Already struggling Chrysler is now being investigated for securities fraud for allegedly stiffing a small county for millions in bonds and expenses over a failed transmission plant project that county officials say could leave the county scraping its coffers. The Indiana Secretary of State filed a complaint against Chrysler and is seeking about $10 million from the car company and one local Congressman says the automaker should not receive any more bailout funds until the small county is reimbursed.
In September, 2008, Tipton County, IN issued $5.5 million in bonds each to Chrysler and Getrag Transmission to build a $530 million dual clutch transmission plant. A day after the bonds were issued, Chrysler told Getrag it would not provide it the assurances needed to finance the project. Two months later Getrag filed for bankruptcy and the project was cancelled.
The 900,000 square-foot transmission plant was expected to provide up to 1400 jobs. Now the 16,000 residents of this agricultural county is left bondless, loaded with debt and stuck with a partially completed plant.
"There's no way we would have issued the bonds had we known Chrysler was going to pull out of the project," said Jane Harper, a Tipton County Commissioner.
For months, Tipton County contacted Chrysler in an attempt to recover the bonds and other expenses.
The county's agreement with Chrysler stated "If Chrysler and Getrag were unable to reach complete agreement on the terms of the cooperative development of the project, Chrysler was responsible for reimbursing Tipton County for all third party costs incurred in furtherance of the project…"
Chrysler agreed to return the bonds last month, but not reimburse the county's expenses. Tipton County Commissioners rejected the offer. They insist Chrysler also owes them $4.5 million in expenses.
Indiana's Office of the Secretary of State recently issued the securities fraud complaint against Chrysler. It contends the troubled automaker failed to notify Tipton County of their lack of agreement with Getrag prior to Tipton County issuing bonds to the two companies.
"Indiana has a long automotive manufacturing heritage and we need to preserve it," said Secretary of State Todd Rokita. "But we also need to ensure a level playing field within all industries, and that includes protecting victims whether they are individuals or groups like taxpayers in Tipton County."
The complaint adds to the woes of the beleaguered automaker. Chrysler filed for Chapter 11 bankruptcy today in what is seen as a move to reorganize its operation and strengthen its alliance agreement with Italian car maker Fiat. As a reward for its efforts, the federal government has agreed to support Chrysler with $3.3 billion in debt to get the company though an expedited bankruptcy proceeding. In addition, President Barack Obama's Administration says it is also prepared to loan approximately $4.7 billion to the "new" Chrysler
"As a part of their proposal for additional funds from the government, Chrysler should make a commitment that they will take care of this obligation to Tipton County," said Congressman Dan Burton (R-IN), who petitioned Treasury Secretary Timothy Geithner on behalf of the county.