaker was "unaware of the concern" that Utah businesses were not getting a fair share of state grant money to create new jobs here.
E-mail: bbjr@desnews.com