Democratic lawmakers called Monday for a federal criminal investigation into a questionable loan deal that Gov. Scott Walker’s top aides initially pushed for a top Walker donor.
Assembly Minority Leader Peter Barca, D-Kenosha, said at a news conference at the Capitol that a State Journal investigation of a $500,000 state economic development loan to Building Committee Inc. (BCI) that has never been repaid shows evidence of “possible corruption.”
The State Journal reported its findings in a two-part series that ran Sunday and Monday.
“$500,000 in taxpayer funds were wasted by Gov. Walker and his administration on a loan that never should have been granted to a major campaign contributor,” said Barca, a board member of Wisconsin Economic Development Corp. “As a taxpayer and someone who cares deeply about economic development in this state, as a legislator and a board member, I am outraged.”
Barca and Sen. Julie Lassa, D-Stevens Point, who also serves on the WEDC board, called on U.S. Attorney General Loretta Lynch and U.S. Attorneys John Vaudreuil and James Santelle to launch an investigation into missing documents, whether taxpayer dollars were misused, and whether criminal violations may have taken place at WEDC.
Vaudreuil’s office said its policy is neither to confirm nor deny an investigation. Messages left with Santelle and state Attorney General Brad Schimel were not immediately returned.
Walker spokeswoman Laurel Patrick said Monday that the governor has asked WEDC to discuss the loan at its next board meeting, which is scheduled for July 21.
“There should be an open, thorough and transparent discussion of this topic, and the appropriate place to address recent concerns raised by two board members is at a full meeting of the board,” Patrick said.
In New Orleans on Monday, Walker told The Associated Press that he played no part in the loan and that Democrats are on a “political witch hunt.”
Patrick also accused the Democrats of “political gamesmanship,” saying as WEDC board members they received regular reports about delinquent loans and loans being written off and had unfettered access to WEDC staff to answer questions.
“Clearly, they chose not to follow up on this until it became a political football for Democrats,” Patrick said. “WEDC is focused on helping the state to grow its economy and create jobs. WEDC does not make decisions based on politics.”
Patrick said the $500,000 loan was mentioned as being written off in a report to the board in October 2014, but Lassa said it was one of four loans on a list, and “the troubled circumstances of this loan were not revealed to the board at its October 2014 meeting, nor at any other time.”
Paul Radspinner, CEO of Madison-based FluGen and a WEDC board member, said the Legislature and WEDC board should get to the bottom of any problems with the loan.
Radspinner, who also is chairman of the WEDC committee that oversees grant and loan applications, said he’s “very confident” the issues with the BCI loan wouldn’t happen today because of additional policies and oversight, including the work of his review committee.
“That kind of company wouldn’t get a loan like that today,” Radspinner said.
Lassa added the BCI loan to a list of problems at Walker’s flagship job-creation agency, which was launched in July 2011 and has been plagued by a series of missteps and negative audits. The most recent report found the agency had failed to follow internal policies in its loan program, such as tracking how many jobs had been created.
Within hours after the audit came out, Walker scrapped a proposed merger of WEDC with the Wisconsin Housing and Economic Development Authority. Last Friday, after releasing documents to the State Journal about the loan to BCI, Walker called for eliminating the loan program altogether, citing the audit.
At the state Republican convention on Saturday, Walker said the decision to scrap the loan program was not related to a specific loan.
“I haven’t looked at it,” Walker said about the BCI loan. “It’s one of those where in the end we have a very clear process where it has to be based on performance just like any loan, just like many we looked at in the last few years made by Gov. Doyle’s administration.”
Last week, Barca and Lassa called on the state’s budget committee to delay any action related to the agency at its upcoming Thursday meeting.
They also called for emergency meetings of the WEDC board and the Legislature’s audit committee to address concerns in the audit.
But Barca said the issues raised in the State Journal investigation go beyond lawmaker scrutiny and should be investigated by federal prosecutors, who are better equipped to handle problems of corruption.
“We’ve crossed the Rubicon,” Barca said. “We’ve passed the point in which we believe we can handle this internally within the board because we don’t have access to the documentation. And I would hope the governor would join us in asking for a federal investigation, because he has an even higher level of fiduciary responsibility as chairman of the board.”
Sen. Rick Gudex, R-Fond du Lac, a WEDC board member, declined to comment, but his chief of staff, Tim Lakin, called the federal investigation request a “knee-jerk reaction.”
A state Democratic Party spokeswoman said it filed a complaint with the Government Accountability Board on Monday. A GAB spokesman said midday Monday it had not received the complaint.
The complaint, provided to the State Journal, names Walker, former Department of Administration (DOA) Secretary Mike Huebsch and former Walker chief of staff Keith Gilkes. It alleges that they violated state law by using state taxpayer resources to reward a donor to Walker’s campaign and advance Walker’s political career.
A State Journal investigation published Sunday and Monday found that Walker’s top aides, including Huebsch, pressed for the state loan to BCI, owned by a top Walker donor.
Gilkes was involved in an initial meeting with Huebsch and company owner William Minahan, after which Huebsch pressed WEDC to provide the company a $4.3 million loan, according to Paul Jadin, then the CEO of WEDC.
After WEDC provided the now-dissolved company an unsecured, “fairly risky” $500,000 loan, he continued to press for additional funding, Jadin said.
Minahan had hired Eric Petersen, an influential lobbyist whose clients donated to Walker, to represent him. He also was one of 32 donors who gave Walker the maximum $10,000 donation in his first gubernatorial campaign in 2010.
The loan has not been repaid and last year WEDC sued the company.
Minahan said on his WEDC application that the company hadn’t been sued in the previous five years, but a review of court records found at least three lawsuits filed in 2010.
Falsifying information on the loan application would have been grounds to disqualify the company for state assistance.
The company also claimed it partnered with La Crosse-based Michaels Energy and UW-Milwaukee, but officials with both the company and the university questioned that characterization.
Records obtained by the State Journal show a DOA official offered to review the project, but a DOA spokesman said that review did not happen.
WEDC spokesman Mark Maley said the agency can’t locate a record of its own staff review justifying the initial $500,000 loan.
Jadin eventually turned down additional requests for funding, and after he left the agency the loan due date was extended 10 months.
“WEDC has pursued and is continuing to pursue all methods possible of collecting the BCI loan,” Maley said Monday.
State Journal reporter Dee J. Hall contributed to this report.