By Jason Stein, Mary Spicuzza and Andrew Hahn, July 10, 2015
Wisconsin's flagship jobs agency failed to run adequate checks and gave two awards worth more than $1.2 million to a financially troubled De Pere businessman who had not disclosed his problems to the state, a Milwaukee Journal Sentinel review has found.
Despite those omissions in 2011 and 2012, Gov. Scott Walker's administration kept working with Ron Van Den Heuvel and his clean energy company, Green Box, into 2014, state records show.
There is no record so far of the Wisconsin Economic Development Corp. notifying the City of De Pere about the company's money troubles even though Green Box was working with the city in an unsuccessful attempt to get tax-exempt bonds — in part to repay the state's soured loan.
It's the second case disclosed in recent weeks in which WEDC failed to catch omissions by businesses about their troubled finances and then continued to work with them.
"It really pains me to see states so snookered like this. It's not like state resources are plentiful these days," said Thomas Cafcas, a research analyst for Good Jobs First, a national group that works with unions, environmentalists and others to look into states' incentive programs for businesses.
After allowing Green Box in September 2014 to renegotiate the state's bad loan of $1.1 million, WEDC sued the company in Brown County Circuit Court in May for failing to make its payments and with two other creditors had the company put into receivership last month.
"Green Box and/or Van Den Heuvel have provided creditors with false financial statements showing inflated assets," reads the lawsuit by WEDC and others. "...Van Den Heuvel appears to have other entities that he has a pattern and practice of changing the entities' names and starting up new entities to escape obligations to creditors. Van Den Heuvel has been involved as a registered agent for 40 separate entities in Wisconsin."
Van Den Heuvel, a longtime donor to Republicans, and Green Box now owe $139,000 in state and federal taxes; delinquent property taxes for a De Pere property; and more than $1.2 million to WEDC for the 2011 loan and a $96,000 grant made in 2012, the lawsuit alleges. Other private creditors are owed millions of dollars more, it says.
In an interview, Van Den Heuvel presented his business as one that would transform the world by converting waste materials into new products. He said he was working hard to pay his creditors — including the state — without going into bankruptcy and needed more time and leeway to do so.
"We're going to eliminate landfills forever from the face of the Earth," Van Den Heuvel said. "...I'm not embarrassed by what happened here. I'm embarrassed for the state that they don't have flexibility."
Walker and lawmakers created WEDC in 2011 as a replacement to the Department of Commerce. The governor serves as the chairman.
The awards to Green Box are the latest in a string of issues facing the state's main jobs agency, which in Mayreceived a tough audit saying it had failed to follow state law and its own procedures in its work. WEDC officials have pointed to the many steps they have taken to improve the agency's financial controls, arguing that past mistakes like Green Box don't reflect the current strength of its operation.
In 2011, WEDC gave an unsecured $500,000 loan from taxpayers to Building Committee Inc., a now-defunct company whose owner, William Minahan, had been taken to court a year earlier for not paying taxes. That loan was first reported on by the Wisconsin State Journal.
BCI and Minahan, a donor to Walker's campaign, indicated incorrectly in their September 2011 application for their state loan that the company, its owners and officials had not been involved in any lawsuits or civil cases in the previous five years.
In forms given to WEDC, Van Den Heuvel said the same. He certified in 2011 and 2012 that neither Green Box nor any of its owners or officers had been involved in lawsuits in the previous five years or had outstanding tax liens.
Online state court records show Van Den Heuvel and companies associated with him have been taken to court repeatedly in the past 10 years, including by the state Department of Revenue for delinquent tax warrants and the Department of Workforce Development in worker's compensation cases.
In 2009, two years before WEDC awarded the initial loan to Green Box, court records show Van Den Heuvel being ordered to pay millions in a legal action brought on by Manchester Mortgage Company LLC. The records show a settlement and dismissal of the case in 2013.
WEDC's staff review for the 2011 loan makes no mention of these financial troubles.
Agency spokesman Mark Maley provided a copy of Van Den Heuvel's personal finances — with large portions redacted — that he had given to WEDC.
Maley said that WEDC's financial reviews of applicants have since improved greatly.
