Nessel seeks to recover $24M as Michigan’s Gotion gamble falters

Michigan Attorney General Dana Nessel is trying to claw back $24 million of taxpayer money that the state gave Gotion Inc. for a failed electric vehicle factory in Mecosta County.

A Jan. 30 letter from Nessel’s office to company official Chuck Thelen asks Gotion to write a $24 million check payable within 30 calendar days. The letter says that the Michigan Strategic Fund warned the company on Sept. 17 that it had defaulted multiple times under the Critical Infrastructure Program grant agreement.

“You were provided 30 days to cure the events of default. You have failed to do so,” the letter said. “As a consequence, the Michigan Strategic Fund is now seeking the immediate repayment of $23,670,873.56 of [Strategic Site Readiness Program] funds.”

Michigan gave the Chinese company $175 million in 2022 for an electric vehicle plant that would create 2,350 jobs. It failed to create those jobs and build the factory but it pocketed the taxpayer cash, Michigan Capitol Confidential previously reported.

The MEDC is working with Nessel’s office to secure the entire amount owed, Danielle Emerson, MEDC public relations manager, told CapCon in an email.

“MEDC has been working since that time to fully brief the Attorney General’s office and coordinate to return the balance of the SSRP grant in order to put the state in the strongest position for repayment,” Emerson wrote. “Now begins a statutory, 90-day clock for the company to repay that amount in full, with no additional penalties. MEDC will continue to pursue the rights and remedies MSF is entitled under the agreement if there has not been a full repayment at the end of that 90-day period.”

Michael LaFaive, director of fiscal policy for the Mackinac Center for Public Policy, called for Michigan to end selective subsidies.

“This project is a reminder that the state is not good at picking winners from losers in the marketplace,” LaFaive told CapCon in an email. “Michigan’s economic development bureaucrats have a long history of getting it wrong. In 2020, the Mackinac Center examined thousands of state economic development deals across nine program or program areas. We found no jobs impact in five of them and an explicitly negative impact in another. We found positive jobs impacts among three programs but with incentive offerings that outweighed the benefits.”

LaFaive cited a more recent Mackinac Center study that found only 9% of jobs promised through taxpayer-funded jobs programs over a 20-year period actually came to fruition.

“Success in clawback attempts will depend on the strength of the state’s case and sometimes the financial situation of the company,” LaFaive said. “For example, one state subsidy recipient under the Michigan Business Development Program filed for Chapter 7 and the MEDC’s spokesperson said in 2018 that they had not received repayment from the firm and don’t expect they ever will.”