IOWA CITY, Iowa (AP) — Iowa economic development officials are reviewing whether to continue a $2.5 million investment in a startup company pitching a groundbreaking fertilizer technology after learning a jury once found its chairman had misused investor money in another energy project.

SynGest Chairman Serge Randhava was found in 2008 by a federal jury in Illinois to have committed civil racketeering and fraud with associates in connection with misusing $500,000 awarded to develop another fertilizer technology, according to court records reviewed by The Associated Press.

A judge vacated the verdict in 2009 when the case was settled. Randhava denied wrongdoing during the case and again in an interview Thursday. He said it was one small part of a messy, high-stakes business litigation that ended with him receiving an undisclosed settlement in 2009.

Still, two members of the Iowa Power Fund Board who backed SynGest's plan to build a $105 million plant told the AP that questions about his background might have doomed its 2009 request for state aid. At the least, they said they would have dug deeply into the litigation as part of their standard due diligence.

"If there had been any hint of that sort of thing, I'm sure we would have dropped them in a moment," said energy expert Pat Higby, an ex-member of the board that awarded $71 million for renewable energy projects. Former member Tom Wind called the revelation disturbing and said it would have been cause for concern.

SynGest was promised $2.5 million to design the world's first plant to make anhydrous ammonia from biomass materials, such as corn cobs, instead of natural gas. Company leaders promised huge returns: hundreds of jobs in Menlo, a new revenue source for farmers selling corn cobs and cheaper, more sustainable fertilizer. Eventually, they envisioned 20 such plants in Iowa.

But the project has struggled. SynGest missed deadlines to raise $3.5 million in private funds, which was required under its contract before state money would flow. The company cited difficulties attracting investors amid a slow economy. In January, state officials gave SynGest 30 days to raise the money or lose the aid. SynGest soon said it had the funds, and provided proof of their deposit in a bank account. SynGest says it will soon begin engineering and design work and start asking for reimbursement from its state aid, although it hasn't yet.

Iowa Economic Development Authority spokeswoman Tina Hoffman said lawyers have started a "full review" after receiving information about Randhava's past from a constituent. She said the agency wants to determine whether any misrepresentation occurred during the application process, which could be grounds for terminating the contract. Until the review is finished, no state funding will be paid.

Hoffman said the review will determine whether the verdict against Randhava should have been disclosed in the application, which asked whether corporate officers had been "accused or convicted of a crime or wrongdoing" or had judgments or court actions "completed or pending" against them.

Wind, the former Power Fund board member, said he believed disclosing such information "is a key part of the due diligence." SynGest answered "no" to both questions in its application, which was signed by CEO Jack Oswald and obtained by AP through a public records request. The document listed Randhava as chairman.

Oswald said Friday he possibly should have disclosed the information, but was unaware of the verdict at the time and did not intend to withhold it. He called Randhava an honest businessman who was the victim of fraud by others and said he planned to explain the circumstances to state officials. He said Randhava was not involved in the firm's daily operations and would not control the state funding.

"After a long, hard slog, we were about to be able to bring an amazing new process to the state of Iowa. Anything that would get in the way of that just doesn't make any sense," he said.

Previously, Randhava was part of an investor group set up to cash in on a once-promising cement technology that sued a prominent research organization, the Gas Technology Institute, and former executives in 2005 for millions for fraud and racketeering when the venture failed.

Months later, GTI filed a lawsuit against Randhava and several others, alleging they were part of a scheme to defraud the organization out of development funds for a separate fertilizer venture.

Two trials happened in federal court in Illinois in 2008: One ended in a $15 million verdict in favor of Randhava's group, which included powerful Chicago alderman Richard Mell. The other ended in a finding that Randhava and associates were part of a civil racketeering conspiracy and that Randhava committed fraudulent misrepresentation and concealment. There was also a $670,000 verdict against them.

A judge threw out the $15 million verdict in 2009, ruling Randhava's investor group failed to prove that much damage and ordered a retrial on more limited claims. Then, a settlement was reached covering both cases that Randhava said Thursday was favorable to him. A lawyer for Gas Technology Institute confirmed the settlement but said its terms were confidential.

The allegations against Randhava were that he and others misused much of the $650,000 the institute invested in a venture to develop methane gas technology used in fertilizer. An institute executive, Peter Barone, was the project manager.

After the money was deposited in a bank account controlled by Randhava, he used more than $100,000 for personal expenses and issued checks worth hundreds of thousands of dollars to companies he'd never heard of and that he knew hadn't worked on the project, the lawsuit alleged.

The lawsuit said some of the money went as kickbacks to entities controlled by Barone, who was later indicted along with two other GTI employees on charges they accepted millions to steer contracts to bogus firms operated by associates. Prosecutors never accused Randhava of criminal wrongdoing. Barone died before trial and the others were convicted. Oswald blamed them for the fraud.

The lawsuit claimed Randhava helped produce a 2002 paper about the technology that was "designed to mislead and deceive" the institute into believing the work was performed. In refusing to dismiss the case before trial, U.S. District Judge Rebecca Pallmeyer wrote in a ruling that she found "ample circumstantial evidence that (Randhava) participated in a fraud." Randhava denied knowingly misrepresenting how the money was spent and claimed the institute did not suffer damages, court records show.