Brownfield redeveloper EnCap Golf Holdings came to the State of New Jersey with a plan to both clean up environmentally hazardous landfills and turn them into golf courses, housing, retail space and a hotel. The state handed over $316 million in loans to the private developer to entice them to take on this risky project.

Now, a state report from the Office of the Inspector General, detailing how EnCap secured funding from the state, shows little was done to clean up the landfills. Meanwhile, EnCap spent over $5 million on costs unrelated to remediation, including pay outs to lobbying and public relations firms.

More than $128 million in state funds remain at risk as EnCap’s new project manager, the Trump Organization, seeks to find more financing to clean up landfills in Rutherford and Lyndhurst. The New Jersey Environmental Infrastructure Trust (EIT) and Department of Environmental Protection (DEP) agreed to loan EnCap $212 million, but have only divvied out $128 million to date.

While the money remains in limbo, Inspector General Mary Jane Cooper said it should not be assumed that the funds are lost. "Technically she’s right because of the past tense of the word ‘lost,’" said Rutherford Mayor John Hipp, who has been against the project. "But, they are seriously at risk."

Several protections, such as a letter of credit from Wachovia Bank and a "performance security bond" to fund landfill closure should EnCap fail to complete the project, give the state a fall back plan if EnCap never finishes the job, said Cooper.

EnCap planned on paying back those loans with up to $450 million in bonds backed by future property taxes from structures built on top of the cleaned-up landfills. However, Governor Jon Corzine put a stop to the approval of those bonds, suggesting they could leave Rutherford and Lyndhurst taxpayers at risk if the project were to fail.

Then Corzine asked the Office of the Inspector General to find out how EnCap managed to acquire so much public funding. Corzine’s request resulted in a lengthy report from the inspector general, blaming "divide and conquer" tactics on the part of EnCap attorneys for the unprecedented amount of public money given to the developer.

EnCap also stood to make $200 million by selling the rights to develop atop the remediated landfills to other developers, money that would also be used to pay back loans from the state.

Along with borough officials in North Arlington, a town where a separate EnCap project is tied up in litigation, Hipp would prefer the state terminate its agreement with EnCap and call upon the $149 million performance bond to close the landfills. Instead, the state granted EnCap a six month extension on meeting the terms of the agreement, its fifth extension to date, to allow new project executive the Trump Organization to show the state what it can do.

"The decision of the state to allow this to continue does not make any sense and I think it’s environmentally reckless," said Hipp.

Where the money went

Former DEP policy adviser and environmental activist Bill Wolfe theorized that the state was an active partner in the corruption revealed in the report. Ending the agreement would bring the matter to litigation. In litigation, all of the details of the deals made between EnCap, state entities and local governments would become visible. In a criminal investigation, the details are confidential.

"If they [the state] actually pull the plug on the project, then all the dirt would come out," said Wolfe.

The report recommended the funding agencies conduct a line item audit on monies given to the developer. EnCap would submit invoices to the EIT and DEP and receive money from the state agencies in return. The funds were paid out pursuant to invoices from EnCap. The report revealed that the state paid for expenses that had nothing to do with remediation of the landfills, including $360,000 to lobbying and public relations firms.

In total, the DEP approved the use of public funds for $5.1 million in "administrative expenses," according to the inspector general’s report. These might even include payments to DeCotiis, Fitzpatrick, Cole & Wisler, the very law firm the inspector characterized as willfully deceitful to the state in the report.

Public financing funded the majority of the project and after finishing the job, EnCap was entitled to a 75-percent tax credit rebate. "It’s a double whammy," said Wolfe.

The inspector general’s analysis of disbursements to EnCap was "by no means exhaustive" and once the state agencies begin conducting their own audits, they might find more cash was loaned to EnCap for expenses unrelated to landfill cleanup, said Cooper.

Hipp said he was disappointed that the inspector general did not delve further into expenses unrelated to landfill cleanup.

The NJMC’s role

The inspector general’s report said EnCap deceived the New Jersey Meadowlands Commission in thinking it had the financial wherewithal to complete the project and the experience necessary to cap a landfill.

"EnCap submitted detailed documentation, including affidavits, outlining its ability to undertake the project, its experience and the qualifications of its team of professionals," said Brian Aberback, a spokesman for the Meadowlands Commission. "Unfortunately, due diligence cannot always uncover deficiencies when an organization sets out to intentionally misrepresent its qualifications."

The report also recommended the creation of a "point entity," a body concerned solely with managing all of the information involved with a public-private partnership like EnCap. The NJMC was not a point entity in the project, according to the report.

The state does not give the NJMC the authority to approve loans or issue environmental permits. Thus, the Department of Environmental Protection was responsible for those aspects of the project.