TNInvestco chiefs ask Chancellor to toss Coleman lawsuit

By Milt Capps Last updated 1:14 p.m. Feb. 23, 2010

Published February 16, 2010

Updated 1:14 p.m., Feb. 23 - Chancellor Perkins ruling is now expected Feb. 25 or 26. Earlier post on his show-cause hearing: Related VN Blog post here.

In a volley fired Friday afternoon, State attorneys asked Davidson County Chancery Court Chancellor Russell Perkins to toss out of court a public-records lawsuit by venture capitalist Larry Coleman.

The filing came on the cusp of the Presidents Day break, and just ahead of a show-cause hearing scheduled today in Chancery Court at 2:30 p.m. This story will be updated, as warranted.

Coleman is a principal in Franklin-based venture capital firm Coleman Swenson Booth. He and Managing Partner Scott Crist of Houston-based Texas Ventures formed Coleman Swenson Crist LLC, in what proved to be a failed attempt to win a share of $120 million in TNInvestco assets.

Coleman earlier petitioned the court to require State Economic and Community Development Commissioner Matt Kisber and Revenue Commissioner Reagan Farr (at left, L-R, respectively) to provide Coleman access to documents that might shine light on how the two officials of Gov. Phil Bredesen's Cabinet chose six winners and two backup firms from a field of 25 that were competing for a share of TNInvestco tax-credit allocations, which can be monetized to fund seed- and early-stage companies based in Tennessee.

The allocations are based on premium-taxes paid by in-state insurance companies. The program enables new TNInvestco funds to sell tax credits to insurers that have premium-tax liabilities, in exchange for capital investments in the new venture funds.

Friday's reply to Coleman's earlier submissions revealed that Attorney General Robert Cooper (below right), in a meeting with Kisber

Feb. 5, personally affirmed the position taken by Kisber regarding the confidentiality of TNInvestco documents they have deemed to be "of such a sensitive nature that their disclosure would seriously harm the State's ability to complete or conclude agreements or contracts for economic or community development – in particular, future rounds of the TNInvestco program."

Kisber and Farr are, in fact, working during the current legislative session to expand tax-credit allocations for the first TNInvestco round, in order to provide allocations to two firms that were originally designated alternates. Those firms – Solidus TNInvestco LLC and Tennessee Angel Fund LLC – were originally to gain TNInvestco credit-allocations if one of the original six winners failed to meet the program's requirements, including securing insurance-industry commitments to participate.

In its filing by Deputy Attorneys General Gina Barham and Janet Kleinfelter, the State dismisses both Coleman's concerns about "the State's interpretation of certain provisions" of the TNInvestco law and Coleman's "desire to verify compliance" with the law, arguing that those issues cannot be "properly" included in what should be a more narrow argument for access to public records.

The State further argues that TNInvestco compliance and accountability are already assured by requirements in the TNInvestco law that the commissioners report annually on such matters to the Governor and to legislative committee chairpersons; and, by the fact that the TNInvestco program is subject to financial and compliance audits by the Comptroller of the Treasury, currently Justin Wilson.

The State also reprises its arguments that the material Coleman seeks is "tax information" that is protected at the discretion of Farr, and-or information that the commissioners deem confidential using the authority vested in them by lawmakers, whom they argue are the only ones who can legislate new limits.

The State also argues for rejecting Coleman's request that his attorneys fees be paid by the State, on grounds the commissioners acted in good faith and have not "willfully" failed to disclose information they "knew" or recognized should be made public.

For these and other reasons, the State asks Chancellor Perkins to dismiss Coleman's petition "in its entirety and with prejudice."

Although Coleman (at left) is on record saying the TNInvestco program is a good thing, he has complained for months that in picking TNInvestco winners the State erred in passing-over bids from what Coleman holds are some of the state's most qualified venture-fund executives.

Coleman and others have raised doubts regarding whether all the six designated TNInvestco winners had actually met the requirements set forth in the enabling Tennessee Small Business Investment Corporation Credit Act; and, whether or not Kisber and Farr had taken what Coleman believes were inappropriate steps to ensure the original six firms they favored would retain their TNInvestco privileges. Kisber and Farr have maintained that all requirements of the law have been met or exceeded.

Correspondence and at least one personal meeting in December between Coleman and the commissioners to discuss the matter have failed to satisfy Coleman, and seem to have produced mainly further acrimony on both sides. ♦