Documents shed renewed light on Wisconsin’s Foxconn deal
By Mike Kaszuba
In 2017, Wisconsin governor Scott Walker announced that tech giant Foxconn would be building a major liquid crystal display manufacturing facility in the state.
Walker touted the project as one that could transform Wisconsin in the same way Silicon Valley had remade the San Francisco Bay area.
Despite the outward excitement, state officials harbored early behind-the-scenes concerns, according to more than 4,600 documents reviewed by Public Record Media (PRM), a non-profit based in St. Paul.
A confidential report, prepared ahead of a private dinner with Foxconn chairman Terry Gou, was revealing. It warned that in Gou, “we are dealing with a highly entrepreneurial [leader], prone to change things on the fly.” The report noted that Gou had an estimated net worth of $10.4 billion, a quirky personality, and would sometimes arrive “unannounced at sites in the U.S. to drum up new business, and [has had] security called on him more than once.” The document was circulated in advance of a dinner attended by former governor Walker, and top Wisconsin business executives, including the heads of Harley Davidson and Briggs & Stratton.
While charging ahead with the project, the governor’s office also compiled an internal review in June of 2017 that offered a sobering look at Foxconn projects elsewhere – including in Vietnam, Brazil, Indonesia and Pennsylvania. The review, for instance, noted that “in 2015, Foxconn’s investment license for a proposed $200m plant was revoked by the Vietnamese government after repeated failures by the company to follow through on its commitment.”
The early warnings were noteworthy given what has since happened.
Future of Foxconn project uncertain
Two years after Walker and President Donald Trump celebrated the announcement of the Foxconn deal, the future of the project remains murky as the company gives mixed signals as to what it will actually build. While Foxconn has said it remains committed to Wisconsin, current governor Tony Evers disclosed in April that the project may have to be scaled back from its initial goals, and that the state’s contract with Foxconn might need to be renegotiated.
An April statement from the Wisconsin Economic Development Corporation (WEDC) – the state entity that negotiated with Foxconn – showed how uncertain the project had become. When asked where the project stood, WEDC vice president Kelly Lietz told PRM that “this question can only appropriately be answered by Foxconn.” However, Lietz also said that the state did not expect to issue any tax credits to the company for the year ending December 31, 2018. The issuance of tax credits — a major component of the public subsidy package — was expected to serve as a measure of the progress being made on the project.
Foxconn documents obtained from Wisconsin governor’s office
The documents obtained by PRM – some of which have not been previously reported – shed new light on Wisconsin’s controversial decision to offer Foxconn roughly $4 billion in public incentives in exchange for the company investing $10 billion into the project, and hiring as many as 13,000 workers for manufacturing jobs averaging $53,875 a year plus benefits.
The documents also show the lengths to which state officials went to keep their initial negotiations secret. At one point, officials hosted a cookout for Foxconn at the governor’s mansion while media members were simultaneously trying to confirm with Walker’s office whether company officials were in town. Other documents detail how public officials orchestrated a carefully-planned rollout of the project – proposing social media Tweets, such as “Great energy in Eau Claire,” before the governor actually arrived for a press conference in Eau Claire to celebrate the Foxconn deal.
And still other documents chronicle how the governor’s office quickly urged prominent officials to pack a public hearing at the State Assembly days after the announcement in an attempt to quickly approve the project. “Thank you for helping to celebrate Foxconn’s decision,” read an e-mail from Walker’s office to Mark Mone, the chancellor at the University of Wisconsin-Milwaukee. “We would like to ask you to consider attending the public hearing and speaking in support of the legislation.”
At the time, Walker and Foxconn were widely praised for the agreement. Brandon Scholz, the chief executive of the Wisconsin Grocers Association, called the announcement a “Walk-off grand slam home run” for the governor and the state. “I see the area potentially blowing up with development,” he added. “I also see an influx of people, which for a grocer is never a bad thing!”
