Walker's economic development agency remains in disarray as he campaigns on economic record

Industrials Associated Press

The economic development agency Gov. Scott Walker created to entice a quarter-million jobs to come to Wisconsin ended up with lots of unwanted baggage: allegations of botched underwriting, ineffectiveness and favoritism. The agency remains in disarray as Walker campaigns for the Republican presidential nomination.

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Walker created the Wisconsin Economic Development Corporation in response to what he described as an economic emergency when he took office in 2011. As the agency's chairman, Walker appointed its top officials and six members of its 15-person board.

Among its early awards: $1.2 million in grants and loans for a company that said it could turn dirty plastic forks and ketchup-stained napkins into jobs. The company, Green Box NA Green Bay LLC, said its world-changing technology would produce recycled products, electricity and even diesel from fast-food waste and promised to employ 116 people.

But Walker's agency appears not to have looked adequately into Green Box. Company founder Ron Van Den Heuvel owed millions of dollars in legal judgments to banks, business partners, state tax officials and even a jeweler. Patents it said it owned are listed as belonging to other entities, according to the U.S. Patent and Trademark Office.

Four years later, Green Box is in court-ordered receivership. The company's attorney told a court that sheriff's deputies have seized five truckloads of documents from its offices as part of an investigation, according to the Green Bay Press Gazette on Monday.

As far as the Wisconsin Economic Development Corporation, "it just keeps getting worse," said Peter Barca, a Democratic assemblyman and minority leader who sits on the agency's board. "Never in my wildest imagination would it occur to me that WEDC would give out loans with so little oversight."

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A spokeswoman for the governor, Laurel Patrick, disputed that the agency had gone awry under his watch.

"There have obviously been lessons learned along the way," Patrick wrote in an email to the Associated Press. But she credited Walker with creating an agency that "could more effectively focus on spurring economic development and job growth."

The Wisconsin Economic Development Agency arose out of Walker's 2010 campaign pledge to abolish the state's Commerce Department. But staff bolted during the new agency's transition out of state government, and the new agency lost track of $8 million in overdue loans. A 2013 state audit found that the agency routinely failed to adhere to its own rules or state law when awarding cash to businesses.

Internal emails obtained by The Associated Press and interviews with former employees reveal continued struggles to keep track of basic paperwork or push back on questionable award applications.

The handling of the Green Box loan suggests continued problems. As recently as February, the economic development agency considered awarding Green Box additional incentives. The agency later joined a lawsuit against the company.

Green Box initially told AP that it was in good standing with the state before acknowledging the litigation. It said the agency's lawsuit is meritless. Its founder offered the AP a tour of a paper plant in eastern Wisconsin and documents verifying its technology, but AP declined after Green Box failed to show it owned the plant and required AP to sign a confidentiality agreement.

Other development projects have come under scrutiny for political ties, with major Walker donors receiving handsome payouts.

In one instance, top Walker aides lobbied the agency to give a $500,000 deal to a troubled, high-risk company owned by a Walker donor. First reported by the Wisconsin State Journal, the ill-fated $500,000 loan was made to construction company Building Committee Inc., whose owner, William Minahan, gave Walker's campaign $10,000 one day before the 2010 election. Walker appointees pushed the agency to give Minahan even more money — even after the agency learned that Minahan had pledged agency funds to pay for a lease on a Maserati sports car. The company defaulted on the loan from the state.

Walker's office has said the governor did not know about the agency's efforts on behalf of Minahan's company.

Uproar over the agency's recent audit and the details of the troubled loan to Building Committee Inc. has cast a shadow over the development agency's future. But Walker appointees and allies — who dominate the agency's board — say that the agency's troubles are now mostly behind it.

Regarding the Green Box loan, "I can't defend it, I won't defend it," said board member Ray Dreger, a Walker appointee. But though the agency "certainly is an effort in progress," Dreger credits Walker with having led it in the right direction.

"He's been very active. He's had the hands on," Dreger said. But he added that as far as the administration of the agency, "of course, he's really not involved."