Idiot in Thief

More disturbing news about a questionable $500,000 loan to a high dollar donor to Scott Walker. Even after WEDC staff became aware of the troubled company’s problems, they still tried to secure federal funds to help pay off business debts like the lease on a Maserati.

http://www.jsonline.com/news/statepolitics/wedc-backed-firm-after-learning-state-money-was-for-luxury-car-debts-b99525593z1-309866451.html

Madison — Officials at Wisconsin’s top jobs agency sought federal tax incentives for a failing Milwaukee business for a year after being told that the owner was seeking the money to pay off business debts such as the leases on luxury cars.

Officials at the Wisconsin Economic Development Corp. worked to get that federal help for Building Committee Inc. even though a $500,000 loan it had given to the company had gone sour within months and the owner of the firm had provided false information to the state.

Top officials in Gov. Scott Walker’s administration pushed to get Building Committee the initial loan and worked to get more for the company. But the jobs agency had to pass on giving the company more money from state taxpayers after finding numerous problems with the firm and being told that owner Bill Minahan was promising some of this second proposed loan to pay a leasing debt on cars such as a 2010 Maserati and a 2011 Nissan 370Z luxury sports car.

Information about state officials’ long-running attempts to find help for the troubled company are coming to light just as the Republican governor prepares to announce his bid for the presidency next month. Walker said this week he didn’t think his jobs agency had cut any corners.

WEDC officials’ alarm didn’t stop them from persuading three counties to allocate $4.5 million for Building Committee from a federal program meant to spur energy conservation, according to hundreds of pages of emails and other documents recently released under the state’s open records law. Those federal incentives were never used because even with the subsidies in hand Building Committee was unable to get the financial backing it needed to move forward with its project.

WEDC officials never told those counties about the concerns that had made them email each other with statements like “Yikes!” and “I can’t believe we are actually going to do this” about earlier proposed help for Building Committee.

“I would hope that when you get a call from a Maserati dealership asking that taxpayer funds be put forward in order to pay off a loan for a Maserati, that the leader of the organization would issue a cease-and-desist order to stop any more dealings with the organization. That’s not what occurred,” said Assembly Minority Leader Peter Barca (D-Kenosha), who sits on the WEDC board.

WEDC spokesman Mark Maley said WEDC’s help getting bonding authority for the project was a “moot point” because Building Committee was never able to get private financing to make the deal happen.

He said no other projects were held up by allocating the bonding authority for Building Committee.

Minahan had been taken to court for unpaid taxes in 2010 and WEDC staff was aware of serious financial challenges he faced, such as late payments on a mortgage and revolving credit accounts with banks that were over their limits.

But Minahan also had political connections and a willingness to work them — he gave a maximum $10,000 donations to Walker’s campaign in 2010 and then-Gov. Jim Doyle, a Democrat, in 2009.

Walker’s administration secretary at the time, Mike Huebsch, urged WEDC officials to find help for Building Committee and Walker’s then-chief of staff, Keith Gilkes, attended an initial meeting on it.

(Walker later appointed Huebsch to sit on the Public Service Commission that regulates utilities. Before and after he served as chief of staff, Gilkes was Walker’s campaign manger; he now runs a super PAC supporting Walker’s likely presidential bid)

With that support from top Walker officials, WEDC loaned $500,000 to Building Committee in September 2011. Huebsch and another administration official, Chris Schoenherr, continued to push for more funding, with Huebsch personally calling WEDC’s head underwriter on the issue in February 2012.

Minahan regularly contacted top WEDC officials, the records show, and sought help elsewhere when he didn’t feel he was making progress with them. In April 2012, he contacted the office of Lt. Gov. Rebecca Kleefisch to see if she could help in releasing funds for him.

By February 2012, WEDC had decided to provide Building Committee with an additional $500,000, with then-CEO Paul Jadin deeming the plan “acceptable” in one email.

A month later, WEDC underwriter John Roos wrote the head underwriter, Steven Sabatke, to say “we are probably going to advance another $1.5 million” to the company, instead of an additional $500,000. Sabatke replied, “I can’t believe we are actually going to do this.”

But days later, Roos wrote a memo that detailed questions about Building Committee and Minahan’s financial strength. “Based upon the lack of collateral to secure additional funding, change in credit repayment status and no confirmed take out financing to repay the WEDC loan, staff recommends not providing additional WEDC funding for the project,” he wrote.

In April 2012, Sabatke emailed WEDC vice president Brenda Hicks-Sorensen to say an automotive leasing company had contacted him to find out about money for Building Committee. The firm was owed money by Minahan and he had told them he would soon receive a grant from WEDC and would pay the firm back once he received it.

“I think the sooner we officially deny this, the better,” Sabatke wrote.