But many things have since changed. Walker lost his re-election bid last year, Gou has since said he intends to run for president of Taiwan, and Reince Priebus – a Wisconsin resident who as Trump’s chief of staff pushed Foxconn to consider the state – was ousted from his White House job as the Foxconn deal was being unveiled.
Trump, who announced the deal at the White House in July of 2017, met with Gou in May amid continuing indications the company was backing away from its original Wisconsin investment and hiring goals.
Foxconn deal emerged quickly
Documents from the governor’s office – including more than 2,900 pages of e-mails and texts – show that the initial deal took shape quickly. Foxconn reached out to Walker’s office with a “super-last minute” exploratory e-mail in late April of 2017. Two days later, the first meeting took place.
Foxconn soon had Wisconsin’s full attention. Three weeks after Foxconn’s initial inquiry, the head of the WEDC was hosting a meeting with thirty Foxconn officials. Walker, who would fly to Japan in early June to meet Gou, was briefed on Gou’s “passion for golf” and was also urged “to invite the Chairman for a game of golf.” The governor would give Gou a souvenir Milwaukee Bucks jersey and a highlight reel of the National Basketball Association team. Other Foxconn officials would get “Frank Lloyd Wright-inspired coasters.”
And by June 6, an e-mail from Louis Woo, a top lieutenant to Gou, indicated that Foxconn was now in an enviable position. “I will put on my thinking cap together with Alan and [others] to think through our request of assistance,” Woo told Mark Hogan, the WEDC’s top executive.
On the same day, Woo took things a step further – asking Hogan to have the state also help Foxconn secure federal funding for the project “to level the playing field for us.” The next day, Woo also informed Hogan that “I am working with Reed Cordish of the [White House] to finalize if and what the big asks should be.”
Through the process, Foxconn would emerge as a full partner with the state – and, at times, help direct its strategy. After the deal was made public, criticism arose that some state environmental regulations would be sidestepped to enable the Foxconn project. Documents showed that Woo and a state official discussed how Foxconn and the state would issue separate – but “corresponding” – statements to rebut the allegations.
“If this issue dies down over the weekend, we will NOT proactively issue [Foxconn’s] statement to generate another new cycle,” Woo told Scott Neitzel, a state Department of Administration official, in a July 30, 2017 e-mail. “You and I can decide if and when Foxconn’s statement should be out and if and when the State should release a similar corresponding statement to let the public know that we are on the same page.”
Neitzel e-mailed Woo after reviewing Foxconn’s statement. “A couple of suggestions: use bulleted points and consider making them more definitive. Example: Foxconn will x; Foxconn will y; etc. [that’s] easier for the media and public to digest,” Neitzel wrote. He added that the state’s own statement would stress that legislation authorizing the project would “not allow any environmental degradation but rather streamline the process.”
He then told Woo: “Will share when we have a draft.”
Woo wrote back to Neitzel. “If you are contacted by any media, please pass the inquiries to the [public relations] team.”
The documents also showed that a “proposed rollout strategy” for the Foxconn announcement suggested that the governor’s office take the lead in asking “the company about taking out a full-page ad in the daily newspapers statewide talking about their commitment to Wisconsin, why they’re coming here,” and the “role of the governor.”
Proposed project scope
By any measure, the Foxconn project was significant and, at least initially, poised to start quickly.
A briefing paper said Foxconn’s new facility – slated to be built roughly 30 miles south of Milwaukee – would be bigger than the world’s largest airport in Dubai, and three times the size of the Pentagon. To make a comparison that Wisconsin residents could envision, the governor’s office said that 11 Lambeau Fields – the home of the National Football League’s Green Bay Packers – could fit into Foxconn’s footprint.
In the end Foxconn, the world’s largest provider of electronics manufacturing services, would create the first liquid crystal display (LCD) manufacturing facility in North America, and the first outside Asia.
The briefing paper said the project would have at least a $7 billion annual economic impact on the state. Foxconn’s facility, the governor’s office said, would be larger than 96 percent of the cities and towns in Wisconsin.
