Tipton County demands restitution from Chrysler

In a state where manufacturing jobs are dying out, Tipton County was quick to offer bonds to help build the Chrysler plant that would have created 1,200 new jobs.

Now, almost two years later, Tipton County has an unfinished factory, might lose millions of dollars invested in the bonds and wants Chrysler to pay the county back.

In May 2007, the county, about one hour north of Indianapolis, agreed to the construction of a new transmission plant on US-31, a joint venture between Chrysler and German-owned automotive company Getrag.

The plant’s total cost was $530 million, which Chrysler and Getrag agreed to pay.
But the companies wanted Tipton County to help.

They sold the county $11 million in bonds that they planned to pay back with revenue from the plant.

The county offered $3.1 million in bonds and $1.4 million out-of-pocket funds to help pay for the plant, which totaled $4.5 million in costs for the county.

Tipton County Commissioner Jane Harper said that Chrysler agreed to pay the extra costs in June 2007 but has since said it is not responsible.

Construction of the plant was put on hold after Chrysler decided it wouldn’t need as many transmissions as previously thought, and the deal fell through. The company failed to supply Getrag with the adequate funding needed to complete the project.

An investigation by Indiana Secretary of State Todd Rokita led him to file a claim against Chrysler demanding restitution for the residents of Tipton County.

Harper said Chrysler gave no indication that the project was in trouble, and the county issued the bonds on Sept. 16, 2008. But the next day, Chrysler filed papers against
Getrag and pulled out of the deal.

“I don’t believe you can tell the county it is going fine and then pull out the next day,” Harper said. “I think they knew the project was in severe jeopardy.”

Harper said Chrysler employees dealing with the county might not have been aware of the situation, but she said she believes that those above them might have known.

As late as Aug. 15, 2008, Chrysler urged the county to speed up the project and even told them to rent a $500,000 temporary water filtering system for the plant, which was never used and later returned. The county did not receive any money back for the system.

The administrative complaint was filed April 17 after evidence collected by the Indiana Securities Division suggested a violation of the Securities Act, said Secretary of State Communications Director Jim Gavin.

Maurer School of Law professor J. William Hicks said private companies are required to notify counties if an agreement cannot be reached. According to securities law, it is illegal to withhold facts and information about a company, Hicks said.

“This is not a peculiar situation given the current circumstances Chrysler is facing,” Hicks said.

Remedies under the Securities Act include restitution, recession, fines or disgorgement, Gavin said.

“In the case of this complaint filed against Chrysler, LLC,” Gavin said, “Chrysler has 15 days to respond and is ordered to appear at a hearing on June 24.”

David Elshoff, a spokesman for Chrysler, issued a statement from the company stating that in the past, Chrysler has paid for about $14.5 million in infrastructure improvements around the Getrag Transmission Manufacturing project in Tipton.

Harper said $9 million of the $14.5 million investment went to the construction of an electrical substation for the Indiana Municipal Power Agency, which will not benefit the county.

Chrysler’s statement also said that Chrysler received bonds of $5.5 million from Tipton County as a way of financing infrastructure improvements.

According to Chrysler’s statement, an offer was made to Tipton County to transfer $5.5 million in bonds to the county at no cost as part of the company’s “good faith efforts to minimize the impact on Tipton County,” but the county is seeking reimbursement for the extra out-of-pocket expenses that it has paid.

Since the matter is currently in litigation, Chrysler spokesmen declined further comment.

The county’s 8,500 taxpayers will have to pay off the debt if Chrysler does not return the more than $4.5 million in bonds that were issued to the company, Harper said.

The Tipton County economy has taken a severe blow because of the plant’s failure, Tipton Mayor Dan Delph said.

“The economy is in the pits,” Delph said. “Even if we had those jobs, Chrysler would have to be able to sell the product, and we would still be in the same situation.”

The county is currently facing a 15 percent unemployment rate, higher than the statewide average of 9.9 percent, according to the Indiana Department of Labor.

Tipton County Commissioner Mike Cline said nothing can be done with the building until all claims against Getrag are settled. The unfinished building has also left more than 140 contractors with unpaid debts, many of them local companies that now cannot get bonded for other projects because of their debts from the plant, Cline said.

Cline said he hopes Chrysler will repay the money.

“Our hope is that Chrysler will make it right with the Tipton County,” Cline said.
Harper said that she hopes any potential bailout money given to Chrysler will go toward the taxpayers of the county.

“Why should we bail them out if they don’t repay us?” Harper said.