It’s an investigation mired in politics.

But will the investigation into New Jersey’s beleaguered economic development authority lead to criminal charges?

The special governor’s task force investigating how billions in state tax incentives were handed out with apparently scant oversight has called into question more than $500 million in awards to firms. Some of those firms submitted false information in their applications, and others failed to comply with the terms of those awards, according to the task force.

The task force, in a report this week, revealed it has already obtained some voluntary terminations of awards, but has referred others to law enforcement agencies. It has said firms and individuals who lied to get lucrative tax breaks could face penalties.

“Obviously, these applications are submitted under penalties under the statute. If there is a representation that was made in the applications and it turns out that that representation was false, the grants are subject to suspension, termination, and recapture and there's a potential of criminal enforcement,” said task force special counsel Jim Walden, a former federal prosecutor, during a public hearing in May.

Pablo Quiñones, a member of the task force, also noted at that hearing that there was real criminal exposure for companies that lie to the state, depriving New Jersey of tax revenue.

“Federal law makes it a crime for anyone to use mail or interstate wires to devise a scheme to defraud, to obtain money or property by false or fraudulent representations,” Quiñones said. “Companies that lie to obtain tax breaks from New Jersey have hurt New Jersey’s economy, potentially committing a serious crime.”

The investigation of the New Jersey Economic Development Authority was launched by Democratic Gov. Phil Murphy in January, after a state comptroller’s report concluded that the agency may have “improperly awarded, miscalculated, overstated and overpaid” tax credits to a number of companies.

The task force appointed by the governor quickly focused on a number of businesses and other entities tied to South Jersey Democratic power broker George Norcross III, who went to court in a failed effort to shut down the investigation.

In its report, the task force concluded that legislation governing the state’s tax incentives was largely shaped by special interests, including a lawyer close to Norcross. And it said the EDA did not have adequate procedures in place to vet applications, including the ability to identify misstatements that would have led to the rejection of some applications.

Among the exhibits attached to the report was an email from the vice president of real estate and facilities for Cooper University Hospital — where Norcross serves as chairman —seeking information on the cost of office space in Pennsylvania as part of a submission for an award meant to encourage companies from moving out of state. That email specifically noted there was “no probability” of the hospital moving office workers to Philadelphia, which the task force said was an example of how the system was being rigged.

Cooper University Hospital in Camden. SJN

It noted that the EDA board approved Cooper Health for an almost $40 million award on December 9, 2014. According to the task force report, based on a recalculated net benefits analysis, the EDA concluded Cooper Health would have qualified for only a $7.15 million award, at most.

Cooper Health officials said they had done nothing wrong, had been asked to provide the out-of-state comp costs, and that the EDA knew they were not planning to leave the state.

Still, with tax incentive payments in the millions of dollars, anyone found guilty of deliberately cheating the state could face substantial legal jeopardy, said defense lawyer John A. Azzarello of Morristown, a former assistant U.S. attorney who specialized in public corruption cases.

“They could charge theft of state funds and they would definitely demand the return of funds through restitution,” Azzarello remarked. “If there is real exposure, the penalties could be significant for theft of state funds.”

The state has not been reluctant to bring criminal cases against those submitting bogus claims for public funds. Over the years, New Jersey has charged more than 125 people charged with diverting more than $8 million in relief funds earmarked for victims of Superstorm Sandy, according to the Attorney General’s office. Most of those cases involved the filing of fraudulent applications for federal relief funds in the wake of the destructive storm that slammed into state in 2012.

Yet it can be difficult to prove a crime was committed without establishing someone’s state of mind, said defense attorney Michael P. Koribanics of Clifton, a former Hudson County assistant prosecutor.

“How do you establish someone was not actually intending to move out of state when they applied?” he asked, referring specifically to allegations that firms might have misrepresented their intentions on EDA applications. Still, he said the question of fraud and public accountability could be serious in this investigation, especially if there were false applications for state money that were certified to be true.

Under federal statute, he said wire fraud is a crime that carries the potential for 20 years in prison.

The state Attorney General’s office said it has already opened its own investigation and the EDA has acknowledged receiving subpoenas in the case. However, there is little doubt that politics pervade the task force probe.

The investigation put in play by Murphy quickly targeted Norcross — a political rival to the governor — from the start. Both the governor and the powerful insurance executive have launched invectives at each other over the incentives and the task force. And the Legislature has been drawn in as well, with the key provisions of the tax incentive program set to expire at the end of the month. The Legislature is considering a bill to extend the deadline.

A spokesman for Norcross said in a statement earlier this week that he and others are cooperating the the Attorney General’s office. He did not respond on Wednesday to additional questions, nor did an attorney for Norcross.

Koribanics said the fact that there are political overtones does not take away from the possibility that criminal charges could be brought.

“It shines a light on the situation and people start paying attention to it. With the amount of money involved, it might be nothing or just the tip of the iceberg,” the defense attorney said.

But those political shadows will no doubt color what happens next, said Robert A. Mintz, former deputy chief of the Organized Crime Strike Force of the U.S. Attorney’s Office in New Jersey and now a criminal defense attorney at McCarter & English in Newark.

“Given the highly charged political climate in which this process is all playing out, it seems likely that any resolution will be more of a political issue rather than a criminal one,” said Mintz. “It would take clear proof of knowingly false and material statements before this conduct could cross over into potential criminal activity.”

Ted Sherman may be reached at tsherman@njadvancemedia.com. Follow him on Twitter @TedShermanSL. Facebook: @TedSherman.reporter. Find NJ.com on Facebook.

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