For the Republican governor, the Foxconn announcement was a high-water mark, and propelled Walker into a heady political orbit. On July 26, 2017 – after Walker joined Gou and President Trump at the White House for the project’s unveiling – the governor’s schedule showed that he and his wife were to dine at the nearby Saint Regis Hotel with Ivanka Trump and Jared Kushner, the president’s daughter and son-in-law.
For some, it was also a triumph of Republican leadership. “Getting to this point would not have been possible without the conservative reforms we’ve been making in Madison to cut red tape and create a healthy business environment,” Jim Steineke, the State Assembly majority leader, wrote in a newsletter two days after the Foxconn announcement.
Trump also took credit for the deal. “If I didn’t get elected, (Gou and Foxconn) definitely would not be spending $10 billion,” the president said to laughter and applause as he helped announce the deal.
In the days immediately after the announcement, the numbers regarding Foxconn would get even larger.
Walker said the 13,000 jobs at the facility would be in addition to 10,000 construction jobs and 22,000 indirect and “induced” jobs spawned by the project. Trump, for his part, said that “I think the $10 billion [Foxconn investment] is going to end up being $30 billion.”
At least at the outset, there were indications that things would happen fast.
On the day before the announcement, White House official Douglas Hoelscher told the governor’s office that “Foxconn will start immediately to set up initial capabilities in Southern Wisconsin while the larger campus is constructed over a 2.5 year period. There will be an initial $10B investment creating 3,000 jobs, which has the potential to grow to 13,000 jobs.” Six days later, the Waukesha County Business Alliance – representing a county just west of Milwaukee – was telling its members that Foxconn would have “a fully-functional manufacturing plant in Wisconsin as soon as 2020.”
Foxconn’s Woo also indicated that the project would materialize rapidly. In a June 2017 e-mail, Woo told state officials that “Terry (Gou) likes to start with the manufacturing of the backend modules with the Open Cell (glasses) to be shipped from Japan/Taiwan/mainland China and final assembly of whole sets including mechanical parts.”
Woo added, “That can create jobs and revenue almost immediately if we can rent out a temporary facility before a permanent facility of backend modules and final assembly is built and outfitted within a year.”
Concerns emerge
Three days after the deal was made public, however, concerns emerged over how it would all come together.
Foxconn officials “like speed and have a fantastic vision for how we can rebuild advanced manufacturing at scale in the US,” Jonas Prising, the chief executive of ManpowerGroup, wrote in an e-mail to the governor on July 29, 2017.
ManpowerGroup is a Fortune 500 staffing company headquartered in Milwaukee.
“But besides the technical knowledge [they have] no clarity yet on how this will be accomplished in a number of areas, including identifying and upskilling the workforce needed, from skilled technicians to advanced LCD engineers,” Prising added. The Foxconn project “will require significant workforce development and upskilling investments (including sending 1000 engineers for 6 months to Japan for training on their most sophisticated manufacturing equipment),” Prising told the governor.
Emphasis on project secrecy
Documents from the governor’s office also outline Wisconsin’s attempts to keep the Foxconn deal secret as it was being put together – a move that also appeared to please Foxconn.
Three weeks after Walker first met with Foxconn, the WEDC signed a non-disclosure agreement with the company in May 2017 because the state agency said Foxconn “may provide commercial data and financial information that are of a non-public nature and the release of which may cause competitive harm” to the company. The state agency said that the three-page agreement – which it suggested is typical in such negotiations – expired as soon as state officials signed the final Foxconn contract.
But when a Milwaukee Business Journal reporter made a formal request in June of 2017 for public data regarding the Foxconn negotiations, Robert Berry – a lawyer in Walker’s office – stated that little regarding the WEDC’s discussions was public information.
“Public disclosure of records relating to pending or potential opportunities impedes WEDC’s ability to productively negotiate with companies about potential projects that will create jobs, increase investment in the state and generate additional state revenue,” Berry wrote in a June 22 letter, a month before the deal was made public.
