AG Rosenblum Announces $4.4 Million Settlement with Ecotrust

April 29, 2020
• Posted in

Oregon Attorney General Ellen Rosenblum today announced a $4.4 million settlement with the nonprofit Ecotrust and its for-profit affiliate Ecotrust Forest Management to resolve claims under the Oregon False Claims Act involving the applications Ecotrust submitted to procure New Market Tax Credit (NMTC) financing for two development projects Ecotrust administered. The development projects procured by Ecotrust included re-opening of the Rough & Ready sawmill in Cave Junction and the purchase of the Desolation Creek forest property from Hood River County.

“Oregon’s New Market Tax Credit program was meant to rehabilitate job opportunities in economically stressed communities and bring economic incentives to parts of the state that could use an economic boost,” said Attorney General Rosenblum. “The program was not supposed to be used to pad the coffers of investors using the tax credits to buy property. But that’s what happened. After more than two years of painstaking review of every financial record, my office has achieved a very good result for the state.”

This settlement follows an earlier agreement in 2019 to resolve an action by Business Oregon and the Oregon Department of Revenue (DOR) to recapture a portion of the Oregon New Market Tax Credits for the Rough & Ready transaction. In that action, the two agencies asserted that Ecotrust had failed to accurately characterize and disclose the intended use of proceeds in the Rough & Ready NMTC project application. With the assistance of Oregon Department of Justice, the action was resolved with a subsidiary of Ecotrust, called Ecotrust Community Development Entity (CDE), agreeing to cure its default by making a new $3.4 million investment in a different NMTC qualifying business.

A few months after applying for NMTC for the Rough & Ready mill, Ecotrust CDE submitted another application to Business Oregon for additional tax credits to fund the purchase of the Desolation Creek property. The deal was sponsored by Desolation Creek, LLC, which is managed by Ecotrust Forest Management.

A more than two-year civil False Claims Act investigation by Oregon DOJ into these transactions confirmed that Ecotrust improperly overstated project budgets for both the Rough & Ready and the Desolation Creek transactions on their tax credit applications. In application materials submitted to the state, Ecotrust reported projected expenditures of $8 million to re-open the Rough & Ready sawmill and an additional $7.5 million to conclude the Desolation Creek forestland purchase. Oregon DOJ’s investigation found that the Rough & Ready project budget was improperly inflated by $4 million and the Desolation Creek budget was inflated by $900,000, causing the state to be overcharged by approximately $1.5 million and $350,000 in tax credits respectively for the two projects.

“I want to thank the remarkable efforts by DOJ staff to reach this resolution,” said AG Rosenblum. Oregon DOJ’s False Claims Act investigation was led by Senior Assistant Attorney General Brian de Haan and Civil Recovery Division Special Counsel Tim Nord.

The Oregon Department of Justice (DOJ) is led by Attorney General Ellen Rosenblum, and serves as the state’s law firm. The Oregon DOJ advocates for and protects all Oregonians, especially the most vulnerable, such as children and seniors.