On Jan. 31, 2007, Governor Jon Corzine asked Inspector General Mary Jane Cooper how EnCap managed to secure hundreds of millions in public financing. Cooper’s answer? By overstating its qualifications and the size of its wallet.

Now, two senate committees want more answers. Are EnCap’s actions criminal? How was the money spent? Did the money make landfills in Rutherford, Lyndhurst and North Arlington cleaner?

Cooper could not answer these questions at a joint hearing of the Senate Legislative Oversight and Environmental Committees in Trenton on March 17. So, Senator Bob Smith, chair of the Senate environmental committee, recommended the state answer these questions.

Criminal investigation

Cooper could not state whether or not EnCap’s actions constituted fraud, but Smith thought the record showed it. "This is not looking like a duck or quacking like a duck. This looks pretty clearly to be fraud," said Smith.

Senator Bob Smith, who represents parts of central New Jersey, called on state attorney general Anne Milgram to criminally investigate EnCap. Senator Nia Gill, who represents parts of Passaic and Essex counties, felt federal attorneys should criminally investigate the matter, claiming the state attorney general would be biased. She even went so far as to call for an investigation of the attorney general’s office. "We should move to investigate the attorney general," she said. "I think New Jersey is in a bigger pickle than we realize."

The law firm that represents EnCap, DeCotiis, Fitzpatrick, Cole & Wisler, represented the state of New Jersey during the administration of former Governor James McGreevey and during other various times, according to Gill. Based on this fact alone, Gill believed the attorney general would have a potential conflict of interest.

Seven attorney generals handled the EnCap project at different times since the project began to take shape in 1999.

Smith disagreed with Gill. If Milgram felt a conflict of interest prevented her from moving forward, she could then move the matter to the U.S. attorneys. "I don’t think the attorney general’s office should be excluded from the process," said Smith.

Sarlo pointed out that Milgram is new to the process, having only been in office since June 2007, and the legislature has an obligation to go to her first to look into EnCap.

Rutherford Mayor John Hipp and North Arlington Mayor Peter Massa have also called on U.S. attorney Chris Christie to look into the matter and have called on him to investigate the project. Both mayors pointed out the absurdity of allowing the state to effectively investigate itself and called the state’s own actions into question.

The money

Smith recommended the state comptroller conduct a financial audit of all of the public and private entities involved to find out if the money was spent properly. To date, the state has loaned $128 million to EnCap. Cooper said the EnCap money was "at risk," but could not be considered lost. "We are hopeful that no money is lost because it’s a loan," said Cooper.

In her report, Cooper said EnCap spent $360,000 on payouts to firms "readily recognizable" as lobbying and public relations firms alone, but did not explore the details of where all of the money went.

Using environmental funds to pay for lobbying and public relations had never been contemplated by the state, thus not making it clearly illegal, said Cooper.

She determined the money was used to advocate changes in the law that would make the project possible, but didn’t know if these changes in the law had anything to do with landfill remediation. Through interviews with DEP personnel, Cooper determined that the payments to these firms could have been used for necessary public hearings, but the invoices did not document this.

Cooper did not go so far as to say this was an improper use of the funds, but said there was "insufficient evidence to support the use of state funds to reimburse these costs." In addition, Cooper found EnCap sought money for invoices that were clearly not related to remediation.

The cleanup

Cooper said her office did not do a thorough review of the environmental remediation. Senator Gerald Cardinale, who sits on the Senate environmental committee, questioned Cooper at length about specifics of the environmental remediation. She could not give Cardinale satisfactory answers, stating she is not an environmental expert.

However, Cardinale pointed to press reports detailing lax environmental controls related to the project. E-mail correspondences between DEP personnel and supervisors revealed higher-ups overruling DEP to allow EnCap leeway on New Jersey’s tough environmental standards, according to the reports.

"We have a large part of the Meadowlands that appears to be worse off environmentally," added state Senator Robert Gordon.

The point person

Sarlo introduced a bill to establish a "point person" to manage public-private partnerships like EnCap shortly after the hearing.

Cooper’s report revealed that EnCap pushed through proposals and funding by talking to state agencies separately. The New Jersey Meadowlands Commission chose EnCap to take on the project, believing the company had adequate private funding. However, EnCap gained funding from the Department of Environmental Protection and the Environmental Infrastructure Trust. Afterward, the developer struck deals with local towns to secure future property taxes and attempted to borrow more money from the state to clean up the landfills.

Cooper’s report claims that the state agencies were unaware of deals with the state and vice versa. It was not until nine years after the project began that all the stakeholders met in one place to discuss the project.

Sarlo said his bill would affect any redevelopment project in the state that receives public money and would force private businesses to disclose their finances before doing business with the state.

Gill did not believe the recommendation went far enough, instead believing the governor’s office and the attorney general should remain the watchdog for public-private partnerships. The attorney general, who acts as counsel to all of the agencies in the executive branch including the NJMC and the DEP, did not act as a point person, but Gill believes they should. "We actually have the correct structure to oversee this if the attorney general steps up to the plate," said Gill.

The attorney general signed off on many of EnCap’s deals with the state, but did not have oversight power. "If the attorney general’s office rejected a proposal made by EnCap or otherwise negotiated a term of the agreement that was unsatisfactory to EnCap, EnCap would address the issue directly with the relevant agency, without including the attorney general’s office," Cooper wrote in her report.

As for the "point person" recommendation, Hipp felt centering a body to control local redevelopment projects in Trenton would not help local municipalities. All development is local, said Hipp, and putting a bureaucrat in charge of all local redevelopment projects would move the person in charge miles away from where the development actually happens.

The Governors

Cooper’s report did not lay blame on any state official in particular. The legislators grilled Cooper to find out who allowed the private developer with questionable qualifications to use public money to operate.

Cooper held agencies responsible for their actions, the Department of Environmental Protection for handing out the loans and the New Jersey Meadowlands Commission for not following up on qualifications, but did not call out any officials specifically.

Senator Gill asked Cooper why she never questioned the governors involved in the project during her report.

Five governors headed the state over the course of the EnCap project: Christine Whitman, Donald DiFrancesco, James McGreevey, Richard Codey and Jon Corzine.

Only McGreevey met directly with EnCap representatives, Cooper’s yearlong investigation found. McGreevey, who received more campaign contributions from EnCap and Cherokee, EnCap’s parent company, than any other public official, approved EnCap’s first state loans, $150 million from the economic development authority.

John McCormac, the state treasurer under McGreevey and Codey, signed off on $212 million in loans from the Environmental Infrastructure Trust and the Department of Environmental Protection with insufficient collateral. He said he did not recall ever discussing the loan with McGreevey or Codey.

McCormac said he would not sign off on such a loan without being directed by a member of the governor’s staff, but could not recall who told him to push it through, according to Cooper’s report. Cooper questioned state officials from both administrations to find out who told McCormac to push the loans through, but no one took responsibility.