Koch Denies Interest in No-Bid Deals; Opens New Lobby Shop

Madison, Wisconsin -- The Capital Times reported on Tuesday that Koch Industries had quietly opened a lobby shop in Madison. This news comes amid concerns about the influence of the company and the billionaire brothers who lead it, and the bankrolling of multi-million dollar ad campaigns like the one that helped sweep controversial governor Scott Walker into office. The company's political action committee]] was also one of the largest PAC donors to contribute directly to Walker's electi, giving his campaign $43,000, second only to the realtor PAC. Amid controversy swirling around a provision in the budget bill Walker introduced that would allow his administration to sell off state heating, cooling and power plants or their operations "for any amount" in no-bid contracts and without any external oversight, Koch Industries denied last night that it was interested purchasing power plants here to go along with its pipeline, refinery, and coal companies in the state.

According to Judy Davidoff, their operation "Koch Companies Public Sector -- Legal, Government, Public Affairs" opened steps from the Wisconsin capitol the week Walker was inaugurated as governor. The lobby firm moved into the seventh floor suite two weeks before the November election was held.

The Center for Media and Democracy told the Cap Times Tuesday, "It's curious that the Kochs have apparently expanded their lobbying presence just as Walker was sworn into office. . . ."  Walker's controversial budget "repair" bill would change Wisconsin law in numerous ways and also vest the Walker administration with unilateral authority to sell off or lease the operation of the state's power, cooling and heating plants in no-bid contracts.

A Bill for Backroom Deals "For Any Amount"

The Walker proposal, as introduced in his budget "repair" bill, expressly states that, notwithstanding some other laws, his administration:

may sell any state−owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under [previously controlling law].

(Emphasis added.)

The legal rules for selling the public's assets that this provision would effectively nullify appear to include those that:

1. require public bids;
2. reserve the right of the government to reject bids;
3. require that any property sold be subject to property taxes;
4. require that the fair market value of the property to be sold be publicly disclosed;
5. require at least 14 days for a public commission to review any proposed sale; and
6. require notification to the legislature in writing of the proposed sale.

(Section 13.48(14).) It would also wipe out the uniform procedures requiring a determination of whether a private contract can be performed "more economically or efficiently" than under state ownership (Section 16.705). It would even moot rules preventing the approval of utility operations that would increase "costs" to consumers without increasing "value" (Section 196.49 (3)).

Key Pipeline Rules Would Be Voided under Walker's Proposal

Notably, one of the provisions Walker's no-bid proposal would also void is a state law preventing a public utility furnishing gas to the public from altering the plant to connect it to a different pipeline from the previously kind of fuel, unless the public utility commission certified that doing so is necessary for the public interest and convenience (Section 196.49).

As the Center has noted, the Koch brothers' financial interests include Koch Pipeline Company, which operates a pipeline system that crosses Wisconsin, part of the nearly 4,000 miles of pipelines owned or operated by the company. It also owns Flint Hill Resources, which distributes refined fuel through pipelines and terminals in Junction City, Waupun, Madison and Milwaukee. Koch Industries also owns the "C. Reiss Coal Company," a power plant supply company located in Green Bay, Manitowoc, Ashland and Sheboygan (the company supplies coal to power plants).

It is not clear how any of the public's assets might enhance or diversify Koch's interests if the company were interested in doing so, although the breadth of the exemptions from standard operating procedure for sales might make the assets attractive as part of any number of business strategies.

Concerns Raised about Power Plant Power Grab; Koch Denies Interest in Purchase

Watchdog groups have expressed strong concerns about Walker's effort to push through his no-bid/no-rules power plant power grab. For example, the Center has raised concerns about the increased influence of corporations and their CEOs in elections and shared concerns with reporter Shawn Doherty, stating "Here you have a situation where extremely wealthy interests help propel Walker into office, and one of the first things he does is to privatize electricity in this state and to do so with the removal of public oversights and checks and no bidding." CMD added, "There should be red flags going up all over the place."

Koch Companies Public Sector president, Philip Ellender, told the Cap Times late Tuesday: "We have no interest in purchasing any of the state-owned power plants in Wisconsin and any allegations to the contrary are completely false. This is a dispute between public-sector unions and democratically elected officials over how best to serve the public interest. Unfortunately, there are those who would prefer to portray it as something else entirely. A balanced budget will benefit our company and its nearly 3,000 Wisconsin employees no more and no less than the rest of the state's private-sector workers and employers."

Walker's proposed unilateral powers would apply to both sales and contracts to operate power plants, as well as to heating and cooling plants.

At Least One Company Is Headhunting for Power Plant Managers for Posts Across the State

A local citizen following this issue discovered that "ThinkEnergyGroup.com" solicited resumes just last week stating "Energy client is looking for experienced Plant Managers for multiple power plants located in Wisconsin." There is no indication which company is headhunting for plant managers for multiple power plants in Wisconsin. There is no indication that the job posting for multiple positions managing power plants is connected to the unilateral power to quickly approve power plant sales or to grant contracts to operate plants without bids, which Walker tried to rush through the legislature last week and which continues to be part of his budget bill. And there is no indication that the energy client referenced is a Koch Industries company. [Editor's note: one of the commentors has discovered that the ad posted by the Think Energy Group appears to be from Alliant energy because it contains some of the same language Alliant used in similar ads, see, e.g., http://www.nationjob.com/job/theg52541.]

Other energy companies besides Koch operate in the state, including Madison Gas & Electric, which has previously expressed some interest in expanding its holdings in the capital city. And, several energy-related PACs made contributions to Walker's campaign directly, including Dominion PAC, Xcel Energy/Northern States Power CoEnergy, Alliant/WI Power & LightEnergy, and something called the WI Energy Better Govt Committee. (None of these PACs gave as much directly as the KochPAC, which gave Walker $43,000, most of these PACs contributed to the gubernatorial candidates of both parties in Wisconsin, and there is no indication that any of the leaders of these companies personally wrote a check for a million dollars to the Republican Governors Association to help propel Walker and others into governor's seats last fall.)