“Such disclosures could hamper WEDC’s efforts to attract new businesses to the state [and] could impede economic development in the state, to the detriment of Wisconsin and its citizens.”
Berry added that the request likewise did not meet the state’s “public records balancing test.”
He stated: “We determined that the public interest in the effective and efficient administration of WEDC’s programs outweighs any public interest in revealing the records of businesses with which WEDC has pending or potential opportunities.”
Berry had much the same response when the Associated Press asked for the governor’s daily calendar for July 12 – a time when Foxconn officials were in Wisconsin meeting with state officials. “You will notice that some items are redacted,” Berry wrote.
“The non-public direct conference-call telephone numbers used by the Governor’s Office are redacted,” he wrote. “Also, redacted from the Governor’s calendar are the names of businesses which Wisconsin Economic Development Corporation has pending or potential opportunities. WEDC does not comment on pending or potential opportunities.”
As the deal was being negotiated, the focus on secrecy continued. “Not a word to anyone. I haven’t even told my husband and won’t,” Mary Bridget Hagerty of the governor’s office wrote in a text two weeks before the July 2017 announcement.
There were however some exceptions to how the media was treated, as demonstrated by the governor’s office’s dealings with a writer from the conservative-leaning Washington Examiner.
“Just wanted to thank you guys for helping us get the comment from Governor Walker this afternoon,” Emily Jashinsky, a commentary writer for the Examiner, wrote to the governor’s office two days after the Foxconn announcement. “Please thank the governor for me as well.”
Tom Evenson, the governor’s deputy communications director, responded: “Thanks, Emily! We appreciate your flexibility and let’s keep in touch. May have some things to pitch to you from time to time.”
At times, the state’s secrecy was pointed. Roughly two weeks before the Foxconn announcement, the governor’s office prepared to host company and state officials for a cookout at the executive mansion on July 11. According to one e-mail, the guest list included 90 people.
On the day before the cookout, a Milwaukee Journal Sentinel reporter sent an e-mail to Tom Evenson. “Is Gov. Walker meeting with Terry Gou or others from Foxconn this week? I wanted to check because I understand Foxconn may be in the state today,” the reporter asked. The documents obtained by PRM do not show a response from Evenson.
On the day after the cookout, the same Milwaukee Journal Sentinel reporter again contacted Evenson, as well as Jack Jablonski from the governor’s office. “Is the governor or anyone from the administration meeting with Foxconn or its representatives today? We understand that Foxconn’s jet is at the Dane County airport” in Madison, asked reporter Patrick Marley. Documents obtained by PRM again showed no response from Evenson or Jablonski.
However, on that same day Jablonski did exchange e-mails with John Garnetti, Foxconn’s deputy director of U.S. strategic initiatives. “Hi Jack, It was great meeting you last night during dinner at the residence,” Garnetti wrote. “I am actually downstairs on the first floor of the Governor’s offices right now until 11am. I would love to meet briefly to touch base and talk next steps.”
Replied Jablonski: “I will come find you.”
Similarly, texts from Neitzel, the state administration official, showed that negotiations were moving ahead as reporters were trying to find out what was happening. “Progress to report. Call when you can,” Neitzel texted the governor on July 12, the day after the cookout. “We are meeting again with them at 7:45.”
Foxconn seemed to approve of the secret negotiating. “Many thanks to you for facilitating and making ‘Flying Eagle’ [an early name for the project] happen and still happening behind the scene,” Foxconn executive Alan Yeung wrote to Walker aide Rich Zipperer on July 13, two days after the cookout.
Subsidy discussions occurred in private
While the state attempted to conceal negotiations about the Foxconn project, documents show that a lively behind-the-scenes discussion about subsidies was occurring.
During the negotiations, Kyle Roskam – the governor’s director of federal relations – briefed an aide to Tammy Baldwin, the U.S. Senator from Wisconsin and a Democrat. In a June 15, 2017 memo written more than a month before the agreement was announced, Roskam said that the governor had already offered a subsidy package of $2.25 billion.
