Reilly faults Healey on break for husband's firm

Attorney General Thomas F. Reilly, a Democrat who is running for governor, yesterday accused his possible Republican opponent, Lieutenant Governor Kerry Healey, of looking the other way while her husband's asset management firm received $1.2 million in a questionable tax credit from the state.

Meanwhile, former assistant US attorney general Deval L. Patrick, Reilly's rival for the Democratic gubernatorial nomination, said he wants to make sure the tax credit program is working as it was intended, to encourage companies to locate in neighborhoods that the state considers blighted.

Sean M. Healey's company, Affiliated Managers Group, had received the credit for locating in the Prides Crossing section of Beverly, one of the state's wealthiest neighborhoods. Last week, AMG returned the tax credit, after the state's inspector general said that in many cases, including AMG's, the credits were ''handed out as favors" to firms.

''The reason that Sean Healey and AMG gave the money back was they were caught cheating taxpayers of well over a million dollars," Reilly said in an interview yesterday. ''This is inside politics at its very worst, a sweetheart deal with tax breaks to the well-connected and wired, all the way to the top of the Republican Party and the administration. It doesn't even come close to passing the smell test."

Patrick said he applauded AMG's decision to return the credit, but was concerned the program was failing.

''The question is about whether we want to be in a situation where the government is sponsoring tax benefits, that are intended for the most needy, for this kind of purpose," said Patrick, a former Coca-Cola executive, in a separate interview. ''The idea of sponsoring tax breaks to encourage investment in Prides Crossing is silly, and everybody knows that."

Patrick said the state ''needs to go back to the drawing board" to ensure the Economic Development Incentive Program is serving the state's best interests.

Reilly, meanwhile, said Governor Mitt Romney should conduct a ''top-to-bottom review" to ensure the program is working. He suggested that Kerry Healey bears some of the responsibility for her husband's firm having benefited from the credit. ''You have to mind the store," he said. ''The lieutenant governor and governor, they looked the other way."

The credit was awarded to AMG in 2001, before Romney and Healey took office in January 2003. In January 2004, Inspector General Gregory Sullivan charged that the tax incentive program had been seriously abused and cited the AMG case. The Globe reported that the state Revenue Department had been preparing a report that was highly critical of the type of credit given to AMG, but that the department then watered down the language, under pressure from another agency in the Romney administration.

Last week, AMG returned the credit, saying it did not want to risk damaging its reputation. Founded in 1993, the firm has $155 billion under management and generates $200 million in annual cash flow.

''Our decision to cease participation in the program results from a desire to avoid becoming the focus of controversy over public policy issues involving the awarding and administration of tax credits to businesses in the Commonwealth," Sean Healey wrote in a letter delivered to Revenue Commissioner Alan LeBovidge.

Yesterday, Tim O'Brien, a campaign spokesman for Romney and Healey, dismissed the suggestion that AMG had benefited from an insider deal. ''There was no sweetheart deal because the deal was done years before Romney and Healey came into office," he said. ''Tom Reilly thinks tax breaks for companies and individuals are a sweetheart deal. But, again, it was awarded years before they came into office."

Although Healey has yet to announce her plans, most Democrats and Republicans expect her to run for governor in 2006, if Romney runs for president. Her political aides have indicated that her campaign will be financed largely by the $13 million in AMG stock options that her husband received when he cashed out. But O'Brien said it was foolish to think Kerry Healey should be held responsible for her husband's firm having benefited from the tax credit. ''AMG is a publicly traded company," O'Brien said. ''She doesn't have anything to do at all with the managing of the company."