By Carol D. Leonnig
Washington Post Staff Writer
Thursday, December 31, 2009; A03
FORD CITY, PA. -- In 2005, Rep. John P. Murtha announced here that a technology firm was moving into an abandoned plate glass factory. Best of all, he promised, the new firm would generate 140 jobs.
The Pennsylvania Democrat steered $150 million in defense money to Caracal Inc., along with a $3 million grant for factory renovations. "Today's ribbon-cutting ceremony is yet another indication that our investment in this region's economic revitalization is paying off," he said that day. But Caracal never created the jobs the congressman touted. The firm peaked at 10 employees and then folded in early 2008. Once its Murtha-engineered Navy contracts ended, the company could not survive.
Murtha, 78, the chairman of the House Appropriations defense subcommittee, has been dubbed the "King of Pork" because he is the House member with the most requests for earmarks, funding added by lawmakers without going through normal reviews. Murtha has defended the practice as a way to create jobs in this hard-hit former coal-mining region.
"Let me tell you: We look at jobs. How do we attract jobs?" he said. A Washington Post analysis of Murtha's earmarks, however, shows that his job promises often come up short. Of 16 local companies the congressman has helped win federal earmarks, 10 have generated far fewer jobs than forecast, and half of those already have closed operations in his district. Murtha's strategy yielded some successes too. Four firms have expanded dramatically with the aid of earmarks, notably Concurrent Technologies Corp., which after more than a dozen years of earmarks has grown to employ 800 in Johnstown and now wins competitively bid contracts.
The Post analysis illustrates the fleeting success of some of the companies backed by earmarks. Some of the jobs generated by Murtha's earmarks cost about $2 million each, and scores disappeared as soon as projects were completed.
Peter Fiske, a former defense executive in Murtha's district, said awarding earmarks to fledgling companies often backfires, a problem that might be avoided with a more rigorous assessment of project risks. Fiske helped found RAPT Industries, a company that Murtha forecast would generate 45 new jobs. It shuttered its four-person office this year.
"If you looked at Congressman Murtha's efforts in the same way you look at an investor's efforts, it's easy to see that the business model originally conceived hasn't really panned out in terms of its rate of return, " Fiske said.Stagnant joblessness
Murtha's office said that all new businesses have a high failure rate and that it is natural for him to be optimistic in the early days of a startup.
"Have we seen startup companies offer a good product only to fail in the end? Unfortunately, yes. But, we've seen a far greater number of companies come to western Pennsylvania and find success, illustrated by the fact that today our local unemployment rate is below the national average," spokesman Matthew Mazonkey said.
In October, the national jobless rate hovered around 10 percent, while the nine counties in Murtha's mountainous central Pennsylvania district reported unemployment of 7.7 to 10.6 percent.
For all the billions in federal contracts the congressman has steered to the region in the past 10 years, now at a rate of $100 million a year, joblessness in his distressed district has not improved. In six of the nine counties in his district, the unemployment rate rose or did not budge, from 1998 to 2008, according to state employment records.
Steve Ellis, vice president of Taxpayers for Common Sense, said members of Congress in economically depressed areas, such as rural Pennsylvania, West Virginia and Mississippi, have tried for years to use earmarks to generate new industry. But he contends the money is wasted because those areas are still left with some of the lowest household incomes and highest unemployment rates in the nation.
"This method continues to fail everywhere it is tried," Ellis said. "Just throwing as much money as possible at your community, or strong-arming larger defense contractors into moving into the area, isn't a sustainable business model, because some day Representative Murtha isn't going to be chairman anymore."
In the Johnstown area, nearly everyone credits Murtha with revitalizing the region after its coal mines and steel mills began shutting down in the 1980s.
"We wouldn't have anything around here if it weren't for Jack Murtha," said Don Bowen, a Windber retiree.
The congressman's earmarks have come under review by the Justice Department, which is investigating a lobbying firm, the PMA Group, that had unusual success in obtaining defense earmarks. Earlier this month, a congressional ethics office closed its preliminary review of Murtha's relationship with PMA and recommended that the House ethics committee need take no further action.Shuttered firms
Murtha's focus on jobs intensified in 1990, when he squeaked by in the primary election. His opponent stressed that Murtha's Washington clout had not translated into economic growth back home.
After that, Murtha used his seat on the House Appropriations defense subcommittee to push the Navy to create an electro-optics research center under the auspices of Penn State University. Murtha began it in 1999 with a $20 million earmark.
In early 2005, Caracal was among the first tenants of a technology park linked to the new Electro-Optics Center in Armstrong County. Murtha announced that September that the silicon manufacturer would receive a $1 million research contract. He said the company had brought 10 jobs to the region and would grow to 140 employees.
Another $1 million grant followed the next year. But in 2008, the Navy cut back on research funding.
"Our commercial product sales were not enough for us to stay in operation," Caracal chief executive Andrew Chomos said then. "The U.S. Navy was 90 percent of our customer base."
Several business people, including former EOC staff members, have complained about the dependence of the center and its corporate partners on Murtha-generated funding.
Kelvin Lynn, a co-founder of an Arizona research firm that considered working with the center, withdrew out of concern that his firm could not survive by relying on Murtha earmarks. He told the Pittsburgh Post-Gazette that the center was "making jobs that aren't going to be around as soon as Murtha steps down."
At a 2006 trade show, Murtha said that the EOC probably would generate 400 jobs and cited firms that had located nearby to tap into the EOC's expertise: Boeing, RAPT Industries, Sabeus Sensor Systems, DRS, Analux and Caracal.
Today, three of those companies are gone. Caracal and RAPT Industries folded. DRS closed its 23-employee operation this year, offering to transfer some workers to a Johnstown plant 50 miles away.
Together, Boeing, Sabeus and Analux now employ 32 people there, state records show.Taxpayer expense
Even when Murtha had not directed earmarks to specific companies, he predicted they would usher in more hiring for his constituents.
In 2005, he thanked General Kinetics Inc. for bringing its headquarters to Johnstown, "an exciting development for our local economy." Behind the scenes, company executives and Murtha's staff knew the company was struggling and closing its Virginia headquarters to cut costs.
At the conference, Murtha likened GKI to another company, DRS Laurel, which had moved to Johnstown with a few workers in the 1990s and grew to 700: "We expect you to be employing a couple thousand people here in a few years, " he said.
The next year, GKI cut its workforce in half. It filed for bankruptcy in February 2007.
Some jobs created by Murtha earmarks have come at great taxpayer expense. The public has invested about $1 million per job to boost employment at a MobilVox facility in his district. Murtha joined MobilVox executives in the spring of 2004 when they announced the company was opening in Indiana, Pa., and creating eight to 10 jobs. Months later, MobilVox received the first of $8 million in earmarks.
At Planning Systems Inc. in Uniontown, Pa., taxpayers spent about $7 million in earmarks to generate four jobs. Matt Warnock, an official at the company that is now a subsidiary of British defense giant QinetiQ, said they believe Murtha "knows what he is doing" for his district.
Warnock added that the dollar amount does not take in account the troops whose lives may be saved by research.
"I think if you asked a mother whose son got to come home because of a product or technology our four employees developed in that office, I think she would say yes, it's worth it."
Research editor Alice Crites contributed to this report.