The money was for energy projects and tax credits created by the 2009 stimulus law. How Hagan's husband won stimulus cash

When Kay Hagan voted for President Barack Obama’s 2009 economic stimulus package, the Democratic senator hailed it as “the best way forward for working families across North Carolina.”

One of the families that later benefited is her own.


JDC Manufacturing, a company co-owned by the Democratic senator’s husband, Chip, received nearly $390,000 in federal grants for energy projects and tax credits created by the 2009 stimulus law, according to public records and information provided by the company.

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Hagan’s GOP opponent, statehouse Speaker Thom Tillis, voted in 2010 to allow the state to participate in the federal renewable energy tax credit program, which benefited a bank in which he owns at least $50,000 in stock.

Hagan and Tillis denied acting improperly.

The two are locked in one of the nation’s most important Senate contests this fall, and how they dealt with the $767 billion stimulus package — one of the most far-reaching laws enacted since Obama took office — is among a litany of issues being litigated in the race.

Approached about the matter last week on Capitol Hill, Hagan referred questions to her office.

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Financial disclosure statements show that the Hagans’ income from JDC Manufacturing increased from less than $201 in 2008 to nearly $134,000 in 2013. Company representatives said higher rental income account for the uptick, not the stimulus-funded projects that were completed during that span.

In statement to POLITICO, the Hagan campaign said the senator did not help her husband win the federal funding and disputed any suggestion they have profited off the law.

Once she learned of her husband’s dealings, Hagan never involved herself in his efforts to obtain the stimulus grants, her campaign said. She consulted with veteran Democratic attorney Marc Elias over the matter, according to spokeswoman Sadie Weiner.

“Kay is not involved in her husband’s business and had no part in helping JDC apply for or receive these grants,” Weiner said. “Her only involvement was when she made sure that a respected ethics attorney was consulted to ensure that it was appropriate, and the attorney found that it was.”

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Senate rules give senators significant leeway in voting for legislation that could benefit them financially, as long as a wider class of investors is affected. They must recuse themselves only if a narrowly targeted bill would specifically benefit a limited class of people that includes the senators themselves. Spouses of senators may enter into contracts with the government so long as improper influence is not exerted by the lawmaker.

Legal experts said there’s nothing improper about Hagan’s actions if the senator, as she says, removed herself from the process of securing the stimulus money. But some argue it spotlights a serious weakness in the ethics rules.

“It simply raises once again the clear problem that the current recusal system ill serves the senators and the members because it leaves too much gray area,” said Meredith McGehee, policy director at the Campaign Legal Center, a watchdog group.

The stimulus package was one of Hagan’s first votes after the former state senator defeated Republican Elizabeth Dole to win her seat in 2008. It passed on a mostly party-line vote, with Republicans decrying it as a big government giveaway and Democrats arguing it would stabilize a cratering U.S. economy. After the vote, Hagan made a strong defense for the program.

“There’s a lot of renewable energy-generating capacity in the stimulus package,” Hagan told The Shelby Star, a North Carolina newspaper, weeks after she cast her vote. “We’re hoping to create enough renewable energy to power 6 million American homes — obviously, that’s not all in North Carolina. This Legislature is going to deliver on our simple promise to change the way things work in Washington, and it’s going to be for those working families and not the special interest.”

In 2012, the Center for Responsive Politics ranked Hagan the ninth-wealthiest senator. She now has a minimum net worth of $9.1 million, according to her most recent financial disclosure reports, though it could be far higher because assets and liabilities are reported in broad ranges. Her husband, Chip, is a partner at a Greensboro law firm but has other business interests, including owning one-third of JDC Manufacturing with his two brothers, John and David Hagan.

In 2010, as the stimulus law was being implemented and money was being doled out, the company learned from one of its contractors that for-profit companies had just become eligible for federal energy efficiency grants, according to information provided by Hagan’s firm. It was a ripe opportunity for JDC Manufacturing, which is a holding company and is leasing space in its Reidsville, N.C., facility to a plastics recycling company, Plastics Revolutions Inc. Company officials said its equipment needed to be modernized.

The plastics recycling company is owned by John Hagan, while Chip Hagan serves on its board of directors. It was undergoing a two-phase improvement project to install more efficient lighting, replace furnaces and installing solar panels on the roof — at a projected cost of $438,000. The company was one of 27 in North Carolina to be awarded funds for energy efficient projects, to the tune of about $250,644.

The company received the money in 2011, after the first phase of the project was completed in late 2010. An additional $137,000 in federal energy tax credits created by the stimulus was awarded to Chip Hagan’s company as well, according to information provided by the company.

JDC Manufacturing also received $50,000 in Agriculture Department funding in 2012 through a program that was part of the 2008 farm bill.

At the same time, the Hagans reported the increase in income from JDC Manufacturing, according to public records.

The firm said the reason for the income spike was a change in its rental agreement with Plastics Revolution; its monthly rent went from roughly $23,000 in 2006 to nearly $47,000 in 2013 to bring the rate in line with market prices. The rest of the income, company officials said, came from refinancing its mortgage.

Caitlin Legacki, a former Democratic operative and now a spokeswoman for the company, said that JDC Manufacturing agreed to charge the plastics company a below-market rate in 2006 in order to allow the firm to invest in additional equipment, saying the plan had been to raise the rent in 2011 all along. She said the company was required to pay for the entirety of the project upfront and that the stimulus money reimbursed a portion of it.

“At no point did the energy efficiency upgrades have any bearing on the rent increases or business terms between” the two companies, Legacki said.

Company minutes provided to POLITICO show the Hagan brothers approving the decision to raise the rent in November 2011.

Elias, the Democratic attorney, informed Hagan that her husband’s move to obtain the grants would not be a conflict of interest under Senate ethics rules. Hagan campaign aides said the senator had no advance knowledge that the stimulus package would eventually benefit his firm when she voted to enact it.

“There was no need to go to the Ethics Committee because this wasn’t even close to the line of the rules,” Elias said in an interview.

Tillis benefited from the stimulus bill in a more indirect manner. He owns $50,000 to $100,000 in “founders investment private stock” in Aquesta Bank in Cornelius, N.C., according to his financial disclosure form. Tillis also has two loans from Aquesta worth between $30,000 to $100,000.

Aquesta specializes in projects that receive government tax credits, according to company officials, including some credits created by the stimulus package.

For instance, in 2011 Aquesta financed a solar farm built by a company, 02 Energies. Aquesta loaned O2 Energies $3 million for the project. The project also received $1.375 million in federal renewable energy tax credits under the stimulus program. A Tillis spokesman said that the GOP candidate has no control over Aquesta’s day-to-day operations or what projects it invests in.

In addition, Tillis voted to support North Carolina’s use of renewable energy tax credits from the federal stimulus bill.

Tillis states on his campaign website that he strongly opposes government intervention in the marketplace, decrying “big government handouts and bailouts.

However, a Tillis campaign official said that the GOP challenger’s opposition to government involvement in the private sector is not total. Spokesman Daniel Keylin noted that Tillis supports incentives for the film industry in North Carolina, as well as other business incentives.

“Thom Tillis believes that tax incentives and tax credits should be evaluated on a case-by-case basis based on their potential impact on taxpayers and their potential for job creation,” Keylin said. “His position is not blanket opposition or support for these types of programs but, rather, a case-by-case evaluation process.”