In the interview, Van Den Heuvel said he had not misrepresented the state of his finances to WEDC. That's because he's the chairman of Green Box's board of directors and technically not an officer of the company, he said.
He said trusts made out in part to his children and grandchildren also own units in Green Box's parent.
The lawsuit filed by WEDC, however, describes Van Den Heuvel as "Green Box's officer and director" and alleges that he controls the company.
Van Den Heuvel told WEDC the loan would create 116 jobs. He said the company has 74 employees.
State Rep. Peter Barca (D-Kenosha), a WEDC board member, said he would like to change state law or agency policies so WEDC would be required to report when it is aware of potential misrepresentations.
"What kind of legal review are we doing?" Barca said.
When companies say they haven't been sued, WEDC officials should be "double-checking when people check that box, to make sure they're being honest," Barca said.
By June 2013, Green Box was having problems making its monthly loan payments to the state, according to a statement provided by WEDC.
But Green Box wasn't done seeking public incentives. The company sought tax-exempt bonds in Wisconsin, Michigan and Georgia, winning preliminary approval from the City of De Pere in April 2014 for $125 million in potential borrowing for a solid-waste disposal and recycling operation, according to WEDC records.
WEDC officials knew that Green Box was seeking the money, as shown by a 2014 loan amendment form for the company that was signed by several WEDC officials, including Chief Executive Officer Reed Hall.
As part of that 2014 loan restructuring, Green Box disclosed legal troubles to WEDC, three years after the agency's $1.1 million loan to the company. In a recommendation to amend the Green Box loan, WEDC staff noted that the company's stated "exit strategy for repayment of the loan" was to get the tax-exempt bonds through De Pere and other sources.
Judy Schmidt-Lehman, the city attorney for the City of De Pere, said that the city council had passed an initial resolution authorizing the business to find private financing but that no bonds were issued. "It kind of died right after that initial resolution was passed," she said.
Schmidt-Lehman said that to her knowledge no one from WEDC had contacted the city to tell it about Green Box's business troubles. The city's resolution makes no mention of the bond money being used to pay off the bad loan made by WEDC.
The bonds would have included a tax exemption — a public subsidy that could have allowed Green Box to get private financing from a bank or other source at a lower interest rate.
Van Den Heuvel said he was no longer seeking those tax-exempt bonds but that, had he done so, everything would have been in order and appropriate.
"You're talking to somebody who reads everything 100 times over," he said.
The federal tax code allows such tax-exempt bonds to be used for solid waste facilities. WEDC's website notes that in general such bonds cannot be used for working capital — another term for cash used for paying bills and keeping ordinary operations going.
There are exceptions to that rule, and Maley, the WEDC spokesman, said he is working to provide more information about the allowable uses of the tax-exempt bonds. Asked late Friday, Maley said he was still checking on whether WEDC had contacted De Pere officials.
In the statement, WEDC officials said the agency had denied other requests by Green Box in 2012 and 2015 for millions of dollars. Another Van Den Heuvel business received $600,000 in state incentives in 2007 under then-Gov. Jim Doyle's administration.
Maley said the loan made in 2011 is "secured with strong collateral."
In the lawsuit filed in May against Green Box, WEDC and two of the company's other creditors, Cliffton Equities Inc. of Montreal and Marco Araujo of Green Bay, present an alarming view of Van Den Heuvel's operations.
The lawsuit says Van Den Heuvel claimed to have 4,500 employees throughout the country but a visit at one site turned up few employees. The plaintiffs said the businessman pledged assets as collateral that had already been pledged to other creditors.
Van Den Heuvel donated $1,500 in 2002 to former Gov. Scott McCallum's campaign and $3,000 to the campaign of former U.S. Rep. Mark Green (R-Wis.) over 2005 and 2006, according to the Wisconsin Democracy Campaign.
The businessman told a reporter he believed he or his wife had donated to Walker's campaign, but there is no record of such a donation.
Van Den Heuvel and his wife gave $10,000 to the campaign of former Gov. Tommy Thompson. One of Van Den Heuvel's companies, PCDI Oconto Falls Tissue Corp., then received $24 million in tax-free bonding. Thompson later returned the money after being asked about the donations by reporters.
Patrick Marley of the Journal Sentinel staff contributed to this article.