Wisconsinites were recently treated to an epic Friday News Dump, with Scott Walker's WI Economic Development Corporation (WEDC) admitting that at least 27 awards totaling $124 Million went out the door without any underwriting. This diary aims to flesh out the circumstances surrounding these awards while we wait for reporters to sift through the "hundreds of pages" of related documents. If you have access to these documents, please post a link in the comments!
For a longer list of WEDC awards to politically-connected companies, please see this diary.
In addition to the 27 underwriting-free awards announced Friday, we know of at least 2 awards totaling $1.1M that were awarded by WEDC without underwriting from federal Community Development Block Grant funds (this is a very big deal!).
On top of that, I found 17 more awards totaling $9.3M that were not included in the Friday release, but likely also had no underwriting -- these are noted with a * in the list below. (E.g., Kestrel received 2 awards on 1/18/2012, but only one was included in the list of 27. That doesn't make any sense.) ...so that's 46 awards for about $135M for those of you scoring at home.
A word about underwriting...
Most of us probably think of underwriting (also called "staff review") in terms of financial institutions verifying the financial health of their lending customers. In the context of WEDC, however, underwriting entails a few more elements:
1) Verify the award recipient's financial health and (if it's a loan) likelihood of repayment
2) Verify that there is a reasonable/feasible plan to deliver promised job creation
3) Verify the recipient's eligibility for the award program(s)
4) Verify that the size and terms of the award are in compliance with program requirements and state statutes
The fact is that of the 27 awards listed on Friday, 20 are in the form of tax credits. At some point a republican near you is going to say something along the lines of "Well, very few of these were loans that had to be repaid, so skipping the underwriting isn't that big of a deal." Don't buy that for a second.
Without underwriting, we don't even know if these companies were eligible for the tax credits they received. And if we're going to make folks run through a gauntlet of fire and surrender their precious bodily fluids for a little bit of food assistance or unemployment insurance, then NOBODY should be getting six- or seven-figure handouts from the state without having to verify their eligibility.
Also, WEDC is already claiming that they've changed their ways and put this issue behind them:
In July 2013, the [WEDC] Board approved over 100 policies. Included in those policies is GOV ADM 121: Awards Administration. This policy spells out the requirement for a written Staff Review to be conducted on all WEDC program awards, and what level of approval is required. Since the adoption of this policy, WEDC has approved over 760 awards, all of which have had a Staff Review completed.
In reality, WEDC is just kinda making sure they do
something and call it "underwriting" for each award. Beats empty folders, I guess.
From the 2015 LAB Audit (pg. 41):
Our file review found that WEDC’s most-recent staff reviews did not consistently evaluate whether businesses met all tax credit eligibility requirements in its policies in effect when the staff reviews were completed.
See below the orange thing for the list...
Plexus Corp. - Appleton & Neenah, WI
08/24/2011 - $2,000,000 Jobs Tax Credit*
06/18/2012 - $15,000,000 Enterprise Zone Tax Credit
Job Creation: 0 of 350
In July 2012, one month after the $15M award, Plexus shipped 116 WI jobs to Mexico.
Director David J. Drury - $30k to WIGOP; $18k to Walker, including $2500 on 5/2/12
SVP Angelo Ninivaggi - $500 to Walker 11/17/11
Director Ralf Boer - $2,300 to Walker; including $1k 5/12/12
Building Committee, Inc. - Milwaukee, WI
09/19/2011 - $500,000 Business Expansion and Retention Investment Loan
You've probably already heard of this one.
Ruud Lighting, Inc. (Cree Inc.) - Racine & Sturtevant, WI
11/03/2011 - $3,275,000 Jobs Tax Credit
11/03/2011 - $725,000 Economic Development Tax Credits
Job Creation: 170 of 469
Ruud had just been sold to Cree less than 3 months before receiving these awards. You'd think that something like a recent 9-figure transaction would be worth a little due diligence.
From the Racine Journal Times:
If Wisconsin governmental bodies can assemble a "reasonable" package, [owner, Alan] Ruud said, "We've got the manufacturing base, and ... it makes sense to move some of the manufacturing capabilities here." …
"I think (the purchase) could lead to many hundreds of jobs in the next few years," Ruud said.
