Foxconn blames coronavirus for delay in audit; WEDC talks amending contract
The coronavirus has delivered a significant impact on Wisconsin businesses, and for the Foxconn Technology Group, it could delay when the company receives millions of dollars in state tax credits.
According to emails obtained by the Milwaukee Journal Sentinel, Foxconn was supposed to submit a third-party report verifying information related to tax credits by May 15. Deloitte, a London-based auditing and consulting agency, has been tasked by Foxconn to write the report.
On May 15, the due date, Robert Berry, an attorney representing Foxconn, sent a letter to Wisconsin Economic Development
Corp. Secretary Missy Hughes asking for a 60-day extension.
“With this extension, we hope Deloitte will be able to safely visit our Wisconsin facilities in order to lawfully and accurately perform the Agreed Upon Procedures relating to their review of our Annual Project Reports, which they have not been able to accomplish due to the previous statewide measures that were set in place in order to protect our communities in Wisconsin from the devastating pandemic.”
The state granted the extension and the report is due to WEDC in mid-July.
“WEDC still must verify the 2019 workbooks through its own procedures before a determination is made
on eligibility for tax credits,” Sam Rikkers, WEDC deputy secretary and chief operating officer, said in a statement to the Journal Sentinel.
Conversations between Foxconn and the state have been frosty at times. WEDC has been the main agency working with Foxconn to make sure the project is progressing under the terms of the agreement. Over the last several months both entities have been communicating and meeting to discuss the agreement.
Foxconn officials expect they will be eligible for millions of tax dollars in subsidies.
In April, Jay Lee, Foxconn board member and vice chairman, wrote in a letter to the WEDC, “Foxconn directly employed over 600 individuals, with more than 550 meeting the criteria for qualification as full-time employees under the WEDC pay-for-performance agreement, based on internal estimates.”
According to the development agreement between the state and the company, Foxconn needs to have hired a minimum of 520 full-time workers subject to certain eligibility requirements in 2019 to receive $4.7 million in state tax credits.
Had the company hired more than 2,080 full-time eligible workers in 2019, it could have received the maximum $19.1 million in tax credits for the year.
The job numbers must be reviewed by a third-party auditor for verification, according to the agreement.
In 2019, Foxconn did not receive any tax credits from the state.
Masks produced at facility
In response to the pandemic, Foxconn has produced at least 100,000 masks at its facility in Mount Pleasant and plans to make ventilators.
“The company has donated 100,000 of those masks to the state of Wisconsin to assist in their pandemic relief efforts. We will continue to produce tens of thousands of face masks for general use by medical professionals, law enforcement, pharmacists, and caregivers while expanding our efforts towards other ways to help,” Foxconn said in a statement.
The pandemic has also hurt other efforts by the state to gather additional information about the project.
In January, officials from both WEDC and Foxconn were discussing a possible trip to China to visit their operation in Shenzhen and Taiwan to visit the facilities of the Foxconn Industrial Internet (Fii), a subsidiary of Foxconn.
In February, Rikkers sent an email to Alan Yeung, Foxconn director of U.S. strategic initiatives,letting him know that he and Hughes canceled their trip to China but were planning on going to Taiwan to visit Foxconn Industrial Internet facilities.
The pandemic prevented that trip from happening.
Foxconn Industrial Internet has been a point of criticism from the state. Currently the company is building a large dome facility on the property in Mount Pleasant, however that is not part of the agreement with the state.
In 2019, Joel Brennan, secretary of the Department of Administration, exchanged heated letters with Yeung saying the Foxconn Industrial Internet and the size of the new manufacturing facility cannot be counted toward hiring and construction goals eligible for tax credits.
In November 2019, Hughes sent a letter to Yeung and Foxconn Industrial Internet officials Brand Chen and FooMing Fu thanking them for meeting and giving her a presentation about Fii.
“As I stated when we met, WEDC and our administration are committed to support Foxconn and Fii’s success in Wisconsin, demonstrated by existing and on-going state and local investments in real estate, roads water, sanitation, fiber and job training,” Hughes wrote.
“We also had a frank discussion about the challenges related to Foxonn’s incentive contract with WEDC and the state. Specifically, we noted that the Foxconn’s project work and plans do not align with the project agreed to by the parties to the WEDC incentive contract, the construction of a Generation 10.5 TFT-LCD fabrication facility,” she added.
“We also noted that Fii, is not a party to the WEDC incentive contract, and outlined the application and certification process Fii would need to follow should it wish to become eligible for state incentives for its future investments and hiring in the EITM zone.”
Hughes went on to encourage Foxconn to meet with the state to amend the contract saying “it would be in Fii’s best interest to apply soon if it wishes to pursue eligibility for tax credits.”
In February, Foxconn and WEDC met to discuss amending the contract and the negotiations that may result in the contract being amended are likely to be kept from the public.
In an email from Rikkers to Yeung on Feb. 16, Rikkers said, “Once an amendment is filed and until it is executed or talks cease, WEDC is able to protect from public records requests documents relating to an amendment’s negotiation.”
When asked about discussions on possible amendments with Foxconn, Rikkers said, “WEDC does not comment on contract discussions unless and until the WEDC board of directors acts on the matter.”
Foxconn and WEDC officials met in Milwaukee on Feb. 26 to discuss the agreement.
When asked about the results of the meeting, Rikkers said, “WEDC continues to have discussions with Foxconn regarding how best to align the contract with the current project. Amendments to the contract would require the approval of the WEDC Board of Directors.”
Asked about the February meeting, Foxconn stated, “Ongoing discussions with the state are a part of the ongoing dialogue about Foxconn’s commitment to bring substantial impact to Wisconsin.”