ST. PAUL (AP) — A company whose plans to build a synthetic granite factory in Cohasset fell through may have violated state grant rules by spending $500,000 on machinery instead of training, according to a report Sunday.
“It appears there’s been some sort of activity that has been misleading on behalf of the company,” said Brian Dietz, a spokesman for the Minnesota Department of Trade and Economic Development.
The agency last year awarded a $500,000 grant to the Iron Range town of Cohasset for Technimar Industries. It now has referred the matter to the state attorney general’s office to determine whether it can recover the money.
Under state rules, the $500,000 grant had to be matched with another $500,000 from the company, and the $1 million total had to be spent on job training. The Saint Paul Pioneer Press reported Sunday that documents and interviews with state officials indicate that $500,000 of that money was spent on machinery.
The St. Paul-based company ran out of money in December before completing a $35 million factory that would make Stonite, a synthetic granite used in flooring and countertops. The company then defaulted on a $12 million bond issued by the city of Cohasset. The town lost $2.3 million, an amount equal to its annual budget.
New managers now are readying the company for sale, or at least a major cash infusion. The company’s major investors are the Minneapolis police and firefighters pension funds.
A Technimar representative said he did not know the fate of the $500,000 grant, though the training has not occurred. Roberto Contreras Sr. and his son Luis Contreras, Technimar’s chief executive and chief financial officer, respectively, when the grant was awarded, did not return the newspaper’s phone calls last week.
St. Paul money manager David Welliver crafted the deal that made Technimar possible, including putting up $13 million in police pension fund money. Welliver raised the $500,000 in state job training money, but he said he did not know of the grant’s fate because he was not a Technimar officer.
State officials base their suspicions about the grant on letters sent within the last two months from Breton SpA. The company manufactures equipment that makes Stonite, and it was to conduct the job training in Italy.
The letters say that $500,000 wired from Technimar to Breton last April was used to partially pay Technimar’s outstanding balance on machinery purchases.
State officials were under the impression that those wire transfers were specifically to be used for training purposes, said Paul Moe, the state agency’s head of business development and finance.
In fact, an April 1997 letter from Breton to Technimar in state files indicates that Breton was supposedly paid $500,000 by Technimar for training.
Breton said in a fax last week that it could not comment on the apparent contradiction. However, the company said that it was in the process of answering that question and others for the state and the city of Cohasset.