Zurik: The house that Chouest built, with your tax dollars

Zurik: The house that Chouest built, with your tax dollars
A view of the LaShip shipyard in Houma (FOX 8 image)
A view of the LaShip shipyard in Houma (FOX 8 image)
A short distance away from LaShip in Houma, grass grows at Chouest's old North American Fabricators facility (FOX 8 image)
A short distance away from LaShip in Houma, grass grows at Chouest's old North American Fabricators facility (FOX 8 image)

HOUMA, LA (WVUE) - A lucrative business deal -  one that some call a clear sign of corporate welfare - may prove to be a big loser for Louisiana taxpayers.

"That's an awful outcome," says Greg LeRoy, who leads the corporate watchdog group Good Jobs First. "It really looks like a shell game."

In 2008, the state of Louisiana signed an agreement with LaShip LLC, a subsidiary of Edison Chouest Offshore. In that agreement, LaShip committed to hiring 1,000 new employees for new positions, with a total payroll of $54 million. The positions and payroll had to be sustained for 42 months, from September 2012 until the end of 2015.

But in August 2012, the state amended that agreement, giving LaShip more time to meet their job guarantees. They moved the start date from September 2012 to March 2014, the end date to June 2017.

In return the state invested $42 million in the shipbuilding facility.

According to Chouest's website, "LaShip is an ultra-modern facility and is now the largest shipyard in the Chouest family of companies."

The state handed over the money. But LaShip has underperformed on the job commitments; they are not fulfilling the contract right now.

"They are out of compliance with the contract," confirms Don Pierson, Gov. John Bel Edwards' pick to lead the state's Department of Economic Development.

LaShip likely wanted to amend that original agreement because of low job numbers.  In March 2012, when those job guarantees were supposed to begin, LaShip had half the committed amount: 507 of the 1,000 jobs promised. That initial contract should have expired at the end of last year; if the company hadn't signed an extension, they would have fallen below that 1,000 job benchmark in 24 of the 42 months. The amendment created a new timetable.

But the jobs still aren't there.  In the first quarter of 2016, LaShip had just 232 jobs.  Again, they promised 1,000.

"That's a catastrophic shortfall," LeRoy observes. "In my opinion that should trigger a withdrawal of the deal. All the money should be getting clawed back by the state at that level."

But there's more.  Remember, LaShip is a subsidiary of Edison Chouest.  Edison Chouest is also a parent to North American Fabricators, another shipbuilding company.  North American Fabricators' facility is closed.  The company isn't even referenced on the Chouest website.

Even though LaShip promised the state new jobs, it doesn't appear that it actually happened.  The state admits Edison Chouest simply transferred the workers from their shuttered company to the new one - and got a large incentive package for it.

"We see this problem in other states, where companies have multiple facilities," LeRoy tells us. "And sometimes they just move jobs around and get paid to do it, or they get paid to create jobs in one place, but they lay a lot of people off at another facility, in another product line.  We think states have to hold companies accountable to an overall state head count to prevent this problem."

All of this took place during the Jindal administration. Chouest and his family were constant campaign contributors, giving $1 million just to his presidential campaign.

"We are absolutely against corporate welfare," Pierson insists.  "We look for these companies to be very accountable."

According to incentives contracts, the state has the ability to take money back from under-performing companies.

"Here's what I hope it says to the taxpayer," Pierson says. "Number one, you and I are watching this carefully."

The Edwards administration says, when the contract expires next year, they'll determine what the company owes the state back.

"We will indeed claw back, should they fail to meet their performance requirements," Pierson says. which.

He acknowledges that Chouest has already failed to meet some requirements.  "But we are innocent until proven guilty," he continues.  "They'll get the full contract period in which to perform, then they'll be evaluated. And if they're short, that's when we'll have clear numbers and a clear understanding of how much their under-performance might actually be."

The Edwards administration plans to wait another year to determine if they need to take money back. Greg LeRoy, who watchdogs corporate welfare across the country, says the state should move in now.  In these tough budget times, every dollar counts.

In the beginning of 2015, LaShip met its job commitment. But since then they've shed workers, failing to come close to a commitment the company made to the state - in return for a large financial commitment made by taxpayers.

"The companies should be getting a haircut on the deal." LeRoy says.  "There's just no doubt about it. Taxpayers are bearing the brunt of this deal. The state held up its end of the deal, the company is not holding up its end.  And the deal is structured in a way that puts taxpayers at risk. That's just… in this day and age, nobody should be doing that anymore."

We reached out to officials with Edison Chouest Offshore for comment on our findings; they have yet to respond.

Chouest's 2008 deal with the state of Louisiana is hardly the sole case of the shipbuilder pledging jobs in exchange for state investment. Mississippi's Sun Herald reported in March that Mississippi officials had agreed to give $36 million to TopShip, another Chouest affiliate, in exchange for a 1,000-job pledge at the company's new shipyard in Gulfport.

The newspaper reported that that state's economic development authorities failed to consider Chouest job creation shortcomings at LaShip and at Gulf Ship in Gulfport.  Even as layoffs were ordered at Gulf Ship earlier this year, Miss. Gov. Phil Bryant, development officials and Chouest company reps were elsewhere in Gulfport, celebrating yet another deal to invest tax dollars in exchange for job creation promises.

Officials with the state's economic development department, or LED, say they've clawed back $57 million since 2008 from companies that under-performed on commitments. They provided a list of reimbursements from companies for under-performance.

LED signed the agreement with LaShip and the Terrebonne Port Commission.  LED views the incentive as a short-term partnership with LaShip, but also a long-term commitment to Terrebonne. Pierson says he views the $42 million investment as helping build a "regional asset."

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