Ruud apparently got the package he was after, but how did anyone know whether or not it was "reasonable" without doing an underwriting review?
Alan J. Ruud - $8,800 to WIGOP, including $1k to Sen. Alberta Darling 8/13/11
Christopher A. Ruud - $3,500 to WIGOP, including $1k to Walker 11/17/11
Mark S. Poker (Owner via Susan B. Ruud Stover Family Endowment Trust) - $2k to Walker
Charles M. Swoboda (Cree CEO) - $1k to Walker
Theo & Wendy Kolokotrones - Chairman of PRIMECAP Mgmt (9.3% stake in Cree) - $27k to Walker
Spectrum Brands, Inc. - Middleton, WI
11/09/2011 - $4,000,000 Business Expansion and Retention Investment Grant
Job Creation: None
From BlueCheddar, back in 2011:
Governor Walker and WEDC (wee-dik) announced yesterday that Spectrum Brands, headquartered in Madison, will receive a grant for $4,000,000 to…. not leave. This despite the fact that the company, which was originally founded in Madison as Rayovac, just relocated its headquarters from Atlanta back to Madison last year and had given no indication that it was planning to move again. When asked by a local radio reporter if the company had planned to leave, a Spectrum spokesman answered “No, not really.”
J.M. Smucker LLC - Ripon, WI
12/22/2011 - $300,000 Economic Development Tax Credits
Job Creation: 0 of 4
No obvious political donations or anything with this one.
Wisconsin Center for Manufacturing & Productivity (aka, WI Manufacturing Extension Partnership, WMEP) - Madison, WI
12/22/2011 - $550,000 Targeted Industry Projects Grant
08/22/2012 - $122,600 ExporTech Grant*
01/17/2013 - $286,000 ExporTech Grant*
10/28/2013 - $539,598 Targeted Industry Projects Grant*
03/27/2014 - $125,000 ExporTech Grant*
WMEP bills itself as "a strong advocate for manufacturers in WI and supports WI manufacturing at a national level," which sounds an awful lot like WI Manufacturers and Commerce (WMC). There seems to be a strange triangular relationship between WMEP-WMC-WEDC, and there's the potential for conflict of interest and revolving-door shenanigans (beyond getting grants without any underwriting) that should be investigated further.
WMEP's Board includes WMC President Kurt Bauer and big WIGOP donors Troy Berg (Dane Manufacturing), Glenn Kennedy (InPro Corp), and John E. West (Fox Valley Metal Tech).
WMEP also hosts its annual Manufacturing Matters conference in conjunction with WMC's Manufacturer of the Year awards ceremony, and they seem pretty comfortable pushing the WMC company-line on issues like the "skills gap."
Most interesting, however, are two former WMEP executive directors who went on to top positions at WEDC -- Lee Swindall and Mike Klonsinski. Klonsinski was WEDC's CFO when most of these no-underwriting awards were handed out, and he resigned in disgrace in Oct 2012 when it was revealed that WEDC wasn't tracking any of its loans.
Kestrel Aircraft Company, Inc. (ONE Aviation Corp) - Superior, WI
01/18/2012 - $18,000,000 Enterprise Zone Tax Credit
01/18/2012 - $2,000,000 Business Expansion and Retention Investment Loan*
12/19/2012 - $2,000,000 Technology Development Loan*
Job Creation: ~24-40 of 665
Kestrel's troubles getting off the ground are well-known, including being behind on their WEDC loan payments. It's tough to imagine awarding $22 million to a start-up with essentially zero assets and totally skipping the underwriting.
This is also an example of how WEDC plays fast and loose with its jobs numbers. When the Kestrel project was first announced, the rosiest projections had up to 600 jobs ultimately coming to Superior.
