The Foxconn/Wisconsin Scam
How an economic development deal used the promise of good-paying jobs to steal from taxpayers.
Photo: Mark Hertzberg/Chicago Tribune, all right reserved.
Last week, I gave an overview of the Foxconn/Wisconsin deal, asking if a con could also be a mark.
In this post, I provide the behind-the-scenes motivations of the major players; how reality unmasked the con; and a timeline of announcements, shifts in strategy, and missed deadlines.
This con runs deep. Almost everyone involved got a piece of the pie, except residents and taxpayers who footed the bill.
The initial champions of the Foxconn/Wisconsin deal, Donald Trump and Scott Walker, had different motivations. Many had a hand: White House Chief of Staff Reince Priebus, then-Speaker of the House Paul Ryan, Wisconsin Gov. Scott Walker, and Foxconn chairman and CEO Terry Gou.
There is so much more to delve into, especially at the local level. If you want to dig in deep, Journalist Lawrence Tabak wrote a book on the topic: “Foxconned: Imaginary Jobs, Bulldozed Homes, and the Sacking of Local Government.”
Donald Trump: The Manufacturing Reviver
When Donald Trump announced the Wisconsin deal with Foxconn at the White House in July 2017, it became a cornerstone of his “America First” agenda to revive U.S. manufacturing.
The idea originated three months earlier, in April of 2017. President Donald Trump took a helicopter ride to an event at Snap-on in Kenosha with Reince Priebus, Trump’s then-chief of staff. They were flying over Kenosha, Priebus’s hometown, when they passed an empty lot that once held an American Motors plant. Trump mused, “Why is all that land vacant? That land should be used.”
Days later, Terry Gou visited the White House to discuss Foxconn’s desire to create thousands of jobs “somewhere in North America.” Trump suggested the site in Kenosha, and his administration got the ball running. The White House’s Office of American Innovation contacted the Wisconsin Economic Development Corporation (WEDC) with an opportunity for a $10 billion investment.
Terry Gou: The Fox
Terry Gou founded Foxconn in 1974 with $7,500 and 10 employees. Headquartered in Taiwan, Foxconn grew based on Gou’s fearless and tenacious sales to U.S. consumer electrics companies. Today, Foxconn is a global consumer technology manufacturer of everything from Apple’s iPhone to Microsoft’s Xbox. It also owns consumer technology brands, including Belkin and Sharp.
Because most of Foxconn’s factory operations are in mainland China, Gou was keen to avoid collateral damage from a U.S.-China trade war. Generating goodwill with Trump and top Republican leaders could insulate Foxconn from tariffs or grandstanding between Trump and Beijing.
As Foxconn’s chairman and CEO, Gou saw that partnerships with governments could help him expand Foxconn with minimal risk — and even make some money along the way. Gou makes big promises to secure favorable terms: a $5 billion factory in Vietnam in 2007, a $12 billion investment in Brazil in 2011, a $30 million investment in Pennsylvania in 2013, a $1 billion investment in Indonesia in 2014, and a $5 billion factory in India in 2015.
Gou had a history of failed partnerships with governments to build enormous Foxconn factories and create thousands of jobs. Time after time, Foxconn nonchalantly abandoned or severely underperformed against its job-creating partnership agreements.
Scott Walker: The Job Creator
During his 2010 campaign for governor of Wisconsin, Scott Walker promised to create 250,000 jobs and add 10,000 new businesses in his first term. Once elected, Walker immediately created a privatized agency, the Wisconsin Economic Development Corporation (WEDC), to make the promise a reality.
Walker claimed that WEDC needed to be nimble to help him achieve his aggressive 250,000 jobs goal. Thus, the agency adopted a public-private structure to ensure agility. And the WEDC had a huge mandate: properly allocating $519 million of taxpayer dollars in bonds, grants, loans, and tax credits for 2011-2012 alone.
Walker named himself Chairman of the Board as job creation was the cornerstone of his administration. By 2014, a One Wisconsin Now analysis showed nearly 60% of economic development awards flowed to businesses with a connection to Walker’s donors.
