Taxpayers' $5 million given to Lee company leads to investigations, accusations

Michel Fortier/Staff 
A panoramic view shows the back of several buildings located in the Alico Road Business Park, with one being leased by VR Labs. The plant remains mostly empty. The pharmaceutical plant is entangled in a legal squabble.

Photo by MICHEL FORTIER, Naples Daily News // Buy this photo

Michel Fortier/Staff A panoramic view shows the back of several buildings located in the Alico Road Business Park, with one being leased by VR Labs. The plant remains mostly empty. The pharmaceutical plant is entangled in a legal squabble.

According to Jeff Kottkamp, the CEO of VR Labs, delays in the opening of the pharmaceutical plant are due to a squabble with the general contractor and will soon be resolved shortly. The building, located off of Lee Road south of Fort Myers, sits mostly empty.

Photo by MICHEL FORTIER // Buy this photo

According to Jeff Kottkamp, the CEO of VR Labs, delays in the opening of the pharmaceutical plant are due to a squabble with the general contractor and will soon be resolved shortly. The building, located off of Lee Road south of Fort Myers, sits mostly empty.

Jeff Kottkamp

Jeff Kottkamp

— A new bottling plant in south Lee County sits mostly empty and dark.

The all-natural V!ah beverages made by VR Labs promised to make those who drank them healthier — and to boost Southwest Florida's economy with hundreds of new jobs.

Now, that promise has come into question after nearly $5 million in taxpayer money has gone to the botanical pharmaceutical start-up company's plant, which has yet to open.

When Jeff Kottkamp, former Florida lieutenant governor turned VR Labs CEO, stepped into the plant for the first time last week, it came against the backdrop of calls for a review of the county's economic incentive program, an investigation by county attorneys and demands by a Lee County commissioner for the county manager's resignation.

Kottkamp and other VR Labs executives toured the unfinished building at an industrial park off Alico Road, keeping it quiet for fear of stirring a media frenzy.

The controversy over VR Labs comes as Collier County looks to reignite its economic development program with guidance from Lee County, and to partner with Lee in a regional alliance to create high-paying jobs and diversify Southwest Florida's service-dominated economy.

"Maybe there are lessons to be learned in the future as this deal in Lee County plays out," said Mike Reagen, president and CEO of the Greater Naples Chamber of Commerce, which has taken a lead role in re-energizing economy-building efforts in Collier.

Collier is in the midst of creating a county-run economic development office like the one in Lee and with that change may revamp its own incentive programs.

"It's foolish to say, 'Let's go wild with incentives,'" Reagen said. "On the other end of the line it's foolish to say, 'Let's have no incentives.' Obviously, we need to be mature and balanced and thoughtful as we go forward in the next couple of years."

In Lee, the money for VR Labs is coming from a $25 million fund, called the Financial Incentives for Recruiting Strategic Targets (FIRST) Initiative. The agreement with Lee County requires the company to invest at least $9 million in the project by Sept. 1 of next year and to create 208 jobs by 2016. Nine jobs have been created so far, with about $4.7 million in taxpayer money already spent.

* * * * *

Some question whether enough strings were attached to the grant and whether there was enough scrutiny of VR Labs and its grant application.

"It seemed like it was not researched and reviewed well by management at the highest level, and the buck stops with the county manager," Commissioner Frank Mann said. "At this point, we've got about $5 million invested at our county manager's recommendation and the project seems to be dead in the water and the future is questionable at best."

While Kottkamp insists everything is fine, Mann and others aren't convinced.

Lee County Commissioner Frank Mann on NewsMakers 10-30-11

Lee County Commissioner Frank Mann on NewsMakers 10-30-11

"The whole thing is just a giant mess," Mann said.

VR Labs is in a dispute with its general contractor, subcontractors have gone unpaid and only parts of the state-of-the-art bottling line have been installed.

Kottkamp, who said VR Labs is fighting to get the plant open, blames the contractor.

"We're going to win. We're going to succeed," he said during a NewsMakers video interview at the Naples Daily News this past week.

