Governor Mitt Romney's tax agency last year shelved a sharply critical report on an economic development program for ''blighted" properties that had awarded a $1 million tax credit to a wealthy company headed by Lieutenant Governor Kerry Healey's husband.
The commissioner of the Department of Revenue, Alan LeBovidge, filed the nine-page report with the Legislature on Oct. 1.
But LeBovidge unexpectedly withdrew it five days later, saying in a letter that he had ''inadvertently presented" what he described as ''a draft document."
The Department of Revenue report, which was made available to the Globe, may present a political problem for Kerry Healey as she prepares for a possible campaign for governor in 2006.
Since May, Healey's husband, Sean M. Healey, has netted $13 million by cashing in stock options in his firm,
The Department of Revenue report confirmed many of the criticisms outlined last year by Inspector General Gregory Sullivan, who said the tax credits, including those to Affiliated Managers Group, had been ''handed out as favors" to companies and should be returned to the state.
The Department of Revenue report did not single out Healey's company, but questioned whether the credits should go to developers of individual parcels, such as the one developed by Healey's firm.
It said the tax credits are meant to encourage development of entire neighborhoods or regions that are designated as blighted or decadent.
Nothing in the department's report indicated that it was a draft, despite LeBovidge's assertion.
In an interview, LeBovidge said that staff members of Romney's Executive Office of Economic Affairs, which oversees the tax credit program, had contacted his office after he submitted the report in October. But he insisted that he had not been not pressured by superiors in the administration to pull back the report.
''They talked to my staff," LeBovidge said, declining to identify who contacted him.
He said that they did not object to his critical conclusions, but that they wanted a broader discussion of reforming the tax credit program. ''They were not concerned with what we were doing, but the legislation was too cumbersome," he said.
Affiliated Managers Group, an asset management firm that manages billions of dollars, received a $1-million tax credit for developing a single, 88-acre estate in Beverly's Prides Crossing neighborhood as its headquarters. The tax credit was awarded two years before Kerry Healey became lieutenant governor.
Sean Healey is president and chief executive officer of the firm. The chief financial officer and executive vice president is Darrell W. Crate, whom Romney picked as chairman of the state Republican Party in 2003. Governor William F. Weld, who created the tax incentive program in 1993, sat on the Affiliated Managers Group board from 1998 to 2004.
In an interview, Crate strongly defended the Affiliated Managers Group's tax credit, saying that it had been awarded in ''full compliance of the law" and that it had generated a significant number of jobs in Beverly. He also said the availability of the tax credit figured into the company's decision to relocate to the parcel.
''This swayed us," he said. ''It was part of the constellation of factors that went into our decision."
Crate also rejected Sullivan's demand that the company return the tax credit. He said that political connections had played no role in the administration's dismissal of the inspector general's call for a reimbursement of the tax credit or the delay of the Department of Revenue report.
''There is no reason we should be unfairly penalized because we are in public service," Crate said.
Through an aide, Kerry Healey declined last week to respond to Sullivan's demands that the state seek a return of the $1 million tax credit. The aide indicated that Healey was waiting for the final Department of Revenue report.
''We do not have any comment until the final report is issued in the next couple of weeks," said Julie Teer, the Romney administration's press secretary.
A month after Sullivan's report, the state Economic Assistance Coordinating Council issued a spirited defense of the project, asserting that Sullivan's report contained ''inaccurate, incomplete, and misleading information" and that he had ''unfairly and without factual and legal support" criticized the Affiliated Managers Group project and a separate tax credit to Manulife, in South Boston's Seaport district.
That state report called the Affiliated Managers Group project an ''unqualified success."
Nonetheless, Sullivan renewed his call for the Department of Revenue to revoke $10.5 million in ''questionable" credits.
''The report that LeBovidge submitted made it clear that these are illegal tax breaks and the money should be paid back," said Sullivan, who added that he had not seen the report until the Globe asked him about the findings.
A key component of the program is a 5 percent state corporate tax credit, which Affiliated Managers Group received. It also got a property tax break from Beverly.
Based on the company's application and the city of Beverly's support, the state's Economic Assistance Coordinating Council had declared the estate a decadent area, although it is in one of the state's wealthiest neighborhoods. It had been owned by the late William Loeb, the publisher of the Union Leader of Manchester. His mansion burned down in 1987; the land has been vacant since.
The recently discovered Department of Revenue report agreed with Sullivan's very sharp criticism that certain tax credit projects do not meet the legal criteria for the program, designed to attract firms to locate in an ''open blighted area" or a ''distressed area" that cannot be developed without tax incentives.
Seizing on the practice of giving tax breaks to developers of individual parcels, the Department of Revenue report said: ''It is not clear that [a parcel-specific] designation is acting as an incentive to attract development."
It said a designation should include at least several properties, to meet the intent of the law. The report states further that a parcel-specific designation ''may instead be a benefit that a developer seeks when it already has a specific parcel and project in mind." Affiliated Managers Group was well into completing its development in 2001 when it got its tax credit.
LeBovidge told the Globe this month that the Revenue Department would release a final report on the tax credit program shortly. Last Nov. 9, he told legislators that it would be ready in six to nine months; that deadline passed last month. LeBovidge said his agency received an extension of time from the Legislature because more time was needed to work on the study.
Renee Fry, undersecretary of economic development and cochairwoman of the economic council administering the tax credit program, did not reply directly when asked whether she or others in her office were aware of the initial report and if any staff members had contacted the Department of Revenue about it.
''All I know is that we are still waiting for that report," Fry said. Fry was not on the Economic Assistance Coordinating Council when the tax credit was given to Affiliated Managers Group under the administration of Acting Governor Jane Swift.
''This project is a success story," Fry said. ''As of June 30, 2004, it created 51 jobs, 21 more than the company had projected. The project has already exceeded its job commitment by 70 percent in just three years."