Foxconn turning into full-on folly and fraud

Josh Dzieza of The Verge magazine headed off into Wisconsin to find out what Foxconn was really doing. And what he found (or didn’t find) is summarized in this fantastic article. I recommend you check out all of it, but I’ll give a few highlights.

Dzieza starts at Foxconn’s alleged Wisconsin headquarters in downtown Milwaukee, where has a hard time getting any information from the few people that work there.

The Foxconn employees I approached invariably said they couldn’t talk to the press, though they were all very nice about it. One even shouted, “Oh no, sorry!” while literally running down the sidewalk away from me. But they held the line; a trio in their 20s who were waiting for a cab couldn’t even confirm or deny that they worked at Foxconn.

What I can confirm: there are Foxconn people there. I’ve seen their purple lanyards, and I’ve seen the panic in their eyes when I introduce myself as a journalist. A search of LinkedIn and local job boards indicates that there are likely a few dozen of them, mostly recruiters, project managers, and “concierge” employees.

As downtown Milwaukee alderman Robert Bauman tells Dzieza, it seems like these Foxconn buildings in other parts of the state aren’t as much for business, but for show.

“[Foxconn was] increasingly tuned into the politics in Wisconsin, and were increasingly aware that maybe this deal isn’t going over so well. We’ve got to give the appearance that we’re doing good things throughout the state,” he said, imagining Foxconn thinking “Let’s run around and buy select buildings in Green Bay, in Eau Claire, in Downtown Milwaukee, sort of increase our public relations a little bit.”

That theme “appearances over output” seems to repeat itself throughout the article, and no better than in this great quote from State Rep. Jonathan Brostoff.

“It’s the Midwest Fyre Festival, straight up,” said state Rep. Jonathan Brostoff when I met him at a diner in Milwaukee, “all sizzle, no steak.” A pugnacious Democrat with a frizzy mane, the result of refusing to cut his hair until his bill improving sign language translator availability is passed, Brostoff thinks the project is “100 percent a scam,” that state Republicans know it, and that the reason they undermined Evers was so the “ticking time bomb of fiscal irresponsibility” explodes on his watch….

It’s become something of a running joke. When I told people I’d been to the headquarters, they would often grin and ask what happened, before recounting their own experiences of getting turned away at the lobby. Brostoff calls it a “ghost town, an empty storefront.” Matt Flynn, who ran in the Democratic gubernatorial primary and is trying to raise money for a suit claiming elements of the Foxconn contract are unconstitutional, calls it a “Potemkin office” and likens it to a flimsy stage set on a television Western. A local observer gave me a tip from his own attempts to discern what exactly is going on inside the headquarters: if you go to the top floor of a parking garage across the street at dusk, you can see into the Foxconn floors. I did so and saw that it looks like a normal office, and there were at least six people inside.

Then Dzieza comes goes to one of Foxconn’s regional “research facilities” in Eau Claire. Here's what he finds.

Public records show that a renovation permit has been taken out for the space, but multiple sources involved with the innovation center process say no one working on the project has a contract, and no one has been paid.

Dzieza says Green Bay's “innovation center” is much the same, with a mutil-tenant building showing little sign of everyday Foxconn operations,and Green Bay’s development director says in the article that “Foxconn would occupy only a single floor of the six-story building.”


Bruce Murphy of Urban Milwaukee has called out the Fox-con from day one, and he both summarized Dzieza’s article, and hearkened back to his own prediction back in July that the GB, Milwaukee and Eau Claire “innovation centers” were PR stunts to help Scott Walker stay in office, and that they’d never amount to much, if anything.

All of which left me with some questions for the company. What is the economic advantage for Foxconn of having three different innovation centers spread around the state? And what is the company paying for these buildings in Green Bay and Eau Claire and when will they be closing on the purchase? Will it be after the November election when Walker hopes to be reelected?

No doubt there are potential employees and suppliers to be found in other parts of the state, but are we living in the age of plank roads and mule teams? Or are these potential partners too shy to use computers, email and cell phones or simply drive along those highway connections to Foxconn’s massive Racine campus that we taxpayers are financing. Why must the company instead create satellite connections all over Wisconsin in order to coax these elusive workers and companies from getting aboard the gravy train of the most publicly subsidized foreign company in American history?

Given the massive subsidy Foxconn is getting, it can probably afford to throw a little money at Eau Claire and Green Bay, even if those satellite centers are completely unnecessary. And Foxconn has every incentive to ensure that Walker wins reelection, given that all eight Democratic candidates for governor have condemned the deal and one, Matt Flynn, has promised to fight the deal in court. Foxconn, moreover, has a long history of backing out of projects it announces. If it could back out of deals in India, Vietnam, Brazil and Pennsylvania, why can’t it walk away from Eau Claire and Green Bay? It can merely explain, a couple months after the November election, that economic conditions have changed, or that it is having no problem getting the suppliers and employees it needs for its Racine plant, and so it won’t need those political outposts — sorry, innovation centers — that helped reelect their generous benefactor.

Fortunately, the voters of Wisconsin weren’t tricked by Foxconn’s cynicism, and booted Walker for Tony Evers in that election. And according to the latest Marquette Law School Poll, they still don’t trust these guys today, despite having Charles Franklin ask the question in the most generous way to Foxconn possible - claiming that Foxconn will add "up to" 13,000 jobs with a $10 billion investment, neither of which will come close to happening.

Near the end of Dzieza's article in the Verge, he attends a meeting in Racine County where a local consultant on the Foxconn project can’t answer any questions on the status of the factory that’s supposed to be built there, and it seems like no one knows what’s going on, including the company itself.

I heard many theories about what Foxconn was doing while I was in Wisconsin: that it’s a scheme to get visas for Chinese workers, a plot to acquire intellectual property or to buy up real estate and become a landlord or to get access to Lake Michigan water for mysterious reasons. A nearby farmer who’d been watching the project closely thinks it’s a ploy to get investor visas using commercial bonds and an excuse for Koch Industries to pipe freshwater over the subcontinental divide and for the military to make large screens inside the US, and that the final product will be a city of tax-protected warehouses and assembly facilities for mostly imported goods. “It’s all opaque so it’s nothing but a guessing game,” he told me.

But the most plausible explanation I heard is that Foxconn’s secret is that it has no idea what it’s doing in Wisconsin.

“In China, people announce projects like this all the time, and some of them get built, and some of them don’t,” said Willy Shih, a Harvard business school professor who consulted in the screen industry for several years. They’re called “state visit projects,” he said. Politicians get a photo op, and companies to get some political goodwill, but everyone knows the announcement is extremely preliminary. Ultimately, the company will do whatever makes economic sense, and sometimes, that turns out to be nothing….

Shih thinks Foxconn is still figuring out what it’s going to do and that the infrastructure development, political attention, and insistence on a factory is painting the company into a corner. “It may be a little more than they bargained for here,” he said.

Or it's been a scam from day 1, and now Foxconn can't keep up with their own BS while still trying to hold up a facade to make Donald Trump, Scott Walker and other Republicans from getting humiliated on this albatross (well, more than they already have).

This thing was bad enough before Friday. And then it got even seamier today. That will be described in the next post.