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Conflicts of interest, inadequate internal policies and lavish travel spending headlined the findings of a monthslong forensic audit of the Indiana Economic Development Corp. and its related entities published Thursday.
Those findings have led to calls from Statehouse Democrats for further investigation into the operations of the IEDC for potential criminal wrongdoing.
Speaking to reporters Friday morning, Rep. Ed Delaney, D-Indianapolis, called the 127-page report by Washington D.C.-based FTI Consulting Inc. “a good start.” But he said the report left out important information and urged the General Assembly and the Governor’s office to take the reins on holding the quasi-public agency more accountable.
“[The audit] identifies those who had conflicts of interest,” Delaney said. “It does not tell us how much they made as a result of those conflicts. It doesn’t tell us what agency failed to make them do their job. It doesn’t tell us why [the IEDC] won’t tell us why they weren’t monitored. But it’s a good start. If you wanted to do a real thorough investigation of what happened, you start with this.”
The audit was ordered by Gov. Mike Braun in April amid reports regarding potential impropriety and transparency concerns at IEDC and related entities. The auditors’ report details findings related to five organizations: IEDC; Indiana Economic Development Foundation, or IEDF; LEAP/IIP LLC (associated with the LEAP Research and Innovation District in Lebanon—LEAP stands for Limitless Exploration/Advanced Pace); Elevate Ventures; and Applied Research Institute, or ARI.
Across the five entities, the audit highlighted the lack of conflict-of-interest procedures that resulted in many instances of the IEDC, Elevate and the ARI giving funding to groups affiliated with agency leaders or to groups who had previously donated to the IEDC.
In its executive summary, FTI said it identified “45 unique findings and observations related to (conflicts of interest), compliance, and financial oversight, including gaps in governance and inadequate policies and procedures.”
Just a start
The audit mentions a handful of instances where entities did not disclose certain documentation, and the report redacts the names of a handful of individuals who donated large sums to the IEDF.
Before the audit was released, the governor’s office stated there were no criminal findings in the audit, although FTI consultants say rooting out potential fraud was beyond the scope of their work.
“The work involved did not include a detailed review of any transactions, and cannot be expected to identify errors, including fraud, that may exist,” FTI consultants wrote.
A vocal critic of the IEDC, Delaney said the investigation should go further and criticized Braun’s announcement there were no criminal findings.
“This report would not lead to a criminal referral by itself, but it would lead anybody who cared to see if anything was inappropriate or [if] money was taken; it would show us where to go look,” he said.
Delaney was joined by Sen. Fady Qaddoura D-Indianapolis in calling for legislators and the Attorney General to investigate the audit’s findings for criminal offenses.
Braun has already made some changes to the IEDC. In June he appointed nine members to the IEDC board, essentially dismantling and replacing its entire roster. Last week, he announced that votes must be taken by the full IEDC board, not in small committees, and that future investment activities must stay in Indiana.
“My focus is on solutions and we are implementing new internal policies and controls to ensure full transparency in the use of taxpayer dollars,” Braun said in a written statement. “Indiana is a great place to do business and with these additional accountability and transparency measures in place, it is an even stronger place to live, work, and raise a family.”
The Governor’s Office did not specify what potential actions, if any, the administration plans to take to address the results of the investigation, beyond the steps detailed in a statement released following the Sept. 24 IEDC board meeting.
Entities respond
Some of the most “disturbing” findings from the audit to Democratic leadership were travel expenses incurred by the IDEF from 2022-2024 under Gov. Eric Holcomb’s administration.
The audit found the IEDF spent close to $4.7 million on 38 separate international trips. Of that total, $86,000 went to car races in other countries, $700,000 went to hotels, including luxury hotels, and $167,000 went to travel expenses for family members of state officials.
Braun has already said he plans to “wind down” the IEDF.
During the time period of the audit, the IEDC awarded $18.8 million to the Bloomington-based Applied Research Institute to help the nonprofit oversee Indiana’s three federal tech hubs.
FTI consultants found the IEDC used vague language in contracts that made it hard to determine whether ARI was adequately performing the work it was contracted to do.
Further, the investigators found ARI had haphazard conflict-of-interest policies and procedures and specifically mentioned Dave Roberts—the former chief innovation officer with the IEDC, who joined ARI as CEO in December 2022—as failing to proactively disclose multiple conflicts of interest he had while leading ARI.
ARI ended up giving $165,000 to two organizations affiliated with Roberts, which he did not disclose, the audit found. Those groups are SportsTechHQ and Indy Innovation Challenge.
In a statement to IBJ, Roberts maintains he filled out all disclosures that were required by the IEDC.
“I was assigned to each uncompensated nonprofit board by IEDC leadership, which all predated and were open and conspicuous positions during my employment at ARI.
“ARI sponsored various events hosted by Sports Tech and Indy Innovation Challenge in an overall effort to support the Indiana innovation ecosystem, including two years where IEDC had a significant presence at CES. At no point have I ever received any compensation from either of these entities, which can be verified on public IRS 990 filings,” Roberts’ statement reads in part.
ARI Vice President of Public Affair Trevor Foughty also provided a statement saying the nonprofit attempted to fix conflict of interest problems before the audit was completed.
“We discovered potential conflict of interest issues before they ever came up in the context of the audit, and—as the report also notes—we hired outside counsel to help us review conflict of interest procedures. We’ve taken several steps to resolve those issues and implement new policies to avoid them in the future,” the statement reads in part. “We appreciate Governor Braun’s decisive actions to ensure transparency and accountability in the use of taxpayer funds, and look forward to continuing to be a trusted partner of the state moving forward.”
Elevate Ventures, the nonprofit venture capital firm that invests in companies on behalf of the IEDC, was specifically called out in April when Braun and Commerce Secretary David Adams announced they were seeking an audit. At that time, Adams announced the state would freeze all funding related to Elevate. The IEDC board voted late last month to resume Elevate’s funding.
FTI said its review of Elevate Ventures identified 15 findings and observations related to things such as governance and board issues, conflict-of-interest policies and disclosures, and accounting and financial reporting.
For instance, one of FTI’s observations was that “coordination and communication between the IEDC and Elevate Ventures has been lacking.” FTI also said it found that Elevate has not historically adequately tracked investments by tranche of IEDC funding or returns generated by investment.
In a written statement Thursday, Elevate characterized the audit results as “affirming [Elevate’s] role as a high-performing partner in Indiana’s innovation economy.”
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