HARTFORD — Gov. Scott Walker defended his embattled job-creation agency Wednesday by insisting it “didn’t cut corners” when staff failed to formally review 27 awards totaling $124.4 million.
Meanwhile, Democratic lawmakers called for the agency’s CEO, Reed Hall, to resign, citing evidence that top Wisconsin Economic Development Corp. officials continued to press for more public assistance to a struggling Milwaukee construction company even after learning that the company’s owner was planning to use taxpayer resources to pay off what turned out to be a $220,000 car-leasing debt.
The initial $500,000 unsecured loan to Building Committee Inc. was one of 27 that didn’t receive a formal staff review. A State Journal investigation last month found the company misrepresented itself on its 2011 application for the taxpayer funds, which the agency’s formal review process at the time should have caught.
“Obviously there’s been a few cases where they weren’t as highly effective as we’d like,” Walker said at a news conference Wednesday.
Walker said the agency “did a review by staff, just not the traditional staff review” of the awards in question.
Assembly Minority Leader Peter Barca, D-Kenosha, disputed Walker’s characterization that the agency didn’t cut corners.
“Any credible process used by any credible economic development organization would have caught (the prior lawsuits against the company),” Barca said. “To say they didn’t cut corners is laughable.”
Barca also reiterated concerns about Department of Administration Secretary Mike Huebsch taking a direct role in advocating for more money for the company. BCI owner William Minahan, who told the agency his net worth was $6.37 million, had made a $10,000 donation to Walker’s campaign on election day 2010 and had hired a lobbyist whose clients are Walker donors.
Walker said Wednesday he hasn’t tried to find out why Huebsch was so deeply involved, noting his department oversaw the state’s energy office and it’s appropriate for his administration to work on business development projects. BCI was seeking money for an energy efficiency project.
“Since then, we’ve added a series of reforms that not only enhance the agency but enhance where things were under the old Department of Commerce,” Walker said.
Walker was speaking publicly for the first time since WEDC released late Friday its review of 371 awards of more than $200,000 made from mid-2011 to mid-2013. It also released nearly 1,000 pages of records related to the BCI loan.
Those records include an April 2012 email in which WEDC’s chief underwriter, Steven Sabatke, described a phone call from a Milwaukee car-leasing company official who said Minahan had promised to pay back his debts with a forthcoming state grant.
“I think the sooner we officially deny this, the better,” Sabatke wrote of Minahan’s request for an additional $1.5 million in state funding to Brenda Hicks-Sorensen, the agency’s vice president of community and economic development.
Both Sabatke and Hicks-Sorensen were involved in marshaling the original $500,000 loan to BCI in September 2011 after receiving pressure from the Department of Administration.
“Yikes!” Hicks-Sorensen replied. “I concur with Steve!”
Milwaukee-based Hallease later sued Minahan for $220,000 that he owed for several family and company vehicles, including a Maserati and a Corvette. The State Journal investigation also found Minahan told the manager of a Tulsa, Oklahoma, credit union to which he owed $131,800 in late 2011, that he would pay them back with money from the state.
Yet in late 2012, after Hall became WEDC’s CEO, the agency continued to pursue federal energy bonds for BCI under the direction of WEDC’s then-chief operating officer Ryan Murray, a former Walker aide who left the agency last year. WEDC collected more than $4.5 million in bonding authority from Waukesha, Washington and Kenosha counties, but Minahan was unable to secure a required financial commitment to obtain the money.
Barca cited those details in calling for Hall to resign.
“That’s potentially criminal activity on the part of senior staff,” Barca said. “Once you know this group had gotten its money under fraudulent circumstances, you can’t continue to try and get money for them, and that’s clearly what occurred.”
WEDC spokesman Mark Maley said in response that “there is a big distinction between WEDC providing an award to a company and working to make a potential bonding allocation available to a company as a tool to try to secure additional private investment.”
“We agreed to let the company pursue the possibility of utilizing the bonding authority as a tool to raise private capital,” Maley said. “But BCI was unable to find a traditional lender to underwrite the bonds, so that authority was never utilized.”
Maley also noted the 27 awards, including the BCI loan, were made before Hall became head of WEDC.
At a Capitol news conference Barca, Sen. Julie Lassa, D-Stevens Point, and other lawmakers also blasted Republican lawmakers for not joining them to demand answers from the WEDC, created by Walker in 2011 as a successor to the former Commerce Department to help businesses create jobs.
Barca and Lassa serve on the WEDC board and requested a slew of documents from the agency after last month’s State Journal report detailing the BCI loan. They said the agency, as part of Friday’s document release, didn’t produce all of the documents they requested, and the ones that were released were poorly organized.
Lassa said documents they requested that weren’t released Friday include information on awards made by WEDC against the judgment of its underwriters and on Community Development Block Grants administered by WEDC and the Department of Administration.
The U.S. Department of Housing and Urban Development reported in 2012 on at least two CDBG awards that didn’t receive a proper staff review. The WEDC review released Friday did not include those examples.