ST. CHARLES, Mo. (AP) — A man who persuaded a rural Missouri town and the state to invest millions in bonds and incentives for an artificial sweetener plant that never materialized pleaded guilty Tuesday to three felony charges.
Bruce Cole is set to be sentenced Nov. 3 after pleading guilty to two counts of securities fraud and one count of theft; prosecutors dropped two of the four fraud counts originally filed in 2012. His trial had been scheduled to start in December in St. Charles County on a change-of-venue request.
Under the plea agreement, Cole faces five to seven years in prison.
Cole, 67, was the chief executive officer of Mamtek U.S. Inc., a company Cole formed to produce artificial sweetener. He convinced the small city of Moberly in 2010 to issue $39 million in bonds for a sweetener plant that Cole said would employ 600. The state authorized up to $17 million in incentives.
The plant never materialized, as the plan collapsed financially before construction finished. Mamtek defaulted on the debt in August 2011 and Moberly defaulted on its bonds. The state never paid any of its incentives because the project failed before the company met the aid criteria.
Attorney General Chris Koster, who filed the initial charges two years ago and handled Tuesday's hearing, said that rural municipal governments need to be wary of economic offers.
"Shysters are going to come through the door just like good businessmen are going to come through that door. The city of Moberly was taken advantage of but it is a reminder for municipal governments all over the state to do the due diligence that is required of any big investment like this."
Cole and his attorney, Raymond Legg, left the courtroom without commenting. Circuit Judge David Pelikan allowed Cole to remain free on bond, but denied a request to remove the ankle bracelet that monitors his movement.
Messages seeking comment from the mayor and city manager of Moberly, a north-central Missouri town of 14,000 residents, were not returned.
When Gov. Jay Nixon announced in July 2010 that Mamtek had chosen the Missouri site for the plant after competition from 12 states, the mood was celebratory in Moberly. Mamtek said at the time it had developed proprietary technology and began manufacturing sucralose, an artificial sweetener, in China.
An investigation eventually determined that Mamtek's only other facility, in Fujian Province, China, was not producing artificial sweetener and, in fact, had been shut down by the Chinese government.
The state filed charges in 2012, accusing Cole of directing a consultant to submit an invoice for more than $4 million to Mamtek for purported engineering-related services by a sham company called Ramwell Industrial Inc. And immediately after Mamtek received the bond revenues in July 2010, the state said Cole instructed the company's bookkeeper to wire $700,000 to his wife's personal bank account. Nanette Cole then allegedly used part of the money to make a mortgage payment on their Beverly Hills, California, home. Nanette Cole was not charged.
The fraud counts were for making false statements to induce investors.
In addition to the criminal case, there are four additional cases involving Mamtek in federal bankruptcy court, along with several lawsuits filed by corporate and individual investors.
In a bankruptcy case last month, a federal judge ruled that Bruce Cole committed fraud. U.S. District Judge Nanette Laughrey ordered Cole and his wife to repay $904,167 that had been transferred to their personal accounts and $360,000 sent overseas to creditors.
Meanwhile, Cole faces a civil lawsuit from the federal Securities and Exchange Commission.
Koster said most of the investors who lost money on Mamtek were "high net-worth individuals, but that doesn't make it any less onerous, the crime that was committed."
Asked if the suggested sentence was appropriate, Koster said, "A better outcome would have been getting the money back for the investors ... We were unable to do that because the money is gone ... but this is an appropriate resolution to the case."