Andrew Ungerleider had a grand vision: eliminate the need to ever again mine pumice by recycling glass into an abrasive compound for cleaning and sanding. But a $9 million investment by New Mexico taxpayers in Ungerleider’s grand vision has so far seen an export of jobs to Mexico and Arkansas, and has produced no returns for taxpayers.
The State Investment Council Loans $9 Million To Ungerleider’s Earthstone International
In 2004, at the urging of Governor Bill Richardson, the State Investment Council (SIC) loaned $9 million dollars to Earthstone International. Governor Richardson said he was “encouraged by Earthstone International’s pledge to create high-paying jobs in Doña Ana County.” The problem is that Earthstone appears to have used the state’s money to create jobs in Old Mexico and Arkansas instead of New Mexico.
Earthstone was founded in 1993 by granola bar giant and serial entrepreneur Andrew Ungerleider and his wife, television producer Gay Dillingham Ungerleider. As an alternative to mining pumice for cleaning and industrial applications, Earthstone uses recycled glass to produce sanding blocks, pool, tub, and grill cleaners and rust removers.
In 2003, Earthstone sought a multi-million dollar loan from the SIC. In that year, again at the urging of Governor Richardson, the Legislature authorized the SIC to invest hundreds of millions of dollars directly into New Mexico companies. Then and continuing until today, however, Earthstone’s corporate headquarters are listed on its website as being in Texas. Its New Mexico connection has been the residence of its founders off Santa Fe’s
Upper Canyon Road in and a modest-sized fabricating plant in the southern part of the city. According to several press releases and news reports, Earthstone claimed it was employing between 22 and 33 people in Santa Fe.
Earthstone’s “pledge” to the State of New Mexico was to construct a 200,000 square foot plant at Doña Ana County’s Santa Teresa border crossing. At least 200 new jobs were touted. In one report, Ungerleider said that plant would be operational within approximately 18 months from when the loan was approved. Earthstone also claimed its products were being distributed in more than 30,000 retail stores worldwide. Its Chief Operating Officer, Scott Corriveau, predicted explosive growth. Earthstone’s products were so superior, he boasted, that once consumers tried them, they would never go back to products from competitors like Clorox, Unilever and 3M.
Earthstone said it would consolidate all its operations in Santa Teresa. “Among the upgrades,” Corriveau told the New Mexico Business Weekly in January 2004, “would be a massive, continuously operating kiln that would recycle blocks through a pizza oven, and glass supplied from an El Paso recycling firm, rather than trucked from the Midwest.”
Earthstone’s loan was approved on January 27, 2004. The loan was a convertible loan, enabling the SIC to convert the debt to equity. Earthstone received $5 million of the loan in the first half of 2004. The balance would be released once Earthstone met certain performance yardsticks.
Earthstone announced on September 30, 2004, that it would open a research and development center in Las Cruces. In an Earthstone press release, Corriveau said, “Our new head of research and development, Dr. William G. Ramsey, wanted to have a research center that was close to both our planned Santa Teresa facility and a recognized research university. New Mexico State University has a history of working with industry and its College of Engineering is one of the nation’s leading research centers.” Ramsey, according to the press release, had just joined Earthstone after working at Mississippi State University where “he led a thermal process engineering group at the Diagnostic Instrumentation and Analysis Laboratory.”
The SIC released the full $9 million to Earthstone. The entire loan has since been converted into equity.
Creating Jobs in Mexico with New Mexicans’ Money
There is no telephone listing for an Earthstone plant in Santa Teresa, New Mexico. There is no telephone listing for an Earthstone research and development facility in Las Cruces. Neither facility was ever built. Economic development sources in Doña Ana County remember the glowing announcements and promises of new jobs, but know nothing of Earthstone even breaking ground.
Earthstone never expanded beyond its modest-sized facility in Santa Fe. Several recent visits showed less than a dozen automobiles occupying the parking lot. Earthstone founder Andrew Ungerleider has confirmed that Earthstone now has fewer than 12 full-time employees at its Santa Fe plant. From this reporter’s personal observations, it appears a good portion of those employees are Mexican immigrants.