The company has developed 12 health drinks under the name V!ah, which are for sale at drugstore.com, amazon.com and v-ah.com. With its own plant in limbo, the V!ah health foods drinks are bottled by another company in Florida.

"We're committed to this. That's what I'll tell you. We're going to get that bottling plant running," Kottkamp said in the studio interview, which airs today.

In fact, he said, once the first bottling plant opens: "We're going to need another one. We know we're going to need more capacity."

* * * * *

The flap over VR Labs has prompted the Horizon Council, a public-private board that advises Lee commissioners on economic development issues, to create a task force to review the guidelines, policies and procedures for incentive programs.

The new task force could bring its recommendations to the Horizon Council's executive committee by year's end. Lee commissioners would have the final say on any changes, which ultimately could be incorporated in the county's administrative code, said Kitty Green, the Horizon Council's chairwoman.

"We are trying to be forward-looking and make the program a little more clear for future applicants and for the county," she said.

In its initial grant application, VR Labs listed a current address on Arnold Avenue in Naples that belonged to an unrelated company called Vitarich Laboratories Inc., a vitamin manufacturer founded in 1992.

The start-up also included projected financials and income statements for Vitarich, though there was never a connection between the two companies. An income statement for 2011 appeared to show $10.7 million in profits, but Vitarich hadn't made money for years.

* * * * *

In December 2010, Vitarich faced closure after losing nearly $20 million over three years. Then, it was owned by Maryland-based Argan Inc., a public company.

Rainer Bosselmann, Argan's chairman and CEO, said VR Labs' references to Vitarich were misleading.

He said VR Labs wanted Vitarich, but it was a "very short conversation.""At one time they were interested, but they didn't have the money and we turned them down," Bosselmann said. "We weren't interested."

In March 2011, Argan sold Vitarich to NBTY, one of the country's largest manufacturers, marketers and distributors of nutritional supplements.

"We don't have any connection to VR Labs," NBTY spokeswoman Andrea Staub said.

Kottkamp said an updated grant application submitted to the county before the final vote on the incentive award didn't mention Vitarich, so he doesn't see it as an issue, though it has prompted concern among county commissioners.

One subcontractor on the project, Trane U.S. Inc., an air conditioning equipment company, has filed a construction lien of its own, saying it's owed nearly $198,000.

* * * * *

The controversy began to unfold in July, when the general contractor for the new plant, GCM Contracting Solutions Inc. in Fort Myers, filed a construction lien on the property where the plant sits, saying it's owed more than $918,000 by VR Labs. Since then, a flurry of liens have been filed by subcontractors who haven't been paid.

In September, GCM sued Kay Gow, the chief administrative officer for VR Labs, and the bottling equipment contractor in Lee Circuit Court, accusing them of deceptive and unfair trade practices and civil conspiracy. The case is disputed, and pending.

Last week, VR Labs lodged its own suit against GCM, alleging the contractor put a fraudulent lien on the property. In the suit, VR Labs says GCM didn't receive its final payments because the contractor failed to provide the required documentation under the contract, billed for unapproved items and didn't complete the project.

"Technically, I'm not in default," responded Robert Brown, GCM's president. "The equipment is not even mine to install."

* * * * *

The dispute between GCM and VR Labs is what triggered an ongoing investigation by the Lee County Attorney's Office.

In a letter to Kottkamp, County Attorney Michael Hunt said VR in its annual report this year failed to include enough information to verify the number of employees and wages — and that the report appeared to be incomplete in showing how much company money has been spent on the plant.

Kottkamp said the company has met all guidelines of the county's $5 million grant by filing the required progress reports and answering all questions it has to under the county's flexible guidelines.

Despite the controversy, Kottkamp said the company's economic impact in Lee County will far exceed the amount of taxpayer money that's been invested.

"People need to go back and think about why the county has an incentive program like this," he said. "It's to diversify the economy. What you're doing is making long-term investments in companies — and it's in a partnership."

© 2012 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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