https://www.courier-journal.com/sto...bevin-neuronetrix-angel-investment/373466002/
Company tied to Gov. Matt Bevin gets $400K through state's 'angel investment' program
FRANKFORT, Ky. — The Kentucky Economic Development Cabinet has approved another $400,000 in “angel investments” in a company that is owned partly by Gov. Matt Bevin.
The cabinet’s website lists three new investments in the Louisville-based medical device company Neuronetrix Solutions LLC.
The investors, who will earn a 40 percent income tax credit upon making their investments, are: Louisville entrepreneur Charles W. Schnatter, a part owner of Heine Brothers’ Coffee, who invested $200,000; businesswoman Fran L. Berg, of Louisville, $100,000; and Louisville attorney Bart L. Greenwald, with the firm Duncan Galloway Egan Greenwald, $100,000.
The new investments, approved in January, will bring to $1.2 million the total amount of capital invested through the state’s angel investment program in Neuronetrix since the cabinet approved the company for such investments in early 2017.
Last year Courier Journal reported that the cabinet approved $800,000 in angel investments in Neuronetrix from friends of Bevin who donated to his political committees.
The largest investment was $300,000 from Neil Ramsey, the investment company owner from Anchorage who is a big donor to Bevin political committees. He also was appointed to the Kentucky Retirement Systems board of trustees by Bevin and sold Bevin the Anchorage mansion where the governor and his family have lived for the past year.
The three new investors in Neuronetrix have not donated to Bevin political causes, nor have they received any appointments from Bevin.
Ramsey’s dealings with Bevin were the basis of two complaints filed with the Executive Branch Ethics Commission that primarily alleged the sale price of the house amounted to an improper gift. But the commission summarily dismissed the complaints, saying Ramsey was not a lobbyist trying to influence the governor or someone who is directly regulated by the Governor’s Office.
Kathryn Gabhart, executive director of the ethics commission, said Neuronetrix’s participation in the angel program presents no ethics problem.
“If it’s a program that any other member of the general public can participate in, and if the company is qualified to participate in that program,” then a state official’s company can participate, Gabhart said.
But Richard Beliles, the chairman of Common Cause of Kentucky who filed one of the dismissed ethics complaints, said, “It’s not illegal, but I still believe it’s questionable for a governor’s company to benefit from this kind of a state-administered tax incentive program.”
The cabinet is currently seeking passage of a bill that makes changes in the program, including removing the lifetime cap on the dollar amount of credits the program can award. Without a change in current law, that cap will be reached next year and the program could award no more credits.
The Governor’s Office did not respond to a phone call and an email seeking comment for this story. David Richardson, the chief executive of Neuronetrix, also did not return a phone message.
Public records do not make clear how much of a stake Bevin has in Neuronetrix. In his most recent personal financial disclosure report filed last April with the Executive Branch Ethics Commission, Bevin disclosed a year ago that he was on the board of Neuronetrix and owned at least 5 percent of the company.
In a disclosure report he filed in 2013 as a candidate for the U.S. Senate, Bevin reported that his assets included an equity investment of between $1 million and $5 million in Neuronetrix.
And five years ago in an interview with Insider Louisville, Bevin said, “I’m the largest shareholder in that company. I’ve funded it for years.”
Bevin said last spring, “There’s more than probably 100 people who have invested in that company. I don’t know who they all are. … I’m not involved in any of the decision making as to who invests what.”
Schnatter, the Louisville entrepreneur, did not return phone messages and email asking how he came to invest in Neuronetrix.
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Berg and Greenwald said Bevin had nothing to do with their investments. Berg said she was well aware of the company because her husband was an early investor in it. “And if you ask around, you’ll learn I’m probably the biggest Democrat around,” said Berg, who contributed $2,000 to Bevin’s Democratic opponent Jack Conway in the 2015 campaign for governor.
Greenwald said his investment grew from discussions with Richardson, who he said is a longtime friend.
Berg and Greenwald said they were attracted by the big tax credit. “It’s a no-brainer. …You’re only risking 60 percent of what you’re investing,” Greenwald said.
Last November Neuronetrix adopted the name “Cognision,” according to records of the Kentucky Secretary of State. The company’s website focuses on a product that it says “empowers medical professionals to effectively evaluate patients” with cognitive disorders such as Alzheimer’s disease, schizophrenia, and traumatic brain injury.
“By facilitating an objective evaluation of patients with cognitive disorders, Cognision helps neurologists and other physicians differentiate between dementia and depression, track disease progression and assess overall cognitive deficits,” the website says.