However, WEDC made 2 awards in Jan 2012 -- the $18M tax credit is supposed to create 665 jobs, and the $2M loan is supposed to create 600 jobs. These are really the same jobs, but they get counted twice, so WEDC can project 1,265 jobs. Likewise, WEDC reports 57 actual jobs from the tax credit and 48 actual jobs from the loan, for a total of 105 jobs. Recent articles from the Wisconsin State Journal and Superior Telegram, however, report that Kestrel currently employs either 24 or 40 people in Superior.
In April 2015, Kestrel merged with Eclipse to form ONE Aviation. Eclipse actually has a real aircraft in production in New Mexico, whereas the Kestrel only exists on paper. This could be a sign that if the Kestrel ever does get built, it might not be happening in WI.
Baptista's Bakery, Inc. (Gardettos) - Franklin, WI
02/08/2012 - $2,260,000 Economic Development Tax Credits
Job Creation: 107 of 240
Owner Nannette Gardetto Cherek contributed $5,425 to Walker's 2010 campaign.
Also, they've received the full $2.26M tax credit already, despite being less than 50% of the way to their job creation goal.
Precision Ice Blast Corporation - Peshtigo, WI
02/20/2012 - $400,000 Economic Development Tax Credits
Job Creation: 45 of 65
Precision Iceblast moved 25 miles from Wallace, MI to Peshtigo, and Scot Walker was there to greet them personally. The facility is now on the WI side of the border, but its doubtful whether this had any net impact on employment in the region.
No obvious political donations, but two of their executives, Keith Boye (who also owns a number of businesses named "Stellar") and Branden Boye have been having a rough go of paying their taxes lately.
Milwaukee Water Council, Inc. - Milwaukee, WI
03/19/2012 - $750,000 Targeted Industry Projects Grant
09/10/2013 - $250,000 Seed Accelerator Grant*
03/06/2014 - $24,950 Targeted Industry Projects Grant*
08/04/2014 - $300,000 Seed Accelerator Grant*
The Water Council is a partnership between the UW and industry to "establish the Milwaukee region as the World Water Hub for water research, economic development, and education."
They get some funding from the conservative Bradley Foundation. And their board is co-chaired by big Walker donors Richard Meeusen and Paul Jones, and includes former WMEP exec director and WEDC VP Lee Swindall.
Global Entrepreneurship Collective, Inc (VETransfer, Victory Spark, Revolution Labs). - Milwaukee, WI
04/04/2012 - $100,000 Capital Catalyst Grant*
08/16/2012 - $300,000 Seed Accelerator Grant
06/13/2013 - $50,000 Seed Accelerator Grant*
Job Creation: 22 (no target set)
This is a group that provides training, mentoring, and grants to start-ups, with a focus on veteran-owned businesses. No obvious political donations, but it's a little weird that they got those first couple grants without any underwriting in what appears to have been their first year of existence.
Also, this group has their own line-item in the upcoming budget.
Fed Ex SmartPost - New Berlin, Brookfield, & Menomonee Falls, WI
04/24/2012 - $388,25 Economic Development Tax Credits
10/09/2013 - $450,000 Economic Development Tax Credits*
02/03/2014 - $390,000 Economic Development Tax Credits (FedEx Ground) *
Job Creation: 28 of 173
FedEx employees gave almost $10k to Walker, including $1k coming on 5/14/12 (a few weeks after the first tax credit) from FedEx Ground CEO David Rebholz.
Also worth noting is that the new facility in Brookfield is a Hammes Company property, owned by major Walker donor Jon Hammes.
Racine Railroad Products - Racine, WI
05/14/2012 - $620,000 Economic Development Tax Credits
Job Creation: 4 of 32
No obvious political donations with this one, but those new jobs are awfully slow in materializing.
Specialty Retail Shops Holding Corp. (ShopKo/Pamida) - Green Bay, WI
05/14/2012 - $2,000,000 Economic Development Tax Credits
Job Creation: 94 (likely negative net jobs) of 129
The merger of ShopKo/Pamida was supposed to create 129 new jobs at their Green Bay HQ. WEDC says that so far 94 jobs have been created. That certainly doesn't take into account the 95 store workers who have since been laid off in Madison and Ashland. And it's unclear whether the 40 workers at the Green Bay HQ laid off late last year have been been factored in.
