The fallout over the meltdown of Scott Walker’s jobs agency continues, with a Democratic group demanding administration records, lawmakers formally asking for a federal investigation, and growing calls for the troubled entity to be scrapped.
The pace of developments suggest the emerging scandal may be set to spill over into the presidential race, as Walker lays the groundwork for his all-but-announced 2016 campaign.
On Wednesday, American Bridge, a Washington-based group with ties to Hillary Clinton, announced it had filed public records requests for documents relating to a questionable loan given by the Wisconsin Economic Development Corporation (WEDC) to a Walker supporter. The same day, Walker’s office backed off a controversial effort to shield WEDC from such requests.
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Days after taking office in 2011, Walker created WEDC, turning the Commerce Department into a semi-private corporation to support job growth, in large part by making loans to businesses. He serves as chair of the agency's board.
The 2011 loan of $500,000, pushed by top Walker aides, went to a construction company, Building Committee Inc. (BCI), run by William Minahan, who gave Walker’s 2010 gubernatorial campaign a last minute $10,000 cash infusion, the maximum allowed. The loan created no jobs, was not paid back, and was given despite evidence that BCI was already in financial trouble. Among a host of other problems with the loan revealed Sunday by the State Journal newspaper: Minahan checked ‘no’ when asked if the company had been sued in the past five years, even though court records show three suits in that time.
Walker’s office has said he wasn’t aware of the loan. After the Milwaukee Journal-Sentinel reported Tuesday that he was copied on a letter from WEDC approving the loan, the governor's office said he didn’t receive the letter.
American Bridge’s public records request to WEDC asked the agency for any documents related to the BCI loan, and any communication between top WEDC officials and Minahan or other BCI staff. In a second records request, this one sent to Walker's office, American Bridge asked the governor’s office for any communication between the governor or his chief of staff and BCI.
"Our office received and is working to fulfill the open records request," said Laurel Patrick, a spokeswoman for the governor.
But the governor’s office appeared to confirm Wednesday that WEDC is subject to the state’s robust open records law. A Walker spokeswoman told the State Journal that it no longer is looking to shield WEDC from the law, as it had sought to do in a budget request submitted in February.
That budget request had also fought to merge WEDC with a separate government agency, a plan that Walker backed down from earlier this month.
Separately Wednesday, two Democratic lawmakers who sit on WEDC’s board sent a letter to U.S. Attorney General Loretta Lynch asking for an investigation into whether the loan violated federal laws against bribery and corruption. The letter, written by state Sen. Julie Lassa and state Rep. Peter Barca, noted that WEDC told the State Journal it could not locate key documents used to make the decision to award the loan, and raised the concern that Walker’s administration “may have willfully erased/destroyed these documents, which would hinder any investigation into their actions.” (Lassa and Barca had said at a press conference Monday that they planned to ask for the investigation).
Peter Carr, a Justice Department spokesman, declined to comment on the letter.
WEDC’s problems go beyond the controversial loan. Earlier this month, a non-partisan legislative audit board released a damning report on the agency, finding that it failed to require loan recipients to document the jobs they created and ignored certain requirements of state law in awarding tax credits, among other issues.
It was that report that prompted to Walker to drop his plan to merge WEDC with another government agency.
Then last Friday—hours after responding to inquiries from the State Journal, Walker’s office announced it would phase out WEDC’s $74 million loan program—until now its core mission—and reorient the agency around job training and tax credits. Democrats saw in the move a desperate effort to take the agency’s checkered record off the table and out of the conversation with the presidential campaign approaching.
Calls for WEDC to be scrapped are coming from across the ideological spectrum.
Conservative Milwaukee Journal-Sentinel columnist Christian Schneider argued Wednesday that the agency that government shouldn’t be in the business of supporting private companies. “So far, there has been nothing worse for economic development in the state than the Wisconsin Economic Development Corp.,” Schneider wrote.
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And in a column of her own, state Senator Kathleen Vinehout said it's time to re-evaluate the state's economic development policies, calling WEDC a "failure."
Even the Republican chair of the House Budget committee acknowledged the need for changes.
"The WEDC model can be effective," Rep. John Nygren told reporters Thursday. "But obviously we’ve got some work to do to make improvements."
Adding to the problem for Walker is his state's poor economic performance. It currently ranks 40th in job growth, and Walker didn't come close to making good on his promise to create a quarter million jobs in his first term in office.