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RI rejects applications for controversial $42M incentive program

Target 12

PROVIDENCE, R.I. (WPRI) – State regulators have rejected the applications of three companies seeking to participate in a controversial $42 million small business incentive program.

In response to a public records request, the state released a tranche of correspondence between the R.I. Commerce Corp. and three investment companies: Advantage Capital, Enhanced Capital and Stonehenge Capital. It included – among other things – rejection letters to participate in the newly created Small Business Development Fund.

“At this time, we are unable to move your application to the next phase of the certification process as it is incomplete,” Commerce president and CEO Jesse Saglio wrote in letters dated Dec. 20. “As the application has been found incomplete, it is denied as of the date of this letter.”

Bill Fischer, a spokesperson for the three companies, released a statement from Enhanced Capital and Stonehenge Capital expressing disappointment. Advantage Capital did not immediately provide comment.

The program — once fully implemented — would provide access to capital for small businesses throughout Rhode Island, Fischer said.

“Today’s development is frustrating for the applicants of the Small Business Development Fund who have engaged in good faith with the Commerce Corporation to move an effective program forward that is transparent with significant accountability provisions,” Fischer said on behalf of Enhanced Capital and Stonehenge Capital.

The public documents obtained by Target 12 reveal back and forth between the companies and the state that appeared contentious at times, underscoring what’s already been a controversial process. General Assembly leaders, who argue the program could create an influx of new capital for Rhode Island companies, championed it and passed it as part of the current fiscal year budget.

But Democratic Gov. Gina Raimondo has sharply criticized the incentive program, warning it could result in another deal like 38 Studios, the video game company that failed in 2012 and cost taxpayers millions of dollars.

The second-term governor has also argued the program would only benefit out-of-state companies. The three firms that have applied to participate so far are based in other states, and two helped lobby for the creation of the program.

Under the law, qualified investment firms put money into a fund that provides capital to small businesses. In addition to profiting off whatever returns the business generates, the investors also benefit from state tax credits totaling about 64% of every dollar.

The state recaptures some of the investment if the business does well, but Rhode Islanders are on the hook for up to $14 million a year in tax credits for investors, according to the Senate Fiscal Office.

In a Nov. 8 letter, Enhanced Capital vice president Carling Dinkler expressed frustration with Commerce’s communications since the company first filed an application in early October. As Target 12 previously reported, Commerce returned the applications on Oct. 30, claiming they were incomplete. The state told the companies they had 15 days to submit a laundry list of additional information or the applications would be denied. 

“We received [the response] from the Commerce Corporation of Rhode Island regarding the applicant’s application to the Rhode Island Small Business Development Fund. Unfortunately, we were first notified of your letter via several media stories that were published before a copy of the actual letter was emailed to us,” Dinkler wrote.

Target 12 filed a public records request for documents on Nov. 20 and Commerce took 30 days (including an extension of time) to fulfill the request. Commerce redacted large portions of the documents, claiming some details – namely trade secrets, along with commercial and financial information – are exempt under the Rhode Island Access to Public Records Act.

The three companies responded to Saglio’s initial request for additional information on Oct. 31, but the state claims the responses still did not include enough information such as a complete business plan, sufficient information about investors, and evidence that the companies have invested at least $100 million in nonpublic companies.

“I thank you for your interest in participating in this program,” Saglio wrote. “We hope that you consider re-applying for certification as a Small Business Development Fund in the future.”

After the new incentive program became law earlier this year, the Raimondo administration scrambled to create stringent rules surrounding the application process. In a letter dated Nov. 15, Advantage Capital Manager Michael Johnson wanted to address some of those strict requirements, but it’s unclear what aspects specifically as nearly everything else in Johnson’s letter is redacted.

Despite the rejections, the companies plan to continue to work with Commerce as non-emergency rules are written for the program, according to Fischer.

“As Commerce prepares regular, non-emergency regulations for the [program], the applicants will continue to work with Commerce and policymakers to ensure the legislative intent of the program is adopted,” Fischer said.  

Eli Sherman ( is a Target 12 investigative reporter for WPRI 12. Follow him on Twitter and on Facebook.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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