But Roskam noted that Foxconn had more in mind.
“The underlying challenge in attracting Foxconn to Wisconsin (or any state), is Foxconn’s assertion that building and operating a facility in the U.S. will add 25-30% to its cost base,” Roskam wrote. “Foxconn believes the U.S. consumer will not ‘absorb’ these increased costs and therefore significant incentives are required to attract Foxconn’s investment.”
A May 2017 analysis by Milwaukee 7, a regional economic development group, outlined what might be needed from Wisconsin. “The amount will dwarf anything offered or perhaps even contemplated for previous Wisconsin projects,” the report stated. The group compared a Foxconn deal with what Tesla, the car maker founded by Elon Musk, had received in Nevada: A $1.2 billion subsidy that allowed Tesla to essentially operate tax-free for 10 years.
The group added: “The Tesla incentive is a useful starting point, but it is unlikely to get us to the finish line with Foxconn.” The Milwaukee 7 report said landing Foxconn in Wisconsin might require a much larger subsidy: perhaps as much as $5.1 billion.
The business group stated that changing state laws to expand enterprise zone subsidies could provide more money to Foxconn – especially if the percentages for calculating tax credits were raised. “For example, credits earned for capital expenditure are currently capped at 10%. Increasing the cap to 20% would generate an additional $1.1 billion of tax credits,” the group reported.
“Wisconsin’s incentive offer must come together quickly if we expect to win the Foxconn deal,” wrote Jim Paetsch, the vice president of Milwaukee 7. “Foxconn wishes to establish a path to site control by July 5 and presumably will require that the framework for the incentive offering be in place by that time. Our team will need to move fast to win this deal.”
In its memorandum of understanding with Foxconn, state officials said they offered their first public subsidy proposal on June 2, 2017, and then offered “revised” proposals both on June 26 and July 12. All three dates were at least two weeks before the deal was announced, and came as the state largely kept private the fact it was negotiating with Foxconn.
After the deal was announced, the governor gave a glimpse at the private negotiating that had led to a $3.1 billion subsidy offer. “We thought it was a smaller number to begin with, which is why we had a smaller package of incentives prepared on the table. As we met with Terry (Gou) and his team, we saw” otherwise, Walker told a Milwaukee TV reporter.
Modifications to environmental laws
Documents describing the early out-of-view negotiating also detailed how state officials moved to change some environmental laws for the Foxconn project – a move that would later bring criticism.
A month before the Foxconn announcement was made, state officials privately circulated draft legislation that would make changes to water diversion from Lake Michigan under the Great Lakes-St. Lawrence River Basin Water Resources Compact. The proposed Foxconn facility would likely be located relatively close to the lake.
The draft legislation focused on communities located only partly within the Great Lakes basin, and stated that the portion located within the basin would only be required to meet “the least stringent water use and efficiency measures.” Any portion of the community located within the Mississippi River basin, by contrast, would be required to meet the most stringent measures. Additionally, the proposal would give communities more time to meet state law.
As the Foxconn deal was announced and Walker pushed for legislative changes, the state Department of Natural Resources (DNR) defended other proposed changes – including changes related to the production of an Environmental Impact Statement, or EIS.
In lobbying for the change, a DNR “talking points” document stated that an EIS “has no regulatory consequence [and takes] months and in some cases as long as a year to prepare.” By removing portions of a state EIS for the Foxconn project, the agency stated, it “streamlines the process.”
Similarly, the DNR explained that the legislation would also give the same exemptions to electronic and technology manufacturing zones – presumably, the Foxconn site – that it already gave to large counties in Wisconsin regarding the dredging, grading or removal of topsoil from the bank of any navigable waterway and moving stream.
The agency document added “If asked — [the DNR should say it] was consulted when the state’s proposal was being put together. As we would do for any business/company wishing to establish itself in Wisconsin, we offered general information on a wide array of possible permit options.”
The “streamlining” of environmental regulations drew the attention of other Wisconsin businesses.
