Gov. Scott Walker announced today the Wisconsin Economic Development Corp.’s chief financial officer has resigned and a series of corrective steps are being taken after the agency failed to track $8 million in past-due loans.
COO Ryan Murray also told the WEDC Board the loans, which were initially made to Wisconsin businesses under the Department of Commerce, weren’t tracked properly because the newly created agency last year failed to assume control of that responsibility from Commerce and the new agency’s software was insufficient to do it. He emphasized that the agency is following up with businesses on collection of these outstanding loans and that because the loans were made under the old Department of Commerce, they will still be referred to the Department of Justice for collection.
Both also said the agency had accepted the resignation of CFO Mike Klonsinski, whose last day was yesterday.
Walker also told the board during closed session that he intended to name Reed Hall, the former executive director of the Marshfield Clinic, acting CEO to replace Paul Jadin, according to a WEDC spokesman. The current CEO is leaving to take a job with Thrive, and Walker said in open session he preferred to appoint an interim CEO for the quasi-governmental agency because he needed Murray, his former deputy chief of staff, to focus on identifying other issues in WEDC while someone outside of the agency was needed to temporarily lead the agency.
“I want to make it clear that overwhelmingly the staff of the WEDC is doing a good job,” Walker said. “But Ryan has found some concerns as of late with this loan portfolio, and we need to allow him to continue to look into those issues.”
The corrective moves announced today include a review of all WEDC financial transactions, a search for new tracking systems and software, and cooperating with ongoing audits in an effort to correct errors that left the $8 million in past-due loans without any oversight.
Murray also said the agency will create a new process for handling the loan portfolio and will review all vendor payments, contracting and other financial transactions. Murray said that since the loans were handled under the old Commerce Department, those past-due loans will still be referred to DOJ for collection.
Assembly Minority Leader Peter Barca, who serves on the WEDC Board of Directors, expressed concern over what he called a “huge mistake” and said professionals with expertise in banking and finance need to be brought in to manage loan portfolios rather than relying on current staff.
The Kenosha Dem also said the Legislature didn’t take enough time to carefully plan out the transition from Commerce to WEDC.
“The idea that senior management had no idea since June of 2011 where this portfolio was at … that is just a massive issue. I mean, it’s hard to even imagine.”
Jadin appeared before the Legislative Audit Committee to discuss the state’s economic development efforts from 2007-11. But the the loan issue wasn’t brought up, and the board debated whether Jadin should have mentioned it at yesterday’s hearing.
Jadin said that meeting was to focus on a very specific issue and that it was not the place to discuss the matter, especially when the full board had not yet been given the full details.
Barca and Dem state Sen. Julie Lassa disagreed with that assessment, saying that while Jadin didn’t have to go into specifics about the issue, he should have “erred on the side of transparency” and notified the committee of the basic details.
Walker defended Jadin’s decision, saying that staff was put in a “no-win” situation once the details of the loan portfolio errors were leaked to the media.
“I think the secretary would have been preempting this very board to talk about an issue that hadn’t even been discussed with the WEDC Board of Directors.”
-Jason Smathers
