McDERMOTT COLUMN: Eager for jobs, S.C. trumpets recycling deal prematurely
One of the warm-and-fuzzy perks of being an elected official is greeting an innovative new business that plans to create jobs and pump money into the local economy.
It must feel even better when times are tough and when cutting unemployment is a big priority.
But a little restraint and a little bit of homework can go a long way on these occasions, especially when the company in question isn't exactly a Boeing or a BMW.
A slightly embarrassing case in point for South Carolina involves a shaky start-up with outsized ambitions.
The Haley administration last year was quick to trumpet the arrival of PyroTec Inc. and chalk up a victory for its economic development scorecard. But a routine review of the company's background and finances would have flagged the deal as sketchy at best, long before it ever reached the publicity stage.
Even the company's board of directors doesn't dispute that.
On, then off
The S.C. Commerce Department hailed PyroTec's arrival in the Lowcountry by issuing a news release June 27.
The company was described as a high-tech Charleston-based recycling business that was to invest $10 million and create 75 jobs in the region. Its global headquarters were to open at Freshfields Village near Kiawah and Seabrook islands by last July. A telephone number was provided for job applicants.
The statement also included canned quotes from several government officials, including Gov. Nikki Haley.
“We celebrate PyroTec's decision to establish its new headquarters in South Carolina, and invest $10 million and create 75 new jobs in Charleston. Announcements like this show that we are on the right track with regards to economic development,” Haley said.
According to the announcement, PyroTec was pursuing a license to a patented technology that extracts materials from scrap tires, discarded plastics and other forms of waste. It planned to sell the refined end product as an alternative fuel.
“South Carolina gives us an excellent business environment, and we look forward to growing our business here,” PyroTec CEO John Burns said in the state-issued press release. “We appreciate the support we've received from state and local officials.”
The company said it expected to announce future factory locations in the coming weeks. It never happened. In hindsight, it wasn't at all surprising.
PyroTec was essentially a shell public company that hadn't yet sold any stock publicly but had filed details about its shaky financial status with the Securities and Exchange Commission.
For instance, PyroTec reported no sales, no operations and just $200 in working capital.
Also, the company required money, lots of it, to execute on the Charleston County expansion. It estimated it needed to raise $50 million quickly and at least another $25 million longer term to secure the long-term licensing rights to its recycling technology.
PyroTec warned that it couldn't guarantee that it would succeed in raising the money. All of that information was publicly available in May on the SEC's website.
PyroTec never did come up with the cash it needed. Last week, it was disclosed that it has changed its name, changed its focus and changed its management. Its executive offices shifted from Wappoo Creek Drive on James Island to Newport Beach, Calif.
Now called Trinergy Global Inc., the business still in existence, but the Charleston expansion plan is dead, said Anthony Paesano, a Birmingham, Mich., attorney who represents the company.
“It's definitely off,” he said Thursday.
No news, good news
Not that it was ever really a go. Paesano said PyroTec's now-ex-CEO should not have approached the state with the deal.
“John Burns decided unilaterally to do that without authorization, and it caused quite a stir internally,” Paesano said
Burns is no longer with the company, and he did not address Paesano's comments in an email Friday. He defended the company's plans and said the state went out of its way to help.
“There were no state tax or direct incentives tied to this announcement, and it was contingent upon acquiring financing,” Burns said. “I can tell you when it became apparent that the financing was not going to occur that the entire team worked tirelessly to acquire new financing for investors, business, as well as, the state.”
Paesano said he was surprised to read how far up the chain the deal went in South Carolina for “a start-up company.”
“It was a shock to see there was a quote from the governor's office,” Paesano said, referring to the press statement. “That surprised me.”
Commerce said it reviews financials only for companies seeking incentives and that meet the qualifications.
“As a pro-business agency, we may support companies with announcements, whether or not incentives are involved,” spokeswoman Amy Love said in statement.
In the end, PyroTec turned out to be a case of no harm, no foul. State and local governments didn't invest any public funds aside from the resources it took to write and issue the announcement.
South Carolinians are eager for news about new jobs and innovative companies. But reputation and credibility should come first. In this instance, no news would have been good news.
Contact John McDermott at 937-5572.