Under Kentucky’s 5-year-old angel investment program, approved investors receive a transferable income tax credit equal to 40 percent of their investments in an approved small business. The credit is 50 percent for investments in companies in economically distressed counties.
The concept is to encourage investment in small companies that, in turn, will “create additional jobs, and promote the development of new products and technologies,” according to the program’s website.
But unlike similar programs in some other states, Kentucky’s program is not restricted to start-up ventures. Neuronetrix, formed in 2003 is not a start-up.
To be eligible for angel investments, a company must have no more than 100 full-time employees and have more than half of its assets and employees in Kentucky. A company must also have a net worth of no more than $10 million or a net income for each of the two preceding years of $3 million or less.
Also, a company “must be engaged in bioscience; environmental and energy technology; health and human development; information technology and communications; materials science and advanced manufacturing; or other new-economy, knowledge-based activity.”
Jack Mazurak, the spokesman for the cabinet, said that as a small bioscience company, Neuronetrix clearly met all qualifications and was approved for participation in the program in January 2017.
The angel investment program has proven to be highly popular with wealthy investors. State law caps the total amount of credits the program can award to $3 million per year. The cabinet sets a date in December for eligible investors to apply for credits — which are awarded on a first-come, first-served basis — the following calendar year. And for this year, credits were all snapped up on that first day.
“Applications started coming in at 12:01 a.m. It was like concert tickets,” Mazurak said.
But a bill endorsed by the cabinet and now pending in the General Assembly must be passed into law if the program is to continue. That’s because current law puts a lifetime limit on the total amount of credits that the angel program (combined with a different incentive program) can award and that limit has nearly been reached.
The bill removes that lifetime cap and expands from $3 million to $5 million the amount in angel credits that can be awarded in a year.
The bill lowers the amount of the tax credit from 40 to 25 percent for counties like Jefferson, but it retains a 50 percent credit for investments made in economically distressed counties. And it also requires additional reporting by companies who get the investments so the cabinet can better document the impact of the program.
Tom Loftus: tloftus@courierjournal.com; Twitter: @TomLoftus_CJ. Support strong local journalism by subscribing today: www.courier-journal.com/toml.
Company tied to Gov. Matt Bevin gets $400K through state's 'angel investment' program
FRANKFORT, Ky. — The Kentucky Economic Development Cabinet has approved another $400,000 in “angel investments” in a company that is owned partly by Gov. Matt Bevin.
The cabinet’s website lists three new investments in the Louisville-based medical device company Neuronetrix Solutions LLC.
The investors, who will earn a 40 percent income tax credit upon making their investments, are: Louisville entrepreneur Charles W. Schnatter, a part owner of Heine Brothers’ Coffee, who invested $200,000; businesswoman Fran L. Berg, of Louisville, $100,000; and Louisville attorney Bart L. Greenwald, with the firm Duncan Galloway Egan Greenwald, $100,000.
The new investments, approved in January, will bring to $1.2 million the total amount of capital invested through the state’s angel investment program in Neuronetrix since the cabinet approved the company for such investments in early 2017.
Last year Courier Journal reported that the cabinet approved $800,000 in angel investments in Neuronetrix from friends of Bevin who donated to his political committees.
The largest investment was $300,000 from Neil Ramsey, the investment company owner from Anchorage who is a big donor to Bevin political committees. He also was appointed to the Kentucky Retirement Systems board of trustees by Bevin and sold Bevin the Anchorage mansion where the governor and his family have lived for the past year.
The three new investors in Neuronetrix have not donated to Bevin political causes, nor have they received any appointments from Bevin.
Ramsey’s dealings with Bevin were the basis of two complaints filed with the Executive Branch Ethics Commission that primarily alleged the sale price of the house amounted to an improper gift. But the commission summarily dismissed the complaints, saying Ramsey was not a lobbyist trying to influence the governor or someone who is directly regulated by the Governor’s Office.
Kathryn Gabhart, executive director of the ethics commission, said Neuronetrix’s participation in the angel program presents no ethics problem.
“If it’s a program that any other member of the general public can participate in, and if the company is qualified to participate in that program,” then a state official’s company can participate, Gabhart said.
But Richard Beliles, the chairman of Common Cause of Kentucky who filed one of the dismissed ethics complaints, said, “It’s not illegal, but I still believe it’s questionable for a governor’s company to benefit from this kind of a state-administered tax incentive program.”
