By Clint Brewer

The state of Tennessee has filed dozens of documents under seal in Davidson County Chancery Court in its fight to keep records related to the controversial TNInvestco program closed to public scrutiny.

In addition, legislative sources said a push to see the program expanded before it completes a full year of operations is intensifying.

The state is attempting to fight off an open records lawsuit from Larry H. Coleman, president of Coleman Swenson Booth Inc, a venture capital fund seeking answers as to why firms were either accepted into or rejected from the TNInvestco program.

TNInvestco is a state program enabled by a law passed in 2009, the Tennessee Small Business Investment Company Credit Act. The law established a base of $120 million of insurance premium tax credits that six investment firms certified by the state can sell to insurance companies who then invest the proceeds into Tennessee small businesses.

Matt Kisber

Under the law, state Economic and Community Development Commission Matt Kisber and Revenue Commissioner Reagan Farr are given broad discretion to choose the six TNInvestco finalists.

Coleman’s firm, which by its own account has invested $63 million in Tennessee businesses over 26 years, was passed over in the TNInvestco process. Coleman’s suit seeks a variety of records that would shed light on how Kisber and Farr determined which investment firms – some of which were only formed in 2009 – would win the tax credits.

Among the records Coleman seeks are the matrices used by Kisber and Farr to rank the investment companies and the letters from the chosen TNInvestco’s showing they had commitments from insurance companies for at least $14 million.

According to court records, the state filed under seal this week:

• TNInvestco Evaluation matrices scored by Farr and Kisber.

• An example Tax Credit purchase agreement and side letter to the agreement.

• Settlement Statements.

• Sample of certificates of TNInvestco tax credits.

• Tax Credit memoranda.

• Letter of Understanding between the state and a TNInvestco.

The heart of Coleman’s suit is to determine whether or not Kisber and Farr followed Tennessee law in choosing the six lucky TNInvestcos.

In a lengthy affidavit, Farr said the information under seal constituted either “tax information” or “tax administration information” and therefore was exempt from the Open Records Act.

Reagan Farr

“In order to promote the type of open and frank discussions needed to formulate effective tax policies for the TNInvestco program, as well as to ensure the proper administration and execution of those policies, I am of the opinion that disclosure of the withheld documents would not be in the State’s best interests,” Farr states in his affidavit.

The TNInvestco program and the related law have already been the source of controversy and criticism.

The Tennessee Small Business Investment Company Credit Act was originally pushed by a St. Louis company called Advantage Capital which had similar programs up and running in other states. The law was sponsored in part by a cadre of state legislators with deep ties to the insurance business.

A Tennessee Watchdog investigation during the 2009 General Assembly showed key sponsors for the law Rep. Charles Sargent and Sen. Bill Ketron have ties to insurance companies that had participated in Advantage Capital’s programs in other states in the past.

However, Advantage has since publicly criticized the program and was not chosen to be one of the initial TNInvestcos. The company has retained lobbyists in an effort to have certain aspects of the law revisited.

In addition, there is a widely held perception due to comments by Farr and Kisber that they will seek to reopen the program and expand it to include to alternate investment companies. A caption bill sponsored by Sargent appears to be the vehicle for that move.

A hearing in the Coleman case is scheduled for February 16.

Legislative sources close to the effort to reopen the TNInvestco program say the pressure is building among Republican lawmakers to support the legislation.