Walker saw the political benefits of the Foxconn deal. He featured them in his campaign ads for his 2018 election. When Walker’s campaign was in trouble, Foxconn promised additional investments: a gift of $100 million to the University of Wisconsin-Madison; partnerships with local companies; and the purchase of buildings to create “innovation centers.”
It was too late. Wisconsin voters saw the deal as a fraud, paid by taxpayers to enrich corporations. By the end of Walker’s tenure, Wisconsin’s economy was lagging behind the rest of the Midwest during the economic recovery. Wisconsin consistently ranks at the bottom in key economic indicators and job growth despite the hundreds of millions of taxpayer dollar incentives spent.
Paul Ryan: The Backer
The Foxconn site lies in the voting district of then-Speaker of the U.S. House of Representatives Paul Ryan. Ryan helped with negotiations with Foxconn and touted the project as transformational for Wisconsin’s economy. As the $3 billion tax incentive package worked its way through the Wisconsin Legislature, Ryan used the potential jobs and $10 billion in economic investment by Foxconn to sell it in community town halls, calling it an “exceptional deal.”
When Kenosha’s Village Board began using eminent domain to take several homes for the Foxconn/Wisconsin project, Ryan responded that he could not intervene because it was not a federal issue. His stance conflicted with the Private Property Rights Protection Act that Ryan co-sponsored in 2005.
In April 2018, Ryan announced that he was retiring from politics. Perhaps all politics are local…
The WEDC: The Unaccountable Agency
Since its founding in 2011, the Wisconsin Economic Development Corporation (WEDC) had a rocky—and scandalous — start. By 2012, the agency lost track of $69 million in loans, including $9 million in past-due loans, because the Walker administration did not assign anyone to oversee them.
A 2013 audit documented dozens of instances where the WEDC broke the law, including making awards to ineligible recipients, for ineligible projects, and for amounts that exceeded specified limits. By October 2013, the WEDC reported that it had addressed all the concerns raised in the May 2013 audit.
A year later, a One Wisconsin Now analysis showed nearly 60% of economic development awards flowed to businesses with a connection to Walker’s donors.
Unsurprisingly, a 2015 state audit showed that the situation had worsened. In 2015, whistleblower Molly Regan outed a range of problems, including that the agency inflated its job creation bona fides. The WEDC had only created 5,840 jobs, not the 60,000 tracked in the official records.
The Walker administration and the WEDC had done their due diligence. They had uncovered Terry Gou’s history of overpromising and underdelivering on significant economic deals. However, Wisconsin officials did not consider this track record problematic. Instead, they described the billionaire as almost philanthropic.
Mount Pleasant Board of Trustees: The Enforcers
The tactics used by Mt. Pleasant’s Village Board of Trustees to secure the twenty-eight-hundred acres of land to build the Foxconn campus should have sparked national outrage. Some residents tried to sue to stop the board’s overreach. However, most impacted residents could not afford to sustain the lawsuits.
The Village Board bought most of the properties outright, sometimes using the threat of eminent domain to force reluctant homeowners to sell at a price determined by the village. Even worse — to seize the property of the few remaining holdouts — the Mt. Pleasant board designated the entire area as blighted to expand its use of eminent domain.
Eventually, homeowners near the Foxconn facility who sold their homes for various road widenings said they were misled. In some cases, construction plans changed, were dropped, or were never planned before homes were razed to nothing. Even more infuriating, some newly built homes were among those bulldozed.
Even after Foxconn fell short across every category, Mount Pleasant’s Trustees have continued to run full throttle, like a voracious vacuum, using eminent domain to suck up more land. I outline just one such example below.
The Unmasking of the Con
Maintaining the mirage required a culture of secrecy, but reality would eventually bring most secrets to the light. The con was apparent as soon as there was no turning back for Wisconsin.