Two Earthstone products, a bathroom scrubbing block and a grill scraper, were purchased in Albuquerque. The boxes for both products state that they were “Assembled in Mexico with components from the USA and China.”
Ungerleider says that the Santa Fe facility now only processes crushed recycled glass into glass foam blocks. Those blocks are then shipped to a factory in Juarez, Mexico, where, in Ungerleider’s words, they are “sliced, diced and wrapped” into the smaller pads used in Earthstone’ cleaning and scouring products. From there Earthstone ships its products to a facility in Bentonville, Arkansas where the final packaging is completed.
Earthstone’s Amazing, Incredible, Game-Changing Products! Not Quite.
In response to a telephone request, an Earthstone representative said their products were available in Albuquerque at K Mart, Lowe’s, WalMart and Home Depot. No Earthstone products, however, were located at K Mart or Lowe’s. A “Bathroomstone,” a block of recycled glass foam with a strip of synthetic sponge glued on one side, was purchased at WalMart for $3.38. A “Grillstone Starter Kit” was obtained at Home Depot for $6.38.
The Grillstone was tested. It consists of a red plastic handle into which a block of glass foam is clipped. (The plastic handle is fabricated in China and shipped to the Juarez facility). The ejector flap on the plastic handle did not work. A small cotton cloth is provided for wiping glass particles from the grill. The Grillstone did a good job cleaning a standard-sized backyard gas grill. In some respects, the result was superior to what has been attained with a reusable wire barbecue brush of roughly the same price. But the Grillstone did an inferior job cleaning away particles it could not reach in corners, crevices and between the rungs of the grill.
Further, the job could not be completed with one Grillstone. The Grillstone was used up on less than half the grill’s surface area. A return trip had to be made to Home Deport to purchase a replacement for $5.86. Thus, to clean a complete grill each time costs more than the purchase of a wire barbecue brush that can be used repeatedly.
New Mexico Angel investor George Richmond and a group of other investors investigated Earthstone for potential investment around the same time Earthstone was seeking a loan from the SIC. As part of their due diligence, they tested a number of Earthstone products. Their conclusion: Earthstone’s products were no better and more expensive than competing products already widely available to consumers. The Angel investors also concluded that Earthstone’s business model showed very little promise for success. Unlike the SIC, they steered clear of Earthstone.
Earthstone’s Co-Founders Fund Richardson and Democrats
In January 2003 Ungerleider’s wife, Gay Dillingham Ungerleider, was appointed by Richardson to the New Mexico Environmental Improvement Board and was elected Chairperson. Dillingham has been a regular contributor to Democrats according to records compiled by CampaignMoney.com. Dillingham contributed $2,000 to the New Mexico Democratic Party in 2002. During the 2006 election cycle, she contributed $2,500 to Democratic candidates. In the 2008 cycle, she gave $13,500 to Democratic candidates or PACs and an additional $2,300 to Richardson’s presidential campaign. Earthstone co-founder Andrew Ungerleider also gave $2,300 to Richardson’s presidential bid. An Earthstone employee named Elizabeth Dillingham gave $2,300 to the Democratic PAC ActBlue.
What Happened to Our Money?
Ungerledier says that instead of using the state’s funds to open the Santa Teresa plant as Earthstone had pledged, the money was used for research and development and marketing. He says that the SIC funds have enabled Earthstone to win several patents. Those patents have become the foundations for several new companies being spun off of Earthstone. As for when New Mexicans can expect to see any direct return on their $9 million investment in Earthstone, Ungerleider offered a lengthy explanation. He says he is “looking for patient investors” and foresees at some future time even larger returns than the SIC had originally anticipated.
The Rio Grande Foundation has filed a comprehensive public records request with the SIC. We want to see what due diligence was conducted before $9 million was released to Earthstone. We want to see the terms of the loan document and why the principal was converted to equity. We want to see what Earthstone told the SIC and what action the SIC took in response to news that the promised Santa Teresa plant and Las Cruces R&D center would not be built. We want to know if the SIC even knows Earthstone has exported jobs to Mexico and Arkansas. As this report was being prepared, the SIC says it needed about ten weeks to respond to our request.