Florida DEO demands $77M back from Sanford Burnham

Sanford Burnham Prebys Medical Discovery Institute has two weeks to return $77.6 million in taxpayer money it received as an incentive to build a Central Florida research center.

However, the nonprofit research center has balked at the demand and claims they should not be required to repay the state.

The Florida Department of Economic Opportunity (DEO) claims the troubled nonprofit has breached its contract to provide jobs and remain in the state for 20 years. The state wants Sanford Burnham to return half of the $155.3 million it gave in incentives to move to Central Florida. Under the 2006 agreement, the California-based research giant agreed to create 303 jobs at its Lake Nona site by July 1 of this year. But according to the latest state report, they were 66 jobs short of meeting that goal.

The DEO Innovation and Incentive Funding Agreement was supposed to last for 20 years, but 10 years into the contract, Sanford Burnham Prebys (SBP) began looking for a way to leave Florida blaming a decrease in federal research grants as its state incentives ran out. If the nonprofit leaves halfway through the deal, the state argues it should get half the money back.

Sanford Burnham tried to broker a deal with the University of Florida to take over the research facility but UF backed out last week.

In an Oct. 28 letter sent from Karl Blischke, DEO’s director of strategic business development, to Sanford Burnham, it said the state “released funds in the good faith belief that our partner would carry out their legal obligations under the agreement. Unfortunately, Sanford Burnham has assumed the posture that it will leave Florida prior to satisfying its contractual obligations.”

Knox Bell, the San Diego attorney representing Sanford Burnham, sent a letter to DEO Oct. 31 responding to the allegations. Knox said that while the research center was unable to reach the 303 jobs in the agreement, it served as “a primary catalyst for Medical City at Lake Nona, a dynamic, prosperous and successful cluster that has created 5,000 new jobs.” He went on to say that according to the DEO agreement SBP should use “reasonable best efforts to create the 303 jobs” and there were no dollar damages or penalty, if the target was not reached.

Knox also said that the Lake Nona operation has “suffered substantial annual operating financial losses over the past few years.” He blamed the losses on the reduction of National Institutes of Health funding and the 2008 recession.

The changing economic conditions prompted Sanford Burnham to propose a gift transfer of all of its Lake Nona assets to UF and Knox said the nonprofit was surprised when UF decided not to proceed in October. He said that Sanford Burnham will continue to operate on an “as is” basis while exploring other alternatives. The attorney asked for further discussion between both parties.

The DEO has requested that the money be returned by Nov. 15, if Sanford Burnham plans to leave Florida.