Responded Hicks-Sorensen: “Yikes!” In a second email, she said she agreed it was important to deny the additional money quickly. Days later, in May 2012, WEDC formally denied providing more funding to Building Committee.

Months later, in August 2012, Hallease of Milwaukee sued Building Committee and Minahan for more than $220,000 for falling behind on payments for eight vehicles, including the Nissan 370Z and Maserati — a sports car painted a dark shade the manufacturer has dubbed “Nero,” after the emperor who was said to have fiddled while Rome burned. A judge ruled in the leasing company’s favor in October 2012.

A string of other lawsuits were filed against Building Committee and Minahan in 2012, including one over back payments on a 1981 Cessna airplane.

Help from counties solicited

By November 2012, WEDC was sending past due notices to the company on the $500,000 loan it provided in 2011. But that didn’t mean WEDC stopped trying to help the company using others’ money.

Early on, state officials discussed using Qualified Energy Conservation Bonds for Building Committee’s project, which involved making financial institutions more energy efficient. Such bonds are issued by local units of government and paid back by private investors, with the borrowing costs subsidized by federal taxpayers.

WEDC needed to rely on others to make that happen, so it asked counties to allocate their bonding authority to WEDC to use for Building Committee. Ultimately, Kenosha, Washington and Waukesha counties turned a total of $4.5 million in bonding authority over to the project.

Racine County was willing to put an additional $2 million in bonding capacity toward the project, but that idea did not advance as far as using the bonding authority of the other three counties, records show.

Officials with Kenosha and Waukesha County told the Milwaukee Journal Sentinel they were not told specifics about the project or the concerns among WEDC staff about Building Committee. David Geertsen, Kenosha County’s finance director, said his county initially decided not to give the bonding authority to the state for the project.

But WEDC contacted the county again in 2013 and officials there decided to give the bonding authority to WEDC because the county did not have other potential projects at the time that could make use of the bonds.

By that stage, WEDC’s staff internally had shown serious concerns about Building Committee and the firm was months behind on paying its state loan, but Geertsen said that information wasn’t shared with Kenosha County.

“We believed the job of vetting the company was the state’s job,” he said. “We thought if the state could use (the bonding authority) for a good purpose, then why not participate if it can create jobs?”

In January 2013 — at a point when WEDC had known about Building Committee’s problems for months — then-Waukesha County Executive Dan Vrakas gave WEDC $1.5 million in bonding authority for the project. Shawn Lundie, who is County Executive Paul Farrow’s chief of staff and served Vrakas in the same capacity, said the county was not told anything about the project other than that it would happen in Waukesha County.

“We never had any discussion about any individual company,” he said.

The state used Waukesha County’s decision to persuade Washington County to do the same thing. In April 2013, WEDC’s chief operating officer at the time, Ryan Murray, provided Washington County’s administrative coordinator, Doug Johnson, with a copy of Waukesha County’s letter releasing its bonding authority. Johnson wrote Murray back to say he would use the letter “as my guide” on the issue and Washington County ultimately allocated $1.3 million to WEDC to help Building Committee.

Although WEDC lined up the bonds for Building Committee, they were never issued. To complete the deal, Building Committee needed to find a local government to issue the bonds and private lenders willing to invest in them, but it didn’t meet all those requirements.

Last year, WEDC sued Building Committee over the unpaid 2011 loan.

In an email to the Journal Sentinel, Murray said he approved denying additional help from WEDC for Building Committee in 2012 because of staff skepticism about whether the company’s plans to install solar panels on financial institutions would be successful. But he said he was not told of the contact from the leasing company or the legal challenges the company and it its owner faced at the time.

“In the case of (Building Committee), we viewed the request to pursue QECBs as a reasonable attempt to help a company succeed before pursuing aggressive collection,” wrote Murray, who is now a lobbyist. “Our belief was that whether (Building Committee) was able to secure such private financing would provide a market check on the value of business model they were pursuing. If they could not receive such financing, it would be a sign that the business model was not viable and we should pursue aggressive collection.

“Ultimately, (Building Committee) was not able to secure the private financing and we did pursue collection. It’s important to understand that this decision gave a Wisconsin business the best chance of success without risking any additional taxpayer funds from WEDC.”

In March 2014 — two years after WEDC declined to give the company any more of its own support — WEDC alerted Building Committee it would withdraw the bonding authority for Building Committee “and distribute it to projects that can more immediately utilize them.”

Jake Kuester, WEDC’s vice president of credit and risk, emphasized the benefits of the public help the bonds provide in his letter to Building Committee.

“The QECB bonds are a valuable economic development tool WEDC relies on to assist businesses like BCI,” he wrote.

Andrew Hahn of the Journal Sentinel staff contributed to this report.

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