Lawmakers voted in favor of the Foxconn deal without seeing the contract. And the legislature cut more than $2 billion from public education during Walker’s first five years in office to offset tax credits set by the deal, which would be direct payments made to Foxconn.
The state legislature made the WEDC responsible for verifying Foxxon’s job creation claims for oversight. Considering the damning 2015 and 2017 audits that outlined the agency’s failures in verifying job-creation claims and rewarding companies that fall short of quotas, that may have been a misstep.
In 2017, Mount Pleasant and Racine County created a $911 million special taxing district to support the Foxconn project. Under the direction of the Mount Pleasant Board of Trustees, contractors bulldozed about 75 homes in Mount Pleasant and cleared hundreds of farmland acres within the following year.
Meanwhile, Foxconn pivoted away from its planned state-of-the-art factory, staffed by thousands of workers almost immediately after its groundbreaking in 2018. New Foxconn employees had to provide their office supplies, including pencils. Most had nothing to do. The “luckiest” were tasked with creating business plans for profitable businesses, only to have Foxconn leadership not move forward.
Even after it was clear that the factory would not materialize, Mt. Pleasant’s eminent domain tactics escalated. In February 2020, Mount Pleasant declared part Erickson Trucks-n-Parts’ property blighted to use eminent domain authority to take about 1.5 acres of Erickson Trucks-n-Parts. Earlier this year, Mount Pleasant put up concrete barricades that blocked the only way for vehicles to enter or exit the remaining 11 acres of the Erickson’s property.
Now taxpayers are looking for relief. Caledonia resident Daniel Hintz and Hintz Real Estate Development brought a lawsuit on behalf of — and against —Racine County and the Village of Mount Pleasant. Foxconn was also named as a defendant. Unsurprisingly, the lawsuit claims that all parties breached its contract. By 2021, The taxpayers of Racine County and the Village of Mount Pleasant have spent $200 million on land acquisition, $185 million on the development of water and sewer lines, and $12 million on roads to prepare for the project.
In return, Foxconn cut the number of new jobs to 1,454 from 13,000. However, that number may still be inflated because it includes indirect jobs from the project, like construction. And the construction jobs — while temporary — are counted cumulatively.
That's $273,040 taxpayer investment/job created.
The Wisconsin Legislative Fiscal Bureau report estimated the state would be in the red on the deal until at least 2042. The payback period could be longer, given that projection does not account for the increased public-services costs associated with population growth.
Without the advanced 10.5 LCD factory promised, Mt. Pleasant is a shell of what it once was. Mt. Pleasant’s debt rating has slipped. Local politics have turned negative. Neighbors have turned against each other over land seizures.
As for Foxconn, the company seems to be moving on. The company just announced that it is buying a former General Motors plant in Ohio for its electric vehicle production partnership with Fisker.
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The timeline: The Trail of Dread
The Foxconn/Wisconsin deal is a complicated maze of announcements and right-hand turns too challenging to follow in written form. Below is the visual timeline that captures the twist and turns of the fiasco with the players involved.
Again, this is just a high-level overview. Check out Lawrence Tabak’s book on the Wisconsin/Foxconn deal: “Foxconned: Imaginary Jobs, Bulldozed Homes, and the Sacking of Local Government.”
