The lengthy dispute between the state of Georgia and a Texas-based auction firm over as much as $100 million suddenly seems destined for a courtroom showdown — and a new headache for Gov. Nathan Deal — after years of legal gridlock.
The firm, Copart, bought a salvage yard co-owned by the governor amid a years-long battle with the state over as much as $74 million in back taxes. The dispute, which became public days after Deal's attorney announced the sale in July 2013, dogged Deal last year throughout his re-election campaign.
The stalemate, though, seems to be closer to an end. The company recently disclosed in a regulatory filing that state officials told it in June that it will be assessed a $100 million fee, a figure which includes interest. Copart said it intended to immediately appeal the assessment to the Georgia Tax Tribunal.
That process is tricky territory for Deal. He has said he wants an independent jurist to settle the dispute, but his recent appointee as chief judge on the tax tribunal, former Republican state Rep. Larry O'Neal, is a longtime political ally.
Department of Revenue officials declined to comment on the matter. Deal’s office confirmed Tuesday that it doesn’t want the case to go before an executive agency or a Deal appointee. That will likely force O’Neal to recuse himself from the case, leaving a Georgia Supreme Court justice to appoint a new judge to oversee the matter. If O’Neal doesn’t withdraw from the case, Deal’s critics will accuse the governor of interfering with it.
“Taxpayers deserve to know whether or not Copart received special treatment because of the company’s financial relationship with Governor Deal,” said Bryan Long, the head of Better Georgia, a left-leaning advocacy group that has been among Deal’s loudest critics. “But, sadly, even as Copart continues to refuse to pay what it owes, the process is shrouded in secrecy.”
Copart declined to comment for this story.
The salvage yard has dogged Deal for years. Deal and his business partner, Ken Cronan, once held a lucrative no-bid agreement with the state to provide space for state employees to inspect rebuilt salvaged cars. The Atlanta Journal-Constitution reported in 2009 that Deal, then a congressman, intervened with state officials who wanted to open the program to more locations.
The story led to an ethics complaint and a congressional investigation. Deal resigned from Congress in March 2010 before the House Ethics Committee could move forward, saying he wanted to devote himself full-time to the governor's race. After he was elected, he put the business in a blind trust.
With an election looming in 2013, Deal and Cronan sold the salvage yard to Copart and netted about $3.2 million each. Copart, meanwhile, continued to pledge in Securities Exchange Commission filings that it would fight the "ambiguous" state rules involving the dispute, which centered on whether parts sales to international resellers are subject to Georgia's sales tax.
Copart’s tune changed in its most recent filing. Instead of vaguer warnings, it said it was now bracing for an “expensive and time-consuming” legal fight that could “result in substantial management distraction.”
“We believe we have strong defenses to the DOR’s notice of assessment, if issued, and intend to defend this matter,” it said. “There can be no assurance that this matter will be resolved in our favor, however, or that we will not ultimately be required to make a substantial payment to the Georgia DOR.”
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