Jim Hartman: Sisolak’s ‘Innovation Zones’ fiasco

In his February “State of the State” speech, Gov. Steve Sisolak boldly promoted an “Innovation Zones” proposal advanced by cryptocurrency Blockchains LLC founder and CEO, Jeffrey Berns.

It would have allowed companies like Blockchains to form local governments on land they own by granting them power over everything — from schools to law enforcement — and to build a “smart city” run on cryptocurrency.

Sisolak made “Innovation Zones” central to diversifying Nevada’s economy. Sisolak boasted they would transform Nevada into “the epicenter of this emerging industry and create the high-paying jobs and revenue that go with it.”

By April 26 Sisolak’s “Big Idea” was discredited and junked, sent to 18 months of “interim study” by the Legislature in a face-saving maneuver. The concept had been roundly mocked, including in the national media and trashed on the Late Show with Stephen Colbert.

The long-awaited “Innovation Zones” bill was never introduced, after near- universal legislative skepticism – even derision – from Republicans and Democrats alike.

A preliminary draft provided that technology companies owning 50,000 acres of land and making a $1 billion investment could create zones governed by three people, like county commissioners. Two would initially be from the company.

All the qualifying provisions applied to Blockchains LLC which owns 67,000 acres of land in rural Storey County at the Tahoe-Reno Industrial Center. A “Painted Rock Smart City” fantasy development was conjured-up over a 75-year period that would include a projected 36,000 permanent residents.

With specifics sketchy, “Innovation Zones” would “re-imagine” a futuristic company town using Blockchains cryptocurrency.

A broad political spectrum of opponents formed from the start, with the self-governing “county-within a county” concept drawing strong formal opposition from Storey County and other rural counties. The Nevada Republican Party blasted the proposal as “Sisolak’s new plan to allow Big Tech to create their own government in Nevada.”

The proposal also received vehement criticism from progressives and environmentalists concerned about giving government power to a corporation and how the proposed “smart city” would obtain water rights required to serve 36,000 residents. Opponents envisioned a massive water grab from rural Nevada.

The surprise is that Sisolak bought into cryptocurrency gambler Berns’ Blockchains LLC and his fantastical dream so completely. Cryptocurrency remains largely unregulated.

Iconic investor Warren Buffett last year described crypto as “rat poison squared” and a “worthless delusion.”

In 2019, multi-millionaire CEO Berns claimed Blockchains would have 1,000 employees by 2021. In fact, the company reduced staff to 67 Nevada employees in 2020. Senior executives left, including Berns’ brother, David, the former president.

Berns’ influence with Sisolak undoubtedly results from his oversized political campaign donations.

Berns contributed $408,000 to Nevada political candidates since 2018, including $70,000 to Sisolak, $70,000 to Democratic State Treasurer Zack Conine, and $50,000 to the Nevada State Democratic Party. Conine shapes Sisolak’s economic legislative agenda.

Prior to Sisolak scuttling “Innovation Zones,” Berns was running a series of television ads and hired more than a dozen lobbyists to push it.

Blockchains also hired the small financial consulting firm, Hobbs, Ong & Associates, where the governor’s wife, Kathy Ong Sisolak, is co-founder and partner.

An in-depth Reno Gazette Journal dive into Berns’ personal history revealed a shady, risk-taking gambler who worked as a personal injury lawyer, then ran a bawdy telephone dating service, returned to law and made a fortune in cryptocurrency.

Along the way, he went bankrupt, a business partner accused him of sexual harassment and co-counsel alleged he underpaid them. Last year, a 45-year-old Incline Village teacher accused Berns and his wife of luring her into a job as a nanny and grooming her for sex instead.

This second sexual harassment lawsuit against Berns likely sunk Sisolak’s “Innovation Zones” scheme.

Jim Hartman is an attorney residing in Genoa. E-mail lawdocman1@aol.com.