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nwitimes.com on Saturday, November 11, 2006 12:11 AM CST

McDermott denies federal investigation

BY SUSAN BROWN
sbrown@nwitimes.com
219.836.3780

HAMMOND | Representing Mayor Thomas McDermott Jr. and his family, attorney Kevin Smith on Friday denied federal authorities are investigating the family's role in the deal that landed a Cabela's sporting goods store in Hammond.

The allegations first surfaced Nov. 4 in a blog belonging to Maurice Eisenstein, a political science professor at Purdue University Calumet.

In the blog, Eisenstein reported two sources confirmed the McDermott family is being investigated by a grand jury for the Cabela's deal.

"We are in the process of determining all of the mayor's and his family's legal options regarding the defamatory remarks that are categorically false," Smith said. "It's our opinion these comments are made intentionally, with malice and no regard to the truth."

Smith said to his knowledge, neither the mayor, his family nor anyone else related to the Cabela's deal had received any subpoenas or requests for information from any grand jury or the U.S. attorney's office.

While Cabela's officials were not available for comment Friday, Smith said the same went for Cabela's.

"Cabela's is a family-owned corporation that deals 100 percent above board and responsibly," he said. "To even make innuendoes (otherwise) is irresponsible."

The U.S. attorney's office did not return calls Friday, but earlier in the week the office's spokeswoman, Mary Hatton, said the office could not comment.

Eisenstein said his sources had not indicated it was a federal grand jury that was hearing the case.

The source also did not address whether the grand jury was convened or at what stage, he said.

Eisenstein called the credibility of his source "impeccable."

Eisenstein said his blog did not say who was being investigated.

"Their threat to sue I find fatuous," he said. "The problem (with Cabela's) has been raised by many people, and he never answered any accusations about it."

McDermott has threatened to sue Eisenstein and others before, Eisenstein said.

"I'm sorry he's using this tactic to shut people down," Eisenstein said. "That's the way he operates."

MONDAY, NOVEMBER 06, 2006 9:20 AM

Retailer Cabela's hunting for incentives

BY KYLE STOCK

In June, lawmakers in Columbia tailored and sold a suit of incentives custom fit for Cabela's Inc., a Nebraska-based retailer with a catalog empire and 18 stores nationwide that is weighing a location for North Charleston.

It wasn't exactly a camouflage outfit, but it was delivered in a stealthy manner.

Tourism interests were pretty excited, including North Charleston Mayor Keith Summey, who envisioned a steady stream of out-of-towners flocking to the proposed store and filling nearby hotel rooms. After all, the legislation specified a huge $25 million property, including a waterfall and a giant aquarium, and was contingent on Cabela's delivering 700,000 out-of-towners a year.

However, local retailers - mainly fishing and hunting stores - were less excited. Where lawmakers saw a waterfall, they saw a tide of their tax dollars subsidizing the competition.

Also, a lot of folks doubted that a Cabela's in North Charleston would draw tourists who would not have come otherwise.

So I wasn't surprised a couple of weeks ago to learn that Cabela's is playing some incentive hardball with Kentucky. I received an anonymous fax of a September e-mail from a Cabela's executive telling an unnamed person that the retailer was no longer looking to build a store in the Bluegrass state.

The author - a person in "new store development" named Barbara Wynkoop - noted that Kentucky lawmakers had turned down Cabela's request for so-called NEXUS status, which would have exempted the company from levying state sales taxes on catalog orders from Kentucky residents, even if it built a store in the state.

"In order to be profitable in any state, we feel that receiving these tax incentives are absolutely necessary," Wynkoop wrote.

Cabela's recently threatened to pull out of a Maine project for the same reason, drawing the ire of L.L. Bean, which does not enjoy such privileges. Last week Cabela's said it would go ahead with that project without the sales tax exemption.

When asked about Wynkoop's e-mail, Cabela's officials said in a short written response that the company presently had no plans to build a store in Kentucky, but that it might if it found the right location and "an appropriate partnership."

Kentucky's Commerce Cabinet admitted they were "hot and heavy" with Cabela's earlier this year when the Legislature was in session, but dialogue had become less frequent, and no doubt more chaste, in recent months, after lawmakers killed a package of incentives crafted for the retailer.

The deal-sweetener was tacked onto a more controversial measure, which was "allowed to die a natural death," according to George Ward, secretary of the cabinet.

Ward is convinced that a Cabela's store, with its elaborate displays and seminars on fly-fishing and hunter safety, would be a huge visitor draw.

"In Dundee, Michigan, they call it the state's largest tourism attraction," Ward said. "Every year I drive past it (to visit family), there's just one more business there - a restaurant or a hotel. Now they're building a water park."

Cabela's posted a $72.6 million profit last year, while its income has increased by an average of 14 percent in each of the past five years. But part of that growth has nothing to do with selling rods, guns and camping gear. At the end of 2005, the company had $16.6 million in grants from governments around the country that it could keep if it lived up to certain promises.

One of the company's financing strategies is to buy a heap of bonds from local governments, the proceeds of which are then used to build its huge stores.

As the municipalities pay off the debt, Cabela's essentially gets a free store, plus interest income.

At the end of last year, it had $144.5 million of these bonds on its balance sheet.

Last week, Cabela's posted $15 million in third-quarter profit, down 8 percent from the year-earlier period. Analysts had expected more, but the company said its bottom line was crunched by opening new stores. Its revenue in the three months ended Sept. 30 rose 14 percent, to $490.5 million.

And its stock rose Friday after it released its earnings. But whether Cabela's stock is rising in the halls of power in South Carolina remains to be seen.

Reach Kyle Stock at 937-5763 or kstock@postandcourier.com.