LANSING — An embarrassing, politically fraught grant could lead to major reforms at the Michigan Economic Development Corp., or possibly even its demise.

State Attorney General Dana Nessel is investigating the state’s quasi-public economic development agency in a larger probe of a $20 million state grant, administered by the MEDC, to a Southeast Michigan businesswoman who is a prominent figure in Democratic circles.

Senate Republican leader Aric Nesbitt (R-Porter Township) is calling for a federal investigation of the matter. Nesbitt is running for governor in next year’s election.

Fay Beydoun obtained the grant in 2022 to fund her newly created nonprofit company, Global Link International, formed (after the grant was awarded) to attract international business investment to Michigan. The Detroit News was first to report that Beydoun spent a portion of the money on a $4,500 coffeemaker, an $11,000 first-class plane ticket to Budapest and her annual salary of a whopping $550,000.

The grant was a budget appropriation approved by the then-Republican-controlled Legislature and Democratic Gov. Gretchen Whitmer. The MEDC, which oversaw the grant, cancelled it in March after the extravagant spending became public.

Investigators from Nessel’s office raided Beydoun’s Farmington Hills home and the MEDC’s offices on June 18. Nessel’s office complained the MEDC had been stonewalling its investigation, an allegation the MEDC denied. Beydoun has not been charged with a crime.

Although the MEDC did not fund the grant from one of its myriad business assistance programs–it was a direct legislative appropriation– the agency was charged with ensuring the $20 million in taxpayer funds was properly spent.

Nessel is seeking to learn more about how involved the MEDC was in pushing the legislative grant for Beydoun, Michigan Advance reported.

Beydoun was a member of the policy-setting MEDC executive committee at the time the grant was awarded. One email sent to the governor’s office by Beydoun said the MEDC approved of the payout to her company, Michigan Advance said.

The MEDC was created by then-Gov. John Engler in 1999 as a public-private partnership and at the time was considered a model for state economic development agencies. Putting the MEDC outside of direct state government control was designed to ensure continuity in economic development strategy regardless of which political party was in charge.

Its CEO doesn’t report directly to the governor like other state department heads, but to an 18-member executive committee. That’s led to less accountability to taxpayers and a long history of contentious relations with lawmakers, the media and other organizations seeking information about its workings.

The Mackinac Center for Public Policy, an often-influential free market proponent, has repeatedly called for the MEDC to be abolished.

Nevertheless, the agency has historically enjoyed strong bipartisan support for the billions of dollars it has spent to keep businesses from leaving the state and to attract new ones.

That was no more true than nearly four ago when lawmakers and Whitmer, caught flat-footed over Ford Motor Co.’s record $11.4 billion investment in electric vehicle and battery production in Tennessee and Kentucky, hastily created a $500 million pot to attract similar factories.

The Strategic Outreach and Attraction Reserve Fund has since committed more than $1 billion to automakers and other clean-energy companies, according to the MEDC’s 2024 annual report.

But not a single job has yet been created from those awards.

That’s mostly due to project delays and pullbacks resulting from electric vehicle sales falling well below earlier projections.

Ford Motor Co. has scaled back job projections at its under-construction EV battery plant in Marshall from 2,350 jobs to 1,700 positions. The plant is expected to start production next year.

General Motors Co. has abandoned plans to convert its Orion Township assembly plant in Oakland County to build electric pickups and instead will build gas-powered trucks there.

GM earlier this year also completed the sale of its stake in a $1.5 billion Lansing battery plant nearing completion to its South Korean joint-venture partner, LG Energy Solution. A $120 million Critical Industry Program grant, part of the SOAR Fund, has been transferred to LG.

The move angered state House Speaker Matt Hall (R-Richland Township), who called it “a troubling pattern (by GM) of fleecing taxpayers and workers.”

Hall also has more broadly criticized the state’s business attraction incentives. He recently claimed the incentives are “not getting the results” and much of the money should be redirected to fixing the roads.

The MEDC’s Michigan Business Development Program, which was created in 2011 during the administration of then-Gov. Rick Snyder, has since its inception announced $290 million in grants and loans to businesses investing and creating jobs in the state.

Only about half of that has been dispersed because of the lack of job creation induced by the incentives.

Businesses committed to creating 28,811 jobs in exchange for the state’s financial support, but have added just 9,918 positions, according to the MEDC’s 2024 annual report. That’s only 2% of the 531,000 payroll jobs added in the state since 2011.

Democrats also have called for overhauling state business and talent attraction efforts.

In 2023, a coalition led by state Sen. Mallory McMorrow (R-Royal Oak) introduced a package of bills that would have shifted half of SOAR funding to community-based programs, including affordable housing, public transit and other investments. The bills failed to pass before the end of the legislation session last year.

But Nessel’s investigation into the MEDC’s role in the Beydoun grant scandal could finally force needed reforms at the agency to improve its effectiveness and its accountability to taxpayers.

It’s becoming more and more apparent that an economic development strategy focused on handing out cash to businesses to create jobs is woefully inadequate.