News: CJ Exclusives

Hagan Firm Keeps Stimulus Project Savings, Sends None to Taxpayers

Hiring family-owned company seems to have violated conflict-of-interest policy

JDC Manufacturing, a company co-owned by Democratic U.S. Sen. Kay Hagan’s husband Charles “Chip” Hagan, lowered the total cost of a 2010 stimulus-funded energy project but kept all of the savings, sending none back to taxpayers who had funded the stimulus grant.

The company’s original application stated the total project would cost $438,627, and said JDC would contribute “leveraged funds” amounting to $187,983, or 43 percent of the total. As the project reached completion, however, JDC revised the total budget downward by $114,519 and applied all the savings to its share, keeping all the taxpayer funding.

Also, JDC’s decision to hire Solardyne/Green State Power, a separate company co-owned by Chip Hagan and the Hagans’ son Tilden, to install a portion of the stimulus-funded energy project at the JDC building appears to violate a conflict-of-interest provision that was included as part of the original application for the stimulus grant.

(Related stories here and here.)

In August 2010 JDC, owned by Chip and his brothers John and David, sought a $250,644 federal stimulus grant to replace light fixtures and gas furnaces and install rooftop solar panels at a 300,000-square-foot building it owns in Reidsville.

The occupant of the building is Plastic Revolutions, a recycling company also owned by the Hagan family. In the grant application, JDC claimed that the building’s lighting and heating systems were outdated and that current energy costs “have prevented the tenant from growing their business as desired due to the energy operating costs.”

“These combined changes will save Plastic Revolutions $100,000 in annual energy costs, offset 2 million pounds of [carbon-dioxide emissions], and generate enough electricity to power six homes,” the application stated.

JDC submitted the grant request to the North Carolina Energy Office under the category Energy Efficiency Projects for Commercial, Industrial and Large Nonprofit Sectors. John Hagan completed the grant application, and Chip, a company officer, signed sections of it.

The Energy Office, then housed in the North Carolina Department of Commerce, handled $76 million in North Carolina stimulus grants that flowed through the U.S. Department of Energy. In 2013, the state Energy Office was transferred to the N.C. Department of Environment and Natural Resources. Project files, such as JDC Manufacturing’s, are public information.

On Dec. 22, 2010, as the project work was being completed, JDC submitted a contract amendment to the Energy Office that read: “This amendment will decrease the budget by $114,519 from $438,627 to $324,108. The decrease in funds is from Grantee’s Leveraged Funds. Leveraged funds were not a requirement of this program. Reducing leveraged funds does not affect overall eligibility for the program.” The amendment was approved by Commerce.

By reducing its spending on the project by $114,519, JDC contributed only $73,464 — or 23 percent of the total project cost, instead of the 43 percent contribution it offered in the original grant application. Though the cost of the project dropped, CDC still received the entire $250,644 in federal grant money.

Conflict of interest policy

The House and Senate adopted the American Reinvestment and Recovery Act, also known as the stimulus bill, on Feb. 13, 2009, with Kay Hagan casting one of the 60 votes necessary to enact the bill in the Senate. Hagan made a point, in a press release issued on the day the bill passed, of citing the stimulus bill’s “promise to change the way things work in Washington” to favor “working families” rather than “special interests.”

JDC stressed “interests,” as well, in its application for the stimulus grant it submitted Aug. 11, 2010. The company included a copy of its conflict of interest policy, which states: “A conflict of interest occurs when an employee/board member has a direct or fiduciary interest in another relationship. Employees are to avoid any conflict of interest, even the appearance of a conflict of interest. The appearance of a conflict of interest can cause embarrassment to the company, jeopardizing the credibility of the company. Any conflict of interest, potential conflict of interest, or the appearance of a conflict of interest should be reported to your supervisor immediately.”

Chip and Tilden Hagan formed the solar installation company Solardyne the same week JDC submitted its stimulus grant, according to documents filed with the state’s Corporations Division. In 2012, Chip Hagan changed the name of Solardyne to Green State Power. Records from the Corporations Division list Chip Hagan, Tilden Hagan, and William Stewart as managers. William Stewart became Kay and Chip Hagan’s son-in-law in 2011.

Public records show JDC paid Solardyne as a company, and Tilden Hagan and William Stewart as individuals for work on the project. The involvement of Solardyne, Tilden Hagan, and William Stewart appears to be at odds with the conflict of interest policy the company submitted with the grant application.

The estimated cost of the solar component of the grant was $187,500. “The attached budget for the solar phase of the project has detailed equipment prices based on quotes or commercially available prices; however, the final project design and installation work will undergo an open bid once awardees are notified,” the grant application stated. CJ could not find any record of an “open bid process” for the solar installation work.

Commerce officials approved JDC Manufacturing’s stimulus grant on Sept. 29, 2010. The JDC Manufacturing installation was Solardyne/Green State Power’s first job as a company.

Don Carrington is executive editor of Carolina Journal.