“A number of business owners have reached out to us in regards to Foxconn’s ability to streamline the DNR permitting process under this legislation,” Dan Perchinsky, a staff member for State Representative Rob Brooks, wrote as the proposed legislation was made public. “Rob would like all businesses to benefit from streamlined permitting.”
Meanwhile, mounting criticism of the proposed environmental changes left some frustrated. “Environmental activists are misleading the public with over-the-top rhetoric and misinformation to drive opposition to the Foxconn legislation. In reality, [the] proposal more than adequately protects our environment,” read a statement from the Wisconsin Manufacturers and Commerce Association as the legislation was unveiled in early August 2017.
Documents detail “roll-out” strategy
Anticipating requests for public data from reporters following the Foxconn announcement, a proposed “rollout strategy” talked of having a ready-to-go generic response already prepared – regardless of what was specifically requested.
“In anticipation of numerous Open Records Requests, we should have a file available showing all responsive records and emails relating to this project,” the “rollout strategy” document stated. “This file would be available immediately after the White House announcement only upon request.”
“Regardless of a reporter’s specific request, we should respond immediately with this file instead of attempting to fulfill each individual request. If a reporter wants more docs, he can follow up with us,” the document stated.
The pre-packaged “rollout strategy” also included other attempts to steer coverage of the Foxconn deal – even offering a behind-the-scenes look at how the deal successfully came together after state officials had tried to keep the negotiating secret.
For example, under the heading “possible story pitches”, the document suggested an “Anatomy of the deal: Offer one media outlet a behind the scenes look at how this came together (USA Today would ensure story would get good play in other Gannett newspapers).”
Public feedback
At least initially, the Foxconn announcement left many looking past the deal’s drawbacks. “Where [can I] apply for employment with Foxconn?” Carolyn Peterson of Fort Atkinson, Wisconsin asked in one of many e-mails the governor’s office received after the announcement.
“I’ve sent you a lot of hateful emails since you’ve been in office, but I might have been wrong,” Lynn Kudick of West Allis, Wisconsin wrote to the governor on the day of the unveiling. “If it all turns out to benefit Wisconsin, I’d actually be proud of you, coming from a democrat who hated your guts.”
But the governor soon grew testy as the criticism intensified. Just days after the project was unveiled, Walker was quoted as saying its opponents could “go suck lemons.”
And, back at the governor’s office, his aides were squabbling with reporters.
“It seems clear, even from the governor’s comments, that the 13,000 jobs is a goal or a possibility, but not something definite,” Tom Kertscher, a Milwaukee Journal Sentinel reporter, said on July 27, 2017, the day of the signing of the memorandum of understanding (MOU).
Evenson responded, and continued exchanging e-mails with the reporter the next day. “Nowhere in the MOU does it mention [the possibility of fewer jobs]. The MOU signed by both parties says 13,000 jobs. That’s the deal,” he wrote.
The governor’s aide added: “Tony Evers (a Democrat who would defeat Walker in 2018) is now pushing the same $1 million per job claim that (another critic) was pushing yesterday.
“It’s blatantly untrue,” Evenson stated.
Foxconn adjusts hiring timeline
By January of this year – with Walker out of office, and the Foxconn project facing doubts – the company sent state officials a letter. “While we remain committed to creating 13,000 jobs in Wisconsin, we have adjusted our recruitment and hiring timeline,” the letter stated. “As a company with operations around the world, we need to have the agility to adapt to a range of factors including global economic conditions. We have done so while simultaneously progressing on other aspects of the project and achieving our foremost priority for 2018 – creating a solid foundation upon which the Wisconsin project can continue to grow further.”
Three months later, Foxconn again said it remained committed to the Wisconsin project. The company’s statement came after Evers said it was unrealistic – given the company’s changing stance – to expect Foxconn to create 13,000 jobs.
(Supporting documents for this article can be accessed by contacting Public Record Media at admin@publicrecordmedia.org , or at 651-556-1381)