Gov. Scott Walker said Wednesday he supports a bipartisan bill that would make defrauding the state’s economic development agency a felony.
His comments came the same day an Assembly committee heard testimony on a bill sponsored by a bipartisan group of 28 representatives and 11 senators that would make fraud against the Wisconsin Economic Development Corp., a Class E felony. Committee members praised the bill.
“For the one or two cases where somebody can point to something like that, absolutely somebody should be prosecuted whether they did it to the Wisconsin Economic Development Corp., or whether they did it to the Department of Commerce in the past or whether they do it to any other state agency that gives out grants,” Walker told reporters Wednesday at a separate event. “If people give out fraudulent information there should be consequences.”
The bill comes in the wake of a Wisconsin State Journal report in May that found a struggling Milwaukee business owner received a $500,000 WEDC loan in 2011 despite including misinformation about past lawsuits and the project’s partners on his loan application.
Building Committee Inc., owner William Minahan made a maximum contribution to Walker’s campaign, hired a top lobbyist to help secure state funding and met with top Walker administration officials before receiving the loan. Walker’s then-Department of Administration Secretary Mike Huebsch pushed WEDC officials to provide the company additional funding. The agency sued the company and has received a financial judgment, but the loan has not been repaid.
So far no law enforcement agency has said they are investigating the BCI deal. Asked if he was aware of an investigation, Walker said “not off the top of my head. I’d have to go back and look. Discussions about this case and the one in Green Bay have been fairly public.”
In the Green Bay case, the state loaned $1.2 million in 2011 to Green Box LLC owned by De Pere-area businessman Ron Van Den Heuvel.
The Brown County Sheriff’s Office has been investigating Van Den Heuvel for months for potential fraud against WEDC. Van Den Heuvel has denied such allegations, but as of Jan. 5 had yet to repay the state, according to WEDC.
Sen. Dave Hansen, D-Green Bay, a sponsor of the WEDC fraud bill, cited both of those cases in testifying in support of the bill he sponsored along with Rep. Samantha Kerkman, R-Powers Lake.
“Any fraud against the taxpayer is significant, but these types of cases can cost taxpayers millions of dollars with one stroke of the pen,” Hansen told the Assembly Committee on Jobs and the Economy.
Kerkman noted the bill couldn’t be used to prosecute past cases of fraud. She also responded to concerns that fraud can already be prosecuted, saying it would give district attorneys an additional tool.
“I hope it never has to be utilized, but there are cases when fraud does occur, as the Senator pointed out,” Kerkman said. “I hope that it’s a deterrent for anyone who wants to take tax dollars from us in this state.”
James Buchen, a lobbyist for the Wisconsin Economic Development Association who was the only member of the public to testify, raised concerns that the bill would have a “chilling effect” on economic development in the state.
He said companies might be worried if they seek state assistance premised on creating a certain number of jobs, but due to changing economic conditions they create only half of the promised number of jobs, that they will be accused of committing fraud.
“The consequence might be fewer deals being done, fewer opportunities, less economic development and less jobs as a result,” Buchen said.
Rep. Scott Allen, R-Waukesha, said he supports economic development but asked Buchen what other steps the Legislature could take to restore confidence in WEDC.
“Those headlines we saw provide a chilling effect on this Legislature in continuing to support WEDC,” Allen said.
WEDC spokesman Steven Michels said the agency will work with the Legislature.
“WEDC’s Audit Committee and Board voted last month on a policy that strengthens our processes for identifying and reporting instances of potential fraud,” Michels said. “We look forward to working with the Legislature to enhance the tools at the State’s disposal to protect taxpayer dollars.”