AUGUSTA, Maine — A bill that was designed to beef up scrutiny of loans and business incentives using taxpayer dollars in the New Markets Capital Investment program suffered defeat Tuesday when the Senate voted 19-15 against it.

Majority Republicans opposed the bill.

The Senate vote contradicts a 100-43 vote in favor of LD 297 Monday in the House of Representatives. The bill is now dead.

The bill originally sought to double the cap on loans from the program to an aggregate of $250 million to $500 million. However, the bill morphed considerably during the committee process, in no small part because of revelations reported by the Portland Press Herald that millions of dollars taken from the New Markets Capital Investment program by Cate Street Capital and other firms were labeled “sham transactions” by the U.S. Internal Revenue Service.

New Hampshire-based private equity firm Cate Street Capital, which owned the Great Northern Paper mill in East Millinocket, used the New Markets program to help lower the taxes it paid on a $40 million investment at the mill. The company promised jobs and continued papermaking, but after a year, the company filed for bankruptcy and laid off 200 workers.

The bill would have provided stronger protections by eliminating the one-day loan scheme used by Cate Street Capital. It also requests that the Government Oversight Committee conduct a review of the program.

Christopher Cousins

Christopher Cousins has worked as a journalist in Maine for more than 15 years and covered state government for numerous media organizations before joining the Bangor Daily News in 2009.