Walker Crony Tries to Spin and Minimize the Controversy

Interestingly, Walker chose Jeff Plale, a close friend from his teenage years, to head the office that would oversee the quick sales of the public's power plants or the no-bid contracts to operate them. Plale became notorious in the state last year, after Walker's election, when he defected from the Democrats to vote against ratifying 17 state employee labor contracts -- contracts that are now at risk as a result of Walker's efforts to destroy the right to collectively bargain. About a month later, Walker announced that Plale was his choice to serve as the administrator of the Division of State Facilities, a post with an annual salary of $90,000 -- almost twice Plale's prior salary as a senator. Plale needed a job after the election because he lost his state senate seat in a landslide vote against him during the Democratic primary, losing 61% to 39%. Plale is a corporate Democrat whose primary opponent ran against him in part for blocking clean energy legislation to help address climate change. (His major role thwarting public employees was post-election.)

As Shawn Doherty notes, Plale is dismissing concerns about his buddy's effort to give him unilateral power to sell off the state's assets or award no-bid contracts without any independent check on those extraordinary powers over assets worth hundreds of millions of dollars. Plale is attempting to palm off concerns by noting that a provision to sell state power plants was proposed before. A closer examination of the two bills, however, reveals dramatic differences.

Proposal Is Similar to a Proposal by Discredited Rep. Jensen, But Worse in Key Ways

First, unlike Walker's bill, the proposal by then-Republican Assembly Speaker Scott Jensen--who was later criminally charged with felony misconduct for having state-paid employees conduct political fundraising activities on the job and pleaded out--did not allow no-bid contracts.

Second, the Jensen manuever to sell off state assets might actually have required the highest bidder because, unlike Walker's proposal, Jensen's bill did not provide that a contract could be "for any amount."

Third, Jensen's proposal also did not require that state law deem any such sale for any amount to be automatically in the public's interest, a provision likely included to try to circumvent any litigation challenging a controversial sale, unlike Walker's proposal.

Unlike Jensen's bill, though, Walker's proposal does not mandate the sale of all the plants, but it would allow the sale of all the plants.

The Provision's Backroom Deals Could Result in the Outsourcing of 100s of Long-Standing Jobs

Back in 2005, Democratic Governor Jim Doyle vetoed the Jensen proposal. The state's Fiscal Bureau had noted that the public's nearly three dozen plants, including plants at the state's universities and prisons, were then valued at around $235.9 million. Doyle noted that the bill would have required the sale of all of the state's plant holdings, regardless of any cost-benefit analysis. He also argued that it would have resulted in the outsourcing of 271 state jobs, in other words eliminating nearly three hundred good jobs of Wisconsin residents and letting a for-profit company replace some or all of them with potential employees from out of state and at lower wages.

Now, Walker -- who campaigned on claims of creating jobs for Wisconsin citizens -- is attempting to force through a change in the law that could strip hundreds of state utility workers of their jobs through back-room sales of the people's assets or no-bid contracts for the operation of those plants to for-profit companies. That's a manuever not even attempted by the disgraced Scott Jensen.

Questions and No Answers

The Center for Media and Democracy called Walker's office repeatedly to try to reach his press secretary for answers to questions about the provision, but no one answered the press line throughout the day, and no messages could be left.

Walker's proposal raises numerous questions, including:

• Which companies do Walker and Plale have in mind for these sales and contracts that would be accomplished without any notice to the people or the legislature, and without complying with long-standing laws intended to protect the assets of the public from squandering and graft?
• Which companies have had any contacts with either Walker or Plale over the past three months about these possible deals?
• Which companies, CEOs or special interest groups have had access to them since contributing either directly to Walker's election or indirectly to his win through PAC donations or "issue ad" spending?
• And, among other things, which company has decided to headhunt for power plant managers to operate plants across the state, after this provision was proposed?

The local press has raised other important questions, such as:

• Why has Koch Industries decided to expand its lobby presence in the state now?
• What is its legislative and regulatory agenda with the Walker administration that its leaders helped put in power?

The Center, a corporate watchdog group, has raised questions about Americans for Prosperity's pre- and post-election aid to Walker. The Center believes the public has a right to know how much coordination has been happening between for-profit and non-profit corporations, including Koch-funded enterprises like "Americans for Prosperity," (AFP) and elected officials on any major issue of public concern to the people who live in this state. The president of that special interest group, Tim Phillips, admitted this week, according to the New York Times, that "[E]ven before the new governor was sworn in last month, executives from the Koch-backed group had worked behind the scenes to try to encourage a union showdown." David Koch serves as the president of the board of AFP, and the Kochs have bankrolled numerous anti-union efforts and also promoted the privatization of assets held by the government.

What Next?

Walker seems to be trying every PR tactic in the book to distract from his real agenda, which parallels the Kochs' agenda for Wisconsin and other states across the nation.

He continues to act as though winning an election 52% to 48% is a mandate to dictate changes to any law he wants.

And his fireside "chat" Tuesday night was widely panned by many watchers as simply another one-way speech filled with PR spin by a governor whose first few months in office have been marked by his penchant to dictate and not negotiate in good faith with fellow representatives of the people.

Two of the key questions are: Will the people get any real say in the sale of their public assets to any company Walker's administration chooses and "for any amount" it sets, without any public check, or without any input from anyone other than Walker's buddies? And of course, which companies will really benefit from this proposed arrangement?

Updated.