Year in review: BHSI scandal leaves impact

File photo The failed BHSI plant was supposed to create more than 300 new jobs for the area.

File photo
The failed BHSI plant was supposed to create more than 300 new jobs for the area.

By Robin Fornoff
CMI Projects editor
rfornoff@cnjonline.com

Two years and more than $2 million later, Clovis is still counting the losses from its decision to fund a startup business that never got started.

The failed Beauty Health and Science Innovations (BHSI) cosmetics plant and the ensuing scandal was easily the story of 2013, as selected by CNJ staff. The city’s own private investigators concluded in November that it all could have been avoided had just one person stood up and demanded rules and laws that were in place be followed.

“Once the money was distributed,” the investigators noted, “any meaningful recovery was simply unlikely.”

BHSI was supposed to create more than 300 new jobs. Lured by the promise, city officials decided in December 2011 to cut checks to its CEO Brian Sperber totaling $1.8 million in forgivable loans.

It was all supposed to be secured with property liens, according to Clovis Industrial Development Corporation Executive Director Chase Gentry, who helped broker the deal. If anything went wrong, Clovis would have first crack at assets worth more than twice what it had invested, Gentry insisted.

When it started to collapse seven months later, the city found itself holding paper on a shuttered plant in California and second in line behind the former owners of a building in Clovis filled with dilapidated equipment that couldn’t produce a marketable product.

Sperber’s whereabouts are unknown, though his lawyers have said he is now living in Guatemala.

It all started in the fall of 2011 with a kickoff at the Clovis/Curry County Chamber of Commerce attended by a who’s who of the city and county. The city would offer up to $3 million in forgivable loans to Sperber, said Gentry, then-Mayor Gayla Brumfield and others. In return, BHSI would create at least 325 jobs paying above-average wages for the area.

Not noted was BHSI was a startup and the city was fronting the money to a man with questionable credit.

Investigators found city officials didn’t run a credit check on Sperber until the day after the City Commission voted to go forward with the deal.

Investigators would later call Sperber’s credit issues — payments past due by months, collections and unverified income and assets — “serious concerns.”

“We learned of no verification or even due diligence by CIDC centering on the actual existence of these assets,” concluded the investigative report drafted by attorneys with the Underwood Law Firm of Amarillo.

The Underwood Report, a compilation of the investigation, criticized Brumfield, City Manager Joe Thomas and the city’s Economic Development Tax Advisory Board (EDTAB) as culpable and contributing to the disastrous deal.

Thomas was criticized for characterizing the credit issues as “bumps” that could be worked out.

Brumfield was blamed for failing to notify the Clovis City Commission about Sperber’s questionable credit or EDTAB’s failure to investigate Sperber’s credit. Brumfield has disputed the charges, noting she was out of town when the credit issue arose and wasn’t made aware of it until two days after problems were discovered.

Brumfield said she relied on recommendations from CIDC board members to move forward with the deal. She also said that while EDTAB was charged by city ordinance with investigating all such economic deals, the board had delegated that responsibility to CIDC in 2007 at Gentry’s request.

“The assertion that the CIDC owed no statutory, legal or contractual obligation to perform due diligence on behalf of the City of Clovis is simply false,” Brumfield’s attorney Randy Knudson recently noted in a letter to the city.

EDTAB took the brunt of the blame. The Underwood investigators pointed out that only EDTAB was charged by city ordinance with vetting such deals.

Collateral damage from the failed deal still haunts the city.

Private businesses are owed thousands for work at the former Froz Fruit building Sperber was to convert into BHSI. City Commissioner Robert Sandoval is facing a possible recall election; Jose Griego is circulating a petition to recall Sandoval for his role in the loss of taxpayer dollars.

The political fallout started earlier this month with Brumfield accusing Mayor David Lansford of interfering with the Underwood investigation and trying to turn it into a witch hunt. Through Knudson, Brumfield said the Underwood Report was filled with errors and demanded the city retract and correct statements about her.

Lansford and the city commission have yet to respond.