Complete 2012 forensic audit documents - Kansas Bioscience ...

KBA Forensic Audit Summary Page 3 of 30
Issues related to KBA investments and investment processes
Audit location Issue/Question Summary
Beginning on
page 69
Beginning on
page 70
In January 2010, KBA approved $1.5 million to
match a Department of Energy grant won by Agco
Corp. for an $11.7‐million project related to
supplying biomass feed stocks to cellulosic
biofuels processors. The project was undertaken
at Agco’s Hesston, Kansas, facility.
In February 2011, KBA approved a $131,800 proofof‐concept
grant to help Choco Finesse, LLC, to
undertake pre‐market work related to a lowcalorie
substitute for cocoa butter and other fats.
The technology is owned by the National Institute
for Strategic Technology Acquisition and
Commercialization at K‐State, which received the
intellectual property as donation resulting from
“merger integration and new priorities” (p. 71) of
the companies that developed and subsequently
owned the property. Some have alleged that “the
company is managed by a schoolteacher and her
husband” (p. 70).
BKD notes in its review of the pertinent investment committee minutes that committee member
Bill Sanford “expressed his opinion that the KBA’s contribution would likely not have much impact
on a company the size of Agco, and that the KBA’s funding is only a relatively minor part of a
much larger project funded by DoE and Agco itself. A member of Agco’s management … in
attendance … acknowledged the validity of these points. However, he stated that Agco’s
involvement in the project was deemed to be a challenge and exposed Agco to a greater level of
risk than other R&D projects it has undertaken. Incentives offered by the KBA and the federal
government will help Agco to undertake this more risky R&D effort and product development”
(pp. 69 and 70).
BKD reviewed information “available from the grant application” about the key company
personnel. KBA notes that none is a schoolteacher and all appear to be highly qualified. KBA also
notes that one person has alleged that Choco Finesse is not a Kansas company, but BKD cites the
company’s Kansas certificate number, as reported on the Kansas Secretary of State’s website,
which supports the assertion that it is.
Beginning on
page 71
In October 2008, KBA approved a $1 million R&D
voucher award to ICM, Inc., for a bioenergy
research project. In June 2010, ICM announced it
would build and operate a new plant in St.
Joseph, Missouri. Some have alleged that “KBA’s
funds were therefore spent in Missouri rather
than Kansas” (p. 72).
BKD reports that “KBA’s … grant was for a specific purpose,” namely to support a specific project
that the KBA reports was performed at ICM’s Colwich, Kansas, location. Tony Simpson, the KBA
director of commercialization responsible for the grant, “indicated he had visited the ICM Colwich
location a number of times and could verify that the research is being done at that location …” (p.
72). BKD concludes that “based on the available information, it does not appear that KBA funds
were used to construct or remodel ICM’s pilot plant at its St. Joseph location” (p. 72).