CHICAGO — Indiana has filed a securities fraud complaint against Chrysler LLC related to the issuance of $14 million of tax-exempt revenue bonds for a proposed transmission plant whose financing has since collapsed.

The $530 million plant, located in Tipton County was a joint venture between Chrysler and German transmission maker Getrag Transmission LLC. Tipton officials agreed to issue tax-exempt bonds to finance water and waste infrastructure projects as well as set up a tax-increment financing district around the plant to supplement financing of the deal.

But just a day after the county issued the bonds in late 2008, Chrysler informed Getrag it could not provide the guarantees necessary for Getrag to secure the remaining funds for the project, and the deal collapsed. The two parties headed to court, suing each other for breach of contract. In November Getrag filed for Chapter 11 bankruptcy.

Indiana Secretary of State Todd Rokita began investigating the case in January and last week filed a complaint with the Indiana Securities Commission alleging that Chrysler allowed the county to issue the bonds without informing officials that it had failed to reach a complete agreement with Getrag.

“Our accusation is that Chrysler had material information that they were not going to issue the guarantee to Getrag, and they withheld that information when that would have affected the bond issue,” said Jeffery Bush, chief deputy securities commissioner with the secretary of state.

Despite the collapsed deal, the security on most of the bonds — all of which were privately placed — protects the county from having to make debt payments. Of the $14.1 million sold, Chrysler and Getrag purchased $11 million, and Harris Bank bought the remaining $3.1 million.

The debt is backed by a pledge of property tax revenue generated in the TIF district, which essentially is the footprint of the transmission plant.

Of the $14 million, $11 million is solely backed by the TIF pledge so if revenue is short, the county has no obligation to repay the debt. But he $3.1 million series features an additional property tax pledge from the county, and the county could be forced to make those payments, according to a source familiar with the situation.

The relatively weak security — making the bonds unmarketable to the public — is rather common for bonds privately placed with automobile-related companies in Indiana, the source said. The companies may be reluctant to provide a strong pledge to back up the tax-exempt bonds but they are willing to agree to purchase the bonds.

But the county is still expected to take a blow from the collapsed deal. The plant is only 80% finished and is still vacant. The vow of 1,200 new jobs for the struggling area appears dim.

Getrag technically owns the plant but as it moves through bankruptcy it’s unclear whether it will be able to make any property tax payments. And because the county already issued TIF bonds on the property, it cannot issue any additional bonds for the plant — making it difficult to attract another company.

The state is seeking an undetermined amount of money as an administrative fine and restitution to Tipton County for the bonds and its cost of issuance.

Chrysler recently offered to transfer its $5.5 million of bonds back to the county, but Tipton officials rejected the offer. A hearing is scheduled for June 24 on the matter.

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