Since we first introduced you to SAC Manufacturing - here and here - the Telegram has taken up the story and added interesting new details (see below).
VOCM makes it sound like the provincial government is looking for the cash rather than trying to avoid noting that the cash is missing in the first place but hey, that's a whole other story.
Anyway, the Telly confirmed that the company went under, a fact the provincial government knew in September 2007 yet for some bizarre reason, apparently failed to disclose to the Auditor General while he was doing the Public Accounts.
AG John Noseworthy included mention of Hebron and some other changes long after the close of the fiscal year he was auditing that looked rosy for the books, but this little story somehow escaped attention.
However, since the company shares could be worthless, the AG really should have listed that fact in the notes to his audited financial statements.
Somewhere.
And he might well have done so.
If he knew.
But in order for him to know, the people who did have the information would have to pass it along.
And apparently they didn't.
Just like they never issued a news release on the $500,000 equity position the provincial taxpayers took in a little company no one heard of. Not like say, Consilient or Blue Line both of whom received a similar equity injection. Or Orphan Industries and it's nearly $1.0 million of provincial cash.
Oh and don't forget that like those other equity stakes, this $500,000 equity position was decided and approved by cabinet.
And for another example, the Telly discovered that the province's $500,000 was in addition to a $175,000 loan dropped into the mysterious company the year before.
And for another example, the Telly quotes the province's innovation minister admitting his department was aware the company had "cash flow issues" and that there were other problems with the company yet dropped the cash in anyway.
Interesting his explanation that somehow SAC Mfg had an innovative product and therefore the cabinet invested in it.
That's interesting because some further digging in the oil patch turned up some people who were familiar with the SAC idea. While they didn't know all the details, these experienced industry players, referred to the concept as a pressure vessel for natural gas, in other words a form of compressor like the industry already uses in several forms.
Or like an oil drum?
Exactly.
Or as one of them put it: as innovative as a 55 gallon oil drum.
If that's the case, the market basically gets its 55 gallon drums from the people who can produce them at high speed at the lowest price. Not much time consuming analysis needed on that one. Also no surprise since, as Trevor Taylor admitted, SAC is now a floater in the East River of failed Newfoundland government business ventures, due to competition from the American market. Innovative ideas don't have much competition.
The Telegram also notes that the company got the $500,000 cash in December 2006 and, as Bond Papers can now note, the directors of the company listed their house for sale the following April. The two year old home was sold within two months.
And if all that wasn't odd for you, try comparing innovation minister Trevor Taylor's comments about SAC to what he said last week about local companies and the investments the Ag criticised in his report.
Last week, Taylor was talking about the need to keep companies here through government investment rather than see them up-stakes and head to where the capital is that might just buy into this or that product.
Ok.
Except in this case, the product was aimed - as Taylor admits - at the Alberta natural gas acreage.
Alberta.
The place with lots of capital, private especially, looking for innovative ideas. As Bond has already noted, the product in this case really isn't useful locally - unlike Blue Lines energy monitor, for argument's sake - and is pretty much aimed at a niche market. Whatever SAC might have gotten around to building, it also wouldn't be a product that needed to be built here, as opposed to Alberta or Saskatchewan.
So why the heck would the provincial government drop cash into it?
That is as much a mystery as the company itself.
And as for government's explanations so far?
Well, those are about as innovative as a 55 gallon drum.
They ring about as hollow too as a brand new empty one rolling down Barter's Hill.
-srbp-
The TelegramThe story below was also carried in The Western Star (Corner Brook). Note that some information at the back end of the piece was chopped. Note especially, though, that the headline conveys a bit of a different twist on the story than what the story itself suggests.
February 5, 2008, p. A1
Business
Company shut down after $675-K handout
Closure came months after infusion of tax cash
Rob Antle
A local oil industry firm ceased operations last year, just months after quietly receiving a $500,000 equity investment from the provincial government.
The province had previously provided a $175,000 loan to SAC Mfg. Inc. of Paradise. Taxpayers are now out a total of $675,000.
But Innovation Minister Trevor Taylor insisted that officials did due diligence on the company, which was working to develop a natural gas compressor for use in the Alberta oil industry.
"We knew it was a high-risk investment," Taylor told The Telegram. "We knew that the company, there were cash-flow issues ... that this was as far as we could go, and that they were going to need to change the way they were conducting their business, or get further private investment or whatever in order to be able to carry forward.
"The reason we invested in it is because it was an innovative product. It was something that was explained to us - as we understood it, based on the analysis that was done - (that) this was an unconventional piece of equipment, that if it took off, would have had a good placement in the oil industry."
There are no news releases in provincial government archives announcing or even referencing any investments in SAC Mfg. Inc. Details of the equity infusion are buried in a schedule attached to the recently-released 2006-07 public accounts.
Taylor said he didn't know why there was no news release trumpeting the SAC cash, even though his department routinely does so for other infusions of government money. "I really couldn't tell you, to be honest with you ... I don't know." But Taylor noted there was no direction from him to keep it quiet.
In early 2006, the province loaned SAC $175,000. Later that year, in mid-December, the government made a $500,000 equity investment in the
company through its new commercialization program.
But soon after SAC received the money, the company's sole two directors - Dana Clancy and Sandy Clancy - sold their Paradise home, according to records filed at the provincial Registry of Deeds. That address doubled as the contact point for the company, according to documents filed at the Registry of Companies.
The house sale went through in June 2007, less than six months after the $500,000 government investment in SAC. There is no record of the Clancys subsequently buying another house in Newfoundland and Labrador. Taylor said one of the firm's principals moved back to Alberta.
The government said it was informed in September 2007 that SAC lacked sufficient capital to continue operations, citing competition from the U.S. and downturns in selected markets.
Government officials are now examining their options to recoup the cash. Taylor acknowledged he is concerned that the company's directors left so soon after the equity investment, but defended the actions of his department.
"We don't have a crystal ball around here that we can gaze into and say, 'Oh yeah, I just saw this person selling a house six months after we gave them money.'"
The province knew SAC Mfg. Inc. was a "high-risk" venture, and decided it was "worth a shot," Taylor said, insisting that the people of Newfoundland and Labrador want the government to take such risks.
"They've asked us - as a department, and as a government - to invest in research and development, and to put our money on the line and to do our due diligence, and understand what the risks are, and understand what the benefits might be if a technology is developed."
SAC officials were not reachable for comment. Sandy Clancy's e-mail address returned messages as undeliverable. All local phone numbers associated with the firm are out of service. And SAC's website has disappeared from the Internet. In fact, its domain is not currently registered by anyone.
The Department of Innovation was slow to respond to inquiries about SAC.
The Telegram first asked about the investment on Jan. 30, following a posting on the company by Internet blogger Ed Hollett.
rantle@thetelegram.com