Doctor RJ’s fine post about the latest shenanigans by General Motors ripped the scab off of some very old feelings I harbor for the firm. Oh my goodness, how I hate this company.
In the early 1980s, I was an Assistant Attorney General in a small state where General Motors had connived with corrupt local power brokers to secure a completely illegal property tax abatement on an assembly plant that would have saved the company over $80 million in taxes, but for a crusading Attorney General, my legal team and me.
At the time GM had purchased the land for the factory and announced its intention to build the facility in our state; they had blathered a good deal in press conferences and elsewhere about all the benefits GM would be bringing, aside from the good new jobs, including paying their taxes like a good citizen. But between those declarations and the actual construction of the plant, the American auto industry was shocked to learn that Volkswagen got tax incentives from Pennsylvania for siting their first American assembly plant there.
Soon thereafter, while digesting his prime rib at lunch after a GM board meeting, the Chairman started sputtering out loud about why GM wasn’t out there getting tax breaks like VW was getting from PA. Those postprandial ruminations quickly translated into corporate policy and company reps, whom I christened “tax bandits” during the ensuing litigation, quickly descended upon our state to threaten that GM would break every promise it made to build a new plant in our state, and would build it somewhere else, if the state didn’t cough up some big incentives. Remember, by this time, GM had completed a lengthy, complex site selection process and bought the land, while the state, county and city had spent big bucks improving major infrastructure required by the large facility, roads, sewers, power, etc. Up until this time, GM had never sought tax abatements for any site selection in its history.
However, none of that prevented GM from committing what amounted to blackmail: Give us what we want or we will kill this assembly plant. At this point, GM had already scored some pretty sweet public support for its factory in the form of low interest industrial revenue bonds issued by a local county industrial development authority that possessed the power to create government issued debt instruments with tax exempt interest that were financed by rent an other payments from the industrial tenant. The local politicians and business leaders who ran the industrial development authority were almost exactly the corrupt assholes you’d imagine in a small Southern state, so when GM demanded tax breaks or else, the officials didn’t wait two breaths to sign whatever GM wanted, in this case, an agreement to collect no property tax (read school tax) for 20 years if GM would go ahead and do what they had already promised to go ahead and do — a tax abatement contract, as it were.
My boss at the time, a Democrat and the most progressive Attorney General in state history, then or since, hated this awful boondoggle and the harm that it caused to innocent school children. He issued an official opinion declaring the boondoggle illegal and that opinion, in turn, obliged local tax authorities to serve tax delinquency notices on GM. GM promptly sued the County and my boss, just as promptly, sent me and my team to intervene in the lawsuit.
I spent weeks in Detroit deposing GM executives and managers. We proved that 1) GM had no place to build its new factory that met the company’s needs except at the location in our state they had already selected, 2) that GM’s efforts to get tax breaks was a complete afterthought and 3) that GM’s claims, that an offer of tax abatement induced the company to build in our state, were a complete fabrication. The company’s entire factual basis for a tax abatement contract failed, There was no consideration for a contract and no alternative basis, either, what lawyers and judges call a reliance interest.
In the end, though, those facts didn’t really matter that much. You see, our state constitution included a very simple and useful, to my arguments, safeguard, to the effect that the power of the state to tax “shall not be contracted away”. Oops.
We won a summary judgement in District Court. The state supreme court affirmed. When GM demanded a rehearing, they affirmed again in even stronger terms. The U.S. Supreme Court denied GM’s request for review.
$80 million you corporate prick bastards. Pay up!