Turns out that WEDC has used money from the U.S. Departent of Housing and Urban Development (HUD) to improperly funnel taxpayer dollars to sketchy companies with little to no oversight. Scott Wittkopf at Badger Democracy goes into great detail about the most damning part of the letter, in which HUD says WEDC had never been approved to be the organization to shell out this money, and that the Walker Administration ignored several months of HUD requests to explain what WEDC was and how they were going to adhere to federal rules (because that money doesn't come without strings, you know). The Walker folks simply ignored the requests, and when that failed, tried to make WEDC's appointment retroactive 8 months after the fact (HUD turned that silliness down).
There were several other issues, as the State Journal article notes.
HUD said some of the problems resulted from the "hasty" transfer of duties from the former Department of Commerce to the new economic development entity without a formal written agreement. The monitoring apparently was triggered by an announcement in February by Walker that four communities had received $9.6 million in CDBG funding.So HUD yanked WEDC's ability to access the CDBG dollars and database in April for flagrantly violating their rules, and also found that $8.6 million in other CDBG funds flat-out WENT MISSING, which the Walker folks are tentatively blaming on a worker that allegedly controlled the money on his last day of work in December 2011.
"At the time these awards were made," HUD said, "WEDC had no legal authority under the CDBG program to award or administer the CDBG funds."
The federal agency ordered Wisconsin to hire a high-level administrator for monitoring, oversight and compliance, saying DOA currently lacks "adequate staff or experience to adequately oversee ... the new activities that are being undertaken by the WEDC."
Among the most serious findings are that the state failed to perform required underwriting — the proceess of determining the financial soundness of a company — before giving $390,000 to Gilman USA LLC, a machining company in Grafton, and $1 million to Morgan Aircraft in Sheboygan. The aircraft company's website said it is developing a vertical lift technology that "combines the operational advantages of a helicopter with the range and speed of a fixed-wing aircraft."
In the case of Gilman, "WEDC staff indicated that the underwriting process was skipped in order to accommodate the business' timeline," HUD said. "In the case of Morgan Aircraft, WEDC staff indicates that an updated underwriting was performed, but not placed in the file. HUD staff requested a copy ... but it has not been provided."
Even better, DOA Secretary Mike Huebsch gave a response to these issues to HUD on Sept. 12, but the Walker Administration hid this from the WEDC board in their meeting on Sept. 20, and Democratic Legislators Julie Lassa and Peter Barca didn't find out about WEDC"s screw-up of HUD funds until the papers ran with the story this week. Needless to say, they weren't happy with the cover-up.
“These problems could have been avoided if the governor and Republican legislators had worked together to ensure a smooth transition from the Department of Commerce to WEDC,” Barca said. “Instead, the Republican legislature made the hasty decision to create WEDC without having a business plan in place. From the beginning, top officials from the former Department of Commerce and the federal government told us there would be problems with the way this transition was handled.”Walker's response to those complaints? They were releasing the information on this issue with HUD on a "need-to-know" basis, and the WEDC Board members didn't need to know.
“It’s inexcusable that this letter was not shared with the WEDC Board at its meeting last week, even though the administration received it in August,” Lassa said. “The legislators on the WEDC Board are supposed to be providing oversight of taxpayer dollars, but we can’t play that role if important information like this is withheld from us. I expect WEDC and DOA to provide a full explanation of these charges, what they’re doing to remedy the situation, and why the Board of Directors was not informed of HUD’s allegations.”
Wow. Just....wow. You wonder why I think the GOP's real motto is "Rules don't apply to us?" At best, WEDC and Walker's DOA has shown staggering incompetence and has been horribly negligent when it comes to being responsible with taxpayer dollars, At worse, it is blatant pay-to-play corruption and a willful violation of federal law. But who could have seen such a thing happening in a public-private, governor-run organization like WEDC?
Well, me for one, especially in light of the scandal from June where WEDC tried to mess with a bid on a major state contract by promising tax credits to a company before their bid was evaluated. Oh, and I also had an idea something was screwed up when WEDC pulled a $14 million deficit in its first 12 months. But don't worry. I'm sure WEDC is just going through growing pains, and has steady leadership at the top to get through this.
Oh wait, you're telling me that the top guy at WEDC is quitting after less than 2 years on the job, and that the Number 2 guy is a 30-year old lifetime GOP political hack with ZERO experience in the business world? Yeah, I don't think this is getting cleaned up very soon.
Not that I think the Walker boys care about cleaning it up- they'd rather have their contributors clean up with sweetheart WEDC handouts at taxpayer expense. Do you get the idea the stories this week is the tip of a pretty large iceburg of sketchiness at WEDC? Because I sure do.