Taxpayers will have to swallow an $84,000 loss on a state grant that was mishandled by a Greene County non-profit, the Department of Community and Economic Development has concluded after a review prompted by questions from the Pittsburgh Post-Gazette.

"It is unfortunate. We've had to write it off as a loss, an $84,000 loss," department spokesman Mark Shade said Tuesday.

Mr. Shade said the state had no way to recoup the money. He also said Greene County Industrial Developments Inc. would not face repercussions for violating the grant terms.

"We did our look and found nothing, so we've closed the case and there'll be no more action," Mr. Shade said.

The state's legal review, conducted by departmental assistant counsel Charles Rees Brown, reviewed grant paperwork.

"They looked at invoices to try to come up with that $84,000 hole, what happened with that," Mr. Shade said. "We can't tell, and Greene County doesn't have the money to return to us anyway."

After receiving a $500,000 grant in May 2007 for its own operational expenses, the Greene County Industrial Developments, which is a private non-profit, struck a deal with Gravity Web Media, a now-defunct Pittsburgh Internet start-up company, and gave it some of the money.

As part of a memorandum of understanding between the two, Gravity Web Media was supposed to move from its headquarters in Downtown Pittsburgh to the nonprofit's EverGreene Technology Park in Waynesburg.

In return for administering the grant, the nonprofit was to take a $10,000 cut.

Mr. Shade said the development corporation should have received state approval to sign the deal with Gravity Web Media, but did not, thereby violating its contract.

The development corporation, which is not affiliated with Greene County, was temporarily "flagged" by the state and unable to receive grants, but that restriction has been lifted.

"We believe they've learned their lesson," Mr. Shade said. "They know not to do a memorandum of understanding without our consent. They know not to change the terms of a contract without our review and approval."

It is not known how much money Gravity Web Media received from the nonprofit.

The defunct company's founder, James H. Rossell III of Churchill, said he got about $200,000 from the Greene County group shortly after the grant was awarded. He did not have any documentation on hand to back up that claim.

Donald Chappel, the nonprofit's executive director, refused to tell a reporter how much he gave to Gravity Web Media.

He referred questions to the nonprofit's lawyer, Ernest P. DeHaas III, who said he was not prepared to comment before speaking with Mr. Chappel.

When Mr. Chappel closed out the grant, he had spent about $243,000. The rest went back to the state.

Mr. Chappel was able to account for about $160,000 in eligible "operational" expenses that were incurred by his nonprofit, the state said. About $84,000 was unaccounted for.

Mr. Chappel said part of the $84,000 comprised reimbursements requested by Gravity Web Media for payments to three consultants.

Mr. Chappel showed a reporter consulting agreements from 2006 that included income tax forms indicating total payments of $168,350 to three people. He said Mr. Rossell provided him with the documents to justify his request for grant money but did not give him copies signed by any of the individuals.

All three consultants -- one of them being Mr. Rossell's father-in-law, Roy E. Brunner of East McKeesport -- said in interviews that they knew nothing about the agreements.

One, Joshua Tanzer, said he never received any money from Gravity Web Media. The other two -- Mr. Brunner and Aaron Merriman of Kentucky, who helped create Gravity Web Media -- said they were paid for some work, but not the sums listed on the tax forms and not through any such agreement.

Mr. Rossell reviewed copies of the agreements and claimed he had never seen them before either.

Mr. Chappel also produced from his files a June 2007 letter and fax signed bearing Mr. Rossell's signature that sought a payment from the grant for $100,000 in salaries and $1,399.96 for two laser printers.

Mr. Rossell said he did not draft those documents.

Mr. Shade was unable to shed light on which documents were authentic. He said the bottom line was that the state's contract was with the nonprofit, not Gravity Web Media, and the state has accepted the nonprofit's documentation.

Mr. Shade said it would not be "prudent" or worth the cost to sue anyone over the $84,000 loss.

Even if the state did sue, he added, "Greene County Industrial Developments basically operates on state grants, so to ask Greene County for the $84,000 back would just be asking for our money back."

However, Mr. Chappel estimated that no more than 30 percent of his group's $280,000 annual budget comes from state funds.

Local News. Roy E. Brunner was never paid by Gravity Web Media. Mr. Brunner was paid by company founder James H. Rossell III, his son-in-law, for materials to remodel Mr. Rossell's home. This story as originally published Feb. 24, 2010 about a review of a state grant used by Gravity Web Media gave the impression that he earned money from the company.

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