LAMAR, Mo. - Within weeks of asking taxpayers to spend nearly $300,000 to cover the cost of training its employees, O'Sullivan Industries quadrupled its CEO's pay and more than doubled the cash compensation of another key executive.

The state approved $40,250 for training of O'Sullivan employees, but that money is temporarily on hold now because of a recent company layoff.

However, neither the executive pay raise nor a subsequent decision by new management to move O'Sullivan's corporate offices to Atlanta are enough to block the taxpayer-subsi-dized customized job training grant.

Customized job training grants are given annually to dozens of Missouri companies. In July, the state gave $2.7 million to 101 companies, including $35,000 to O'Sullivan to train 175 of 900 workers. The state also will pay an administrative cost of $5,250 for the O'Sullivan project, bringing the total taxpayer cost to $40,250.

O'Sullivan's initial request was for $260,413 for job training, with an administrative cost of $38,948.

The latest job-training grant was the company's ninth in the last 10 years. Since 1994, O'Sullivan has received $370,854 to train nearly 1,200 employees. The company received some of its largest grants, such as one for $55,494, in 2000 when it was reporting record sales of $423.4 million. That compares to annual sales of $268.8 million for the fiscal 2004 year reported Monday.

Companies don't have to cite hardship to receive the money, but to be eligible must be creating new jobs in the state above their peak employment level of the last year or must be "retraining existing employees as a result of a substantial new capital investment," according to rules outlined by the Missouri Department of Economic Development.

Officials with the Department of Economic Development blacked out the line on the application form that explains O'Sullivan's capital investment after The Globe requested a copy. DED cited a state law that restricts the release of information that it said might endanger the competitiveness of a company receiving the job training money.

However, in its application for the state funds, company officials told the Missouri Department of Economic Development that they expected to be hiring.

"New full-time jobs anticipated this summer," the company stated in its application, dated May 5. Instead, employees were laid off.

But David Turney, director of investor relations for O'Sullivan, said that when new management took over, it decided to reduce inventory, which meant scaling back production and laying off 150 workers for 90 days or so beginning in August. At the time, O'Sullivan had 900 production workers and another 300 workers in accounting, engineering and support programs who worked in Lamar.

"Hopefully we will be back to normal by the end of the calendar year," said Turney.

Tammy Miller, spokesman for the Missouri Department of Economic Development, said the layoff has prompted the state to examine the grant to make sure the money was not for those positions that were affected.

"We are still reviewing how the layoffs are affecting the training ... so the money has not been released to the company."

Both Miller, and Amy Deem, assistant director with the Division of Workforce Development, said the corporate pay increase will not affect the taxpayer grant for job training.

O'Sullivan's new chief executive, Robert Parker, has a base salary of $1 million and is eligible for a 50 percent bonus. The previous chief executive received a $372,415 salary and did not receive a bonus in 2003. O'Sullivan's new chief financial officer, Rick Walters, will receive a salary and bonus package of $450,000, while his predecessor received $174,338 in salary in 2003, with no bonus.

The state officials also said the decision to move corporate offices outside of Missouri will have no effect on the taxpayer grant. O'Sullivan's new management announced Aug. 19 that it was moving corporate headquarters to Atlanta, taking or creating there 35 to 50 jobs in executive management, seniors sales management and selected financial and support personnel.

Deem also said no customized job training money can be used for executive training, and as long as the production jobs remain in Lamar, that is consistent with program goals.

"The whole idea is to keep the jobs in Missouri," she said.

Under Georgia law, companies that move their headquarters to that state and meet certain conditions may be eligible for tax breaks of up to $5,000 per person per year for five years.

But Turney said in a statement that, "The decision to move the headquarters to Atlanta had nothing to do with the tax breaks ... To take advantage of those Georgia tax credits, you must have taxable income. O'Sullivan Industries has not had significant taxable income since 1994 when we were spun off from Radio Shack ..."

And because of the terms under that deal, O'Sullivan expects to report taxable net operating losses for "several years past 2009," Turney explained. "It is going to be a long time before we have taxable income."

The Georgia law only allows those tax credits to be carried forward 10 years after a company moves into that state.

Even though O'Sullivan's headquarters are moving to Atlanta, the jobs for which the training grant was awarded will stay in Missouri, said Nancy Kenney, director of the Alliance for Business Consulting and Development. ABCD is a partnership between Missouri Southern State University and Crowder College to provide the training, which in this case is for a lean manufacturing process being implemented by O'Sullivan.

Companies have to provide matching training money to receive the state funds, Kenney said.

"It's not like this is a gimme, and they have no responsibility," she said.

ABCD instructors have actually been working on the production lines at O'Sullivan to learn the processes before they help the company implement leaner manufacturing.

"At the end of the year, we hope to have saved O'Sullivan hundreds of thousands of dollars," Kinney explained.

She added, "If we don't continue to upgrade these folks' skills, if we don't make them more productive, if we don't teach them to cut costs, they (the jobs) are going to China."

But Kevin Ashdown, vice president of a watchdog group called Taxpayers for Common Sense, based out of Washington D.C., was critical of what he sees as "corporate welfare" at a time when executives are raising their salaries.

"It smells . . . the appearance from the outside is that this money is padding the pockets of the fat cats."

Workers, meanwhile, "are really paying for their own job training," he added.

Ashdown agreed that employees will benefit from the new skills, and that they will be able to take those skills with them if they leave O'Sullivan, but added: "The immediate economic beneficiary of job training is the company. We would like to see more of these (costs) being paid for by the beneficiary . . . the guys receiving the dough."