CropTech Corporation, which negotiated with North Carolina for more than a year in an effort to relocate to the state, instead decided to move to South Carolina in May 2002. But officials knowledgeable about the company say that by then the time spent dealing with North Carolina drained its limited finances, and less than a year later it was bankrupt.

Why did CropTech give North Carolina so much time?

“Because the initial proposal and interactions were so encouraging,” said a former company executive. “We persisted because we were persuaded that the people involved were serious and sincerely interested in seeing this deal get done.

“We were astonished at the later stage, that the whole set of understandings that led us to commit to a long period of negotiations suddenly went up in smoke.

“Nobody complained about the structure and the basic terms of the proposed deal until later on,” he said, “until we became part of a political crossfire, which we didn’t understand at the time.”

The former CropTech official considered Rick Watson, president of North Carolina’s Northeast Partnership and the most direct negotiator with the company, to be a big source of the problems.

“He made himself the linchpin, but seemed to have a personal agenda,” the official said. “He seemed to have no interest or capability to put anything together.”

As negotiations progressed, not only did the financial terms change, but control over the tobacco growing process did as well. Because CropTech’s goal was to produce pharmaceuticals, the company needed to control every part of that process.

“Those terms were changed at the very last stage,” the official said. “Every participant in the deal had more than ample time to review the proposed agreement. All the participants, other than the Northeast Partnership and [Edenton-Chowan Development Corporation], agreed in principle with those terms — in fact, most had signed off. Then suddenly Watson got involved and all those understandings were cast aside.

“We felt enormously frustrated and even desperate, because we proceeded in good faith over many months. We were really damaged by these people.”

One of the Northeast group participants viewed negotiations differently.

“From the ECDC’s perspective,” said Peter Rascoe, ECDC’s lawyer, in an e-mail, “Rick Watson and the Northeast Partnership spent untold hours in attempting to put this industry recruitment deal together.”

“We can say that the North Carolina participants were very dedicated and professional in this process,” said William Upchurch, executive director of the Tobacco Trust Fund Commission.

The former official said CropTech had enlisted an investment bank to raise private funds, based upon the timetable and assurances the company believed were conveyed by “responsible North Carolina officials.”

Why did the company negotiate through Senate President Pro Tem Marc Basnight, instead of Commerce?

“We were told there was no one more powerful in the state of North Carolina than Senator Basnight,” the official said. “No one, not even the governor.” He said contacts in Commerce confirmed the claim, which seemed unusual. “But as a practical matter we accepted what we were told were the realities of dealmaking in that environment,” he said. “Who were we to know?

“It was understood that this was an exceptional situation because of the involvement of the Tobacco Trust,” the official said, “and Senator Basnight had the key to that resource. His key to opening that door was accommodating his interests — that’s what we were led to believe.

“Rolf [Blizzard, Basnight’s director of special projects] was running the show, and he seemed like a highly competent fellow and dedicated to the project, and obviously had the mandate from the Senator.”

The former CropTech official said ultimately those assumptions were wrong, as the Commerce Department and Attorney General’s Office “showed their power to slow down and stymie the deal by inserting themselves into the final review process.”

But the deal was effectively killed by the sudden imposition of new conditions that were unacceptable to CropTech. The company official said one of those “last minute” conditions, the performance bond, was “absurd on its face.”

“CropTech was not a contractor engaged to construct a bridge or building that needed to be bonded to ensure completion of the job,” the official wrote in an e-mail to CJ. “We were a highly promising biotechnology company being courted to relocate… because of its potential to attract new capital investment and new jobs.

“For an early-stage biotech company, a performance bond was neither appropriate nor available. We were concerned that the sudden imposition of this and other new terms was evidence of incompetence in the best case, or in the worst case, a means of just driving us away and killing the deal.”

But Rascoe said CropTech was on board with some of those milestones. “It is our knowledge that CropTech originally suggested private investment goals,” Rascoe wrote. “It is also our understanding that CropTech agreed to a performance bond requirement when suggested by a state agency to protect the expenditure covenants of a proposed grant from that agency.”

The Tobacco Trust also viewed the deal differently. “From the Commission’s point of view, it was being asked to invest public money in a private enterprise where the private enterprise kept pursuing the Commission with great vigor,” Upchurch said. “The assurances we asked for in negotiations… were intended to protect the public money given to CropTech in the event the company either failed or succeeded.

“In hindsight, the Commission’s insistence on assurances was wise. Our understanding is that CropTech eventually went to South Carolina for more money and incentives than were ever on the table in North Carolina and then filed for bankruptcy a year later.”

According to the former company official, Watson steered CropTech, for some unknown reason, away from Elizabeth City, to Edenton, as a condition for his help. But he said the ECDC, with their conditions, “were unpractical and overreaching in their demands.” Towards the end of the negotiations CropTech contacted Elizabeth City development officials to see whether there was still an opportunity there.

“We wanted to go back to Elizabeth City and deal with reasonable people,” the company official said. “But then [Watson] made it clear that that was not something that would be allowed.

“The whole thing reflected very poorly on the state and its economic development. It couldn’t have been much worse. It revealed a very seamy and sordid political structure. That was quite a shame, because good people, particularly Commerce Department people, were involved.

“The blow-up of the deal with North Carolina had a major impact on weakening the company. We never really recovered from the loss of precious time, capital, and opportunity involved. It was a major factor in our ultimate failure.”

Chesser is an associate editor at Carolina Journal.