The cabinet is currently seeking passage of a bill that makes changes in the program, including removing the lifetime cap on the dollar amount of credits the program can award. Without a change in current law, that cap will be reached next year and the program could award no more credits.
The Governor’s Office did not respond to a phone call and an email seeking comment for this story. David Richardson, the chief executive of Neuronetrix, also did not return a phone message.
Public records do not make clear how much of a stake Bevin has in Neuronetrix. In his most recent personal financial disclosure report filed last April with the Executive Branch Ethics Commission, Bevin disclosed a year ago that he was on the board of Neuronetrix and owned at least 5 percent of the company.
In a disclosure report he filed in 2013 as a candidate for the U.S. Senate, Bevin reported that his assets included an equity investment of between $1 million and $5 million in Neuronetrix.
And five years ago in an interview with Insider Louisville, Bevin said, “I’m the largest shareholder in that company. I’ve funded it for years.”
Bevin said last spring, “There’s more than probably 100 people who have invested in that company. I don’t know who they all are. … I’m not involved in any of the decision making as to who invests what.”
Schnatter, the Louisville entrepreneur, did not return phone messages and email asking how he came to invest in Neuronetrix.
You may like: Kentucky gave $15M to a manufacturer. Now, one of its investors is raising money for Bevin
Berg and Greenwald said Bevin had nothing to do with their investments. Berg said she was well aware of the company because her husband was an early investor in it. “And if you ask around, you’ll learn I’m probably the biggest Democrat around,” said Berg, who contributed $2,000 to Bevin’s Democratic opponent Jack Conway in the 2015 campaign for governor.
Greenwald said his investment grew from discussions with Richardson, who he said is a longtime friend.
Berg and Greenwald said they were attracted by the big tax credit. “It’s a no-brainer. …You’re only risking 60 percent of what you’re investing,” Greenwald said.
Last November Neuronetrix adopted the name “Cognision,” according to records of the Kentucky Secretary of State. The company’s website focuses on a product that it says “empowers medical professionals to effectively evaluate patients” with cognitive disorders such as Alzheimer’s disease, schizophrenia, and traumatic brain injury.
“By facilitating an objective evaluation of patients with cognitive disorders, Cognision helps neurologists and other physicians differentiate between dementia and depression, track disease progression and assess overall cognitive deficits,” the website says.
Under Kentucky’s 5-year-old angel investment program, approved investors receive a transferable income tax credit equal to 40 percent of their investments in an approved small business. The credit is 50 percent for investments in companies in economically distressed counties.
The concept is to encourage investment in small companies that, in turn, will “create additional jobs, and promote the development of new products and technologies,” according to the program’s website.
But unlike similar programs in some other states, Kentucky’s program is not restricted to start-up ventures. Neuronetrix, formed in 2003 is not a start-up.
To be eligible for angel investments, a company must have no more than 100 full-time employees and have more than half of its assets and employees in Kentucky. A company must also have a net worth of no more than $10 million or a net income for each of the two preceding years of $3 million or less.
Also, a company “must be engaged in bioscience; environmental and energy technology; health and human development; information technology and communications; materials science and advanced manufacturing; or other new-economy, knowledge-based activity.”
Jack Mazurak, the spokesman for the cabinet, said that as a small bioscience company, Neuronetrix clearly met all qualifications and was approved for participation in the program in January 2017.
The angel investment program has proven to be highly popular with wealthy investors. State law caps the total amount of credits the program can award to $3 million per year. The cabinet sets a date in December for eligible investors to apply for credits — which are awarded on a first-come, first-served basis — the following calendar year. And for this year, credits were all snapped up on that first day.
“Applications started coming in at 12:01 a.m. It was like concert tickets,” Mazurak said.
But a bill endorsed by the cabinet and now pending in the General Assembly must be passed into law if the program is to continue. That’s because current law puts a lifetime limit on the total amount of credits that the angel program (combined with a different incentive program) can award and that limit has nearly been reached.
The bill removes that lifetime cap and expands from $3 million to $5 million the amount in angel credits that can be awarded in a year.
The bill lowers the amount of the tax credit from 40 to 25 percent for counties like Jefferson, but it retains a 50 percent credit for investments made in economically distressed counties. And it also requires additional reporting by companies who get the investments so the cabinet can better document the impact of the program.
Tom Loftus: tloftus@courierjournal.com; Twitter: @TomLoftus_CJ. Support strong local journalism by subscribing today: www.courier-journal.com/toml.
