An independent review of Elevate Ventures found the state contractor needs more oversight even though it is "substantially compliant with its investment and operational requirements,” Indiana Gov. Mike Pence's office said Friday.
Pence ordered a review of Elevate by auditing firm KPMG in July after an investigation by The Indianapolis Star found the development agency contractor directed $800,000 in taxpayer money to a pair of companies connected to Elevate chairman Howard Bates and his son, Justin.
The Indiana Economic Development Corp. hired the company in 2011 to run the Indiana Angel Network Fund, which uses federal money to spur small business development.
Bates is CEO of a startup, Smarter Remarketer. In November, Smarter Remarketer received nearly $500,000 from the Angel Network Fund. In addition, MaxTradeIn, a company run by Justin Bates, received $300,000 from the same fund a few months later.
KPMG's review found the IEDC should have had stronger oversight over the contractor. It also found two minor non-compliance issues and made 25 recommendations to strengthen the private not-for-profit investment manager's policies and procedures.
Among the recommendations are that IEDC be given final say over the contractor's investment decisions and that the centralized powers of Bates, a well-connected businessman and Republican campaign donor, should be more broadly distributed among an executive board. The review also said Elevate Ventures and the IEDC should review documentation related to conflicts of interests.
Pence said he has asked Elevate Ventures and the IEDC to implement the recommendations immediately.
“The people of Indiana expect economic development to be conducted in a manner that reflects the highest level of integrity and transparency,” he said in a prepared statement. “I am grateful for the reassurance that Elevate Ventures’ business practices are sound, and I have asked that the Indiana Economic Development Corp. and Elevate Ventures work together to implement KPMG’s recommendations so they can focus on conducting economic development activity in a way that safeguards public resources.”