Specialty Retail is owned by Sun Capital Partners. They don't have any obvious donations to Walker's campaigns, but they've been huge donors to Mitt Romney's SuperPACs, so there may be some dark-money we don't know about.
Milwaukee Electric Tool Corporation - Brookfield, WI
06/06/2012 - $250,000 Business Expansion and Retention Investment Loan*
09/05/2012 - $2,050,000 Jobs Tax Credit
Job Creation: 360? of 103
This could be another instance of jobs being double-counted by WEDC. The June 2012 award called for creating 100 jobs, and the Sept 2012 award called for 103 new jobs. It is unclear whether these overlap, or were supposed to be 203 distinct jobs.
Owned by Techtronic Industries. No obvious contributions from the parent company, but Milwaukee Electric Tool employees have given about $12k to WIGOP in recent yrs, with about half of that going to Walker.
Collaborative Consulting - Wausau, WI
06/08/2012 - $2,250,000 Jobs Tax Credit
Job Creation: 76 of 200
No obvious political donations or anything with this one.
Kohl's Department Stores, Inc. - Waukesha, WI
07/17/2012 - $62,500,000 Enterprise Zone Tax Credit
Job Creation: 473 of 3,000
No show-stopping political donations, but for goodness sake, this is $62 Million, the largest award ever handed out by WEDC by a wide margin. There is no excuse for failing to underwrite this.
Also, the project has been scaled back from what was proposed at the time of the award, and WEDC Board member Scott Klug has a financial interest in Kohl's.
WD Parket, LLC (Nicolet Hardwoods) - Laona, WI
09/04/2012 - $750,000 Business Expansion and Retention Investment Loan
Job Creation: 84 of 150
WD Parket is the flooring division of Nicolet Hardwoods, owned by the Connor family, who have spread over $100k around to WIGOP candidates over the years. They're also only about halfway to their proposed 150 new jobs, now almost 3 years in.
WTS Paradigm, LLC - Middleton, WI
09/04/2012 - $500,000 Economic Development Tax Credits
09/04/2012 - $500,000 Jobs Tax Credit
11/06/2014 - $201,000 Economic Development Tax Credits*
Job Creation: 32 of 103
No obvious political donations or anything with this one, but they're well behind on their promised job creation.
Ripon Foods/Heritage Wafers (Rippin' Good Cookies, ConAgra)- Ripon, WI
11/05/2012 - $400,000 Economic Development Tax Credits
ConAgra has already claimed the full $400k tax credit for (briefly) retaining 182 jobs and creating 128. Now, they're closing a factory and laying off 320 people in Ripon.
Also, WEDC Board member Scott Klug has a financial interest in ConAgra.
Blue7 Solutions, LLC (Blue Star Infotech America Inc.) - Bayside, WI
12/27/2012 - $3,250,000 Economic Development Tax Credits
12/27/2012 - $500,000 Business Expansion and Retention Investment Grant
Job Creation: 17 of 250
No obvious political donations or anything with this one, but well behind on promised job creation.
Update: Blue Star Infotech is hiring, just not in WI or even the United States.
KCS International - Oconto, WI
04/15/2013 - $820,000 Jobs Tax Credit
04/16/2013 - $180,000 Workforce Training Grant*
Job Creation: 8 of 170
Owner Kenneth C. Stock has contributed $22k to Walker, including a $1k donation on the same day the tax credit was awarded.
County Materials Corp. - Turtle, WI
04/30/2013 - $750,000 Economic Development Tax Credits
Job Creation: 65 of 43
The Sonnentag family that owns County Materials has donated over $50k to Scott Walker.
Ta Chen International, Inc. (TCI) - Pleasant Prairie, WI
06/03/2013 - $1,025,000 Economic Development Tax Credits
Job Creation: 1 of 92
There aren't any obvious political donations from Ta Chen directly, but the developers on this project (a new distribution center) have some connections.
Wispark LLC executives have contributed over $8k to Walker, and Wispark is a subsidiary of WE Energies, which has provided massive support to Walker.