Company criticized for deals out of Md. Hearing may be held on investments of tax dollars outside state

September 29, 1998|By Greg Garland | Greg Garland,SUN STAFF

An investment company that used Maryland tax dollars to invest in out-of-state companies might be in for scrutiny by the General Assembly.

A leading Republican legislator is calling for hearings on MMG Ventures, which invested $1.25 million in a California company that owns Spanish-language radio stations and $1 million in a food processing company near Dallas.

Del. Robert L. Flanagan, a Howard County Republican and House minority whip, said MMG President Stanley W. Tucker should be using the state's money to help disadvantaged, minority-owned Maryland businesses -- not businesses in other states.

"The fact of the matter is, this is not appropriate -- to be gambling taxpayer funds on companies that are not promoting the economic development of Maryland," Flanagan said. "It is ridiculous. It is absolutely ridiculous."

Flanagan's call for a hearing is getting support from other legislators.

But Tucker said MMG is within its rights to make such investments and the deals will benefit MMG and the state. He notes MMG also is investing in companies based in Maryland.

Tucker has been under fire for campaign contributions made by a separate company he heads, MSBDFA Management Group Inc., which has a $1.1 million contract to manage small-business loan programs for the state.

State auditors have raised questions about the contributions because MSBDFA Management gets its funding from the state. Tucker argues MSBDFA is a private contractor with the right to make such donations.

Flanagan said he plans to ask the legislature's Joint Budget and Audit Committee to examine MMG's investments, its campaign contributions and other practices by Tucker's group. He said he would press for a hearing after a legislative audit of Tucker's group is completed, expected in November.

Support for review

MMG got $9.7 million through the state Department of Business and Economic Development in 1996 to set up the venture capital fund. The agreement with DBED gave MMG authority to decide how to invest the money.

So far, more than half the $3.7 million MMG has put to work -- $2.25 million -- has gone to the two companies in California and Texas.

Del. D. Bruce Poole, a Washington County Democrat and vice-chairman of the joint committee, agreed the Tucker group's state contract warrants review. He said news accounts of MMG's out-of-state investments "certainly raised my eyebrows." He said he sees no reason for MMG to invest out of state unless there is "one heck of a benefit to taxpayers."

Sen. Barbara A. Hoffman, a Baltimore city and county Democrat who sits on the audit and budget committee, said she expects it to deal with MMG. Tucker said his company isn't concerned about legislative scrutiny: "If they want to hold hearings and what-not, that's fine with us."

In a letter to key legislators this month, Tucker blamed state officials for trying to "create obstacles" to keep his company from succeeding. He did not identify the officials.

Tucker said MMG's license with the U.S. Small Business Administration as a "specialized small business investment company" would not allow the state to restrict MMG to making investments in Maryland. He said the state knew that when it provided money.

Other investments secret

Although the MMG venture capital fund was set up with state money, DBED officials would not release reports on MMG's investments to The Sun. A DBED staff attorney wrote that the reports are "confidential financial information of a private entity."

Flanagan said that information should be available: "They're keeping it a secret from the public because they want to avoid voters getting angry at the misuse of public funds."

While MMG's other investments remain secret, executives with two out-of-state companies confirm MMG invested in their businesses in 1996.

Z-Spanish Radio Network Inc., based in Sacramento, Calif., got an infusion of $1.25 million to help it expand, while $1 million helped finance a the purchase of a food processing company in Texas, now known as Simeus Foods International.

Z-Spanish Radio, headed by Amador S. Bustos, was mentioned by Hispanic magazine last year as one of the fastest growing Latino-owned businesses in the country. Its sales went from $5.1 million in 1992 to $16.1 million in 1997, the magazine reported.

The company owns and operates 22 Spanish language radio stations, mostly in the West and Southwest. A company executive said MMG's $1 million investment helped it acquire two FM radio stations in Dallas.

Simeus Foods was created when Dumas M. Simeus, a former president and chief executive of TLC Beatrice International, acquired Portion-Trol Foods Inc. The company reports more than $100 million in annual sales of a variety of food products to restaurants.

More for Maryland

Tucker said MMG is working to invest in more Maryland businesses. It has invested in two unidentified Maryland firms, which got $1.45 million from MMG.

He said MMG has made commitments to invest $4.5 million in seven more companies, five in Maryland, although the deals have not closed. "It's not like we're not working with Maryland firms," Tucker said.

Pub Date: 9/29/98

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