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Wisconsin development agency not tracking loans

MADISON, Wis. (AP) – The semi-public agency charged with overseeing economic development efforts in Wisconsin did not track how much was owed on $8 million in overdue loans for more than a year, leading Gov. Scott Walker to promise dramatic corrective action.

The Milwaukee Journal Sentinel reported Thursday on the latest problem facing the Wisconsin Economic Development Corp. The authority was created last year by Walker and the Republican-controlled Legislature to replace the Department of Commerce and lead the state’s job-creation efforts.

Walker released a statement to the Journal Sentinel promising to discuss “dramatic moves” with the board that oversees the agency at its Friday meeting.

“Being a good steward of taxpayers’ money while helping people create jobs is my top priority,” Walker said.

Democrats and even a Republican member of the WEDC board expressed anger and frustration at the news.

“I don’t think we have any excuses,” said former GOP U.S. Rep. Scott Klug, a member of the WEDC board. “I think this has to be straightened out. The board naively assumed that someone would be collecting on these loans … The board will be more aggressive moving forward.”

Democratic state Rep. Jon Richards, D-Milwaukee, called it “a horrendous abuse of the public trust.”

“If it had happened at a private business, heads would roll – not just one head but many heads,” Richards said.

Republican Senate Minority Leader Scott Fitzgerald, a recent addition to WEDC’s board, downplayed the issue and blamed Democrats for trumping it up.

“There’s no accusation about impropriety. This is about accounting. Beyond that, I think there’s some politics in play,” Fitzgerald said.

The agency’s chief operating officer Ryan Murray said he first learned last week that the loans to 99 businesses had not been tracked since June 2011, the month before WEDC was created.

The agency was still trying to determine how much taxpayers are owed on the largely state-funded loans and how much is past due.

The failure was discovered as the agency prepared materials for an ongoing legislative audit, Murray said. The agency is still investigating how the mistakes were made, why it took so long to discover them and what will happen to those employees who failed to keep tabs on the taxpayer-funded loans, Murray said.

“Clearly, a ball was dropped here a year ago but the system worked in uncovering it,” Murray said. “The system to detect this worked but the system to collect on loans obviously did not.”

Murray said WEDC sent a letter Wednesday to some of the businesses with past-due loans and would start making more contacts with all of the businesses in the coming days. He said the agency likely would ask the state Department of Justice to sue some of the businesses to recover the money. The state also has retained a law firm specializing in debt collections to assist in the process, Murray said.

Paul Jadin, the head of the WEDC, didn’t mention the blunder when he testified Wednesday before the Legislature’s Audit Committee. It was holding a hearing on an earlier audit on WEDC that focused largely on whether the agency was being transparent and accountable to taxpayers about its subsidies to businesses.

Jadin announced last month that he is leaving as the head of WEDC effective Nov. 1 to lead a regional economic development group based in Madison.

Not tracking the loans is just the latest in a string of problems for WEDC. This summer the state had to suspend and then restart bidding on a state contract after WEDC offered one of the bidders, Skyward of Stevens Point, tax credits if it won the contract.

Federal officials also recently raised concerns that for eight months WEDC spent nearly $10 million without legal authority.

Information from: Milwaukee Journal Sentinel, http://www.jsonline.com

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