In addition to the articles linked within this post, the dates and details in the timeline were sourced from the following:
Aug 11, 2017. McKinney, Dave. “Audits show lax oversight by Wisconsin agency counting Foxconn jobs” https://www.reuters.com/article/us-foxconn-wisconsin-fears/audits-show-lax-oversight-by-wisconsin-agency-counting-foxconn-jobs-idUSKBN1AR23Z
Nov 3, 2018. Kaufman, Dan. “Did Scott Walker and Donald Trump Deal Away the Wisconsin Governor’s Race to Foxconn?” https://www.newyorker.com/news/dispatch/did-scott-walker-and-donald-trump-deal-away-the-governors-race-to-foxconn
Jan 16, 2019. Bybee, Roger. “Masters of Our Domain: Foxconn and State Minions Seize Land” https://progressive.org/dispatches/eminent-domain-foxconn-seize-land-190116/
Feb 1, 2019. Dzieza, Josh. “No one seems to know what Foxconn is doing in Wisconsin” https://www.theverge.com/2019/2/1/18206261/foxconn-wisconsin-factory-government-subsidies-investments
Apr 29, 2019. Vauerlein, Valerie. “Foxconn Tore Up a Small Town to Build a Big Factory—Then Retreated” https://www.wsj.com/articles/foxconn-tore-up-a-small-town-to-build-a-big-factorythen-retreated-11556557652
May 2, 2019. Shepardson, David. “Foxconn chairman meets with Trump on Wisconsin project” https://www.reuters.com/article/us-foxconn-chairman-trump/foxconn-chairman-meets-with-trump-on-wisconsin-project-idUSKCN1S81EB
Jun 6, 2019. “Inside Wisconsin’s Disastrous $4-5 Billion Deal With Foxconn” https://www.bloomberg.com/news/features/2019-02-06/inside-wisconsin-s-disastrous-4-5-billion-deal-with-foxconn
Sep 5, 2019. Hess, Corrinne. “Owners near Foxconn say they were misled. Now their homes are gone.” https://www.kenoshanews.com/news/local/owners-near-foxconn-say-they-were-misled-now-their-homes-are-gone/article_7e358624-da40-56d1-af5a-48bf315273cb.html
Dec 7, 2019. Romell, Rick. “Foxconn’s Terry Gou visits Milwaukee after Trump tells him to ‘bring more jobs to Wisconsin’” https://www.jsonline.com/story/news/2019/12/07/foxconns-terry-gou-visits-milwaukee-after-trump-urges-more-wisconsin-jobs/4362784002/
Apr 8, 2020. Porter, Jon. “Foxconn will produce ventilators at its controversial Wisconsin plant: Medtronic’s CEO announced that the plant will manufacture its open-sourced design” https://www.theverge.com/2020/4/8/21213269/foxconn-ventilators-wisconsin-plant-medtronic-pb-560-open-source-design-covid-19
Oct 19, 2020. Dzieza, Josh. “The 8th Wonder of the World*” https://www.theverge.com/21507966/foxconn-empty-factories-wisconsin-jobs-loophole-trump
Oct 22, 2020. Einenkel, Walter. “Republican Party’s Wisconsin Foxconn has exploded, with zero manufacturing jobs and $400 mil deficit” https://www.dailykos.com/stories/2020/10/22/1988670/-Shady-GOP-deal-promised-13-000-manufacturing-jobs-It-s-cost-Wisconsin-400M-for-just-281-jobs
Jan 4, 2021. McNally, Joel. “The Foxconn Con Was Always a Scam” https://shepherdexpress.com/news/taking-liberties/the-foxconn-con-was-always-a-scam/#/questions
Feb 19, 2021. Rogan, Adam. “Foxconn says it plans ‘to capture a substantial percentage’ of U.S. server market; details not disclosed.” https://journaltimes.com/news/local/foxconn-says-it-plans-to-capture-a-substantial-percentage-of-u-s-server-market-details/article_436963b0-f42f-51b4-92e3-00b3c97b7eb0.html
Apr 22, 2021. Holt, K. “Foxconn drastically scales back plans for $10 billion Wisconsin factory. After promising 13,000 new jobs in the state, Foxconn will only create 1,454 positions.” https://www.engadget.com/foxconn-wisconsin-factory-scaled-down-161101946.html
Jul 12, 2021. Edelstein, Stephen. “Foxconn and Fisker Confirm Talks About Making 30,000 EV in Wisconsin” https://www.greencarreports.com/news/1132855_foxconn-and-fisker-confirm-talks-about-making-30-000-ev-in-wisconsin
Sep 30, 2021. WGTD News. “EV Production A No-Go For Now At Foxconn In Mt Pleasant” https://www.wgtd.org/news/ev-production-no-go-now-foxconn-mt-pleasant