After being fired in 2009 as the top executive of Willard & Kelsey Solar Group, a Perrysburg start-up that has received millions in state loans, William Mitchell made a decision that he wasn't going to go away quietly.
Emails from Mr. Mitchell also show that he took a keen interest in another company expense -- the monthly payments, some as high as $40,000, that went to several top executives.
Mr. Mitchell made a key decision to use this information in the months after he was fired. He hired a lawyer to press the company to pay him more than $1 million he claimed he was owed, not only as an executive of the firm but also as a part owner.
A review of the correspondence between Mr. Mitchell, his lawyer, and the law firm representing Willard & Kelsey, which was obtained by The Blade along with the copies of company records that he kept when he was fired, show he was going to use that information to get the money he felt he was owed.
In email after email to his lawyer he claimed he was instructed by the current CEO and chairman of the firm, Michael Cicak, to make payments to company executives from money supplied by a group of Italian investors and from funds from the Ohio Department of Development.
The lawyer, Joseph Katarincic of Pittsburgh, decided to use that information in his negotiations with Willard & Kelsey lawyers and then decided to turn up the heat -- telling them that he had informed the chief counsel for former Ohio Gov. Ted Strickland what Mr. Mitchell was claiming about company spending.
"I have made the initial contact with the counsel to the office of the governor of Ohio, who is making himself familiar with the transaction, and we plan to talk next week. These are matters that should receive our joint attention. I think we all realize the implications of what was done here and they are not good," Mr. Katarincic wrote in a Feb. 12, 2010, letter to Michael McGowan at the Toledo law firm of Shumaker, Loop & Kendrick, which was representing the firm.
If true, payments from state loan funds to Willard & Kelsey executives would be in direct violation of the company's loan agreement.
Kent Markus was chief legal counsel to the governor's office under Mr. Strickland, but he declined an interview with The Blade. Mr. Markus is now the director of enforcement at the U.S. Consumer Financial Protection Bureau.
The bureau, however, released this statement: "Markus no longer has access to records which would indicate what information, if any, he or his staff may have received and what actions or referrals he or his staff might have taken in this matter."
Mr. Strickland, who now is a consultant in Columbus and is a national co-chairman of President Obama's re-election campaign, said in a telephone interview with The Blade that he had no recollection of allegations that executives at Willard & Kelsey were paid with state funds. He said if he had been told that, he would remember it.
"They were people that I had talked with on numerous occasions," the former governor said. "I had visited the company and looked at the apparatus and the production line. Yes, I certainly had contact with those folks. I wouldn't say I had a close personal relationship. I certainly spent time there, and I don't know on how many occasions I was there, two or three, maybe more."
The Strickland administration ardently supported green energy, and it was a pillar of the governor's 2010 unsuccessful re-election campaign.
Campaign finance records show four Willard & Kelsey executives contributed a combined $23,400 at fund-raisers for Mr. Strickland in 2010.
Mr. Strickland said the contributions would not have influenced him or his decisions if he had been informed about problems at the firm.
"I got contributions from a lot of people," he said. "I didn't do that in this set of circumstances or any set of circumstances while I was governor."
Mr. Mitchell died in July, 2011, of complications related to an illness.
Mr. Cicak, the current CEO, hung up on a Blade reporter on April 20 and has refused an interview.
"The state loan bought these assets. That's really the end of the discussion on the state loan. The state loan bought these assets," Branch Springer, Willard & Kelsey chief financial officer, repeatedly said during an interview.
The company received a $5 million loan and a $500,000 grant from the state Department of Development in March, 2009.
That money was to finance equipment the company already had purchased.
In a Feb. 11, 2010, email to Mr. Katarincic -- the Pittsburgh attorney from the firm Thorp, Reed & Armstrong -- Mr. Mitchell wrote that he was directed by Mr. Cicak to take money from the state loan and make distributions to executives.
The email also states that Mr. Mitchell was directed to compensate executives with money from $5 million supplied to Willard & Kelsey by Italian investors.
The executives named in the email include Mr. Cicak, Gary Faykosh, listed as the chief operating officer, James Heider, listed as the chief technological officer, and Jim Appold, listed as the company's president. None of the men responded to messages left by The Blade.
Mr. Katarincic declined to comment and said "attorney-client privilege goes into the grave. That's my rule." Mr. McGowan did not return a call seeking comment.
Willard & Kelsey's financial records kept by Mr. Mitchell show payouts to company executives from the Italians' investment funds. Loans to five company executives totaled more than $500,000 from August to October, 2008. In addition, the executives received payments of almost $1 million from November, 2008, through March, 2009.
An August, 2010, lawsuit against Willard & Kelsey by Brenlux sarl -- a company that bought the Italian investors' interest in the solar firm -- states that executives didn't allow Brenlux access to the company's books. The lawsuit also states Willard & Kelsey created "corporate waste through sham loans and 'guaranteed payments' " to company executives.
The case was filed in the U.S. District Court in Toledo and was settled in December, 2011, court records show. The settlement was not included in the court documents.
Willard & Kelsey's Maumee attorney, Marvin Robon, offered to show The Blade invoices that detailed the firm's equipment purchases before receiving state funding. When a reporter met with Mr. Springer, Willard & Kelsey's current chief financial officer, he did not provide the invoices but produced a printout showing the firm had spent more than $13 million on machinery and equipment.
Mr. Springer would not release an itemized account of the firm's spending after it received the $5 million loan from the state Department of Development.
"Can I show you that? No," he said. "[The state money] would have gone into the company's general fund."
Mr. Robon released a statement last week about how Department of Development loan and grant money was spent.
"Of the $5.5 million you should be aware that when those monies came in, a local bank was paid more than half of that sum to repay a 'bridge loan' and the remaining monies went into Willard & Kelsey Solar Group LLC's general checking account to further reimburse the company for monies spent to acquire the property, plant and equipment," he wrote in an email.
Mr. Robon denied in a prior statement that loan funds were used for the benefit of the company or its executives. He also said the company never has been contacted by the state about a misuse of public funding at any time during its operation.
Mossie Murphy, Willard & Kelsey vice president of development, said the loan couldn't have been misspent because it was a reimbursement for equipment that was previously purchased.
"We already spent the state money for the purposes necessary," Mr. Murphy said. "I think that to a certain degree what we have here is a document, and we're caught in a bit of a semantics problem here. It would have been impossible for us to use the state money to give to these folks."
The $5 million would not be eligible for executive payouts or payroll at Willard & Kelsey per the Department of Development loan agreement, said Daryl Hennessy, assistant chief of the business services division at the Department of Development.
He said that although the $5 million was a reimbursement, it still would have to be spent to repay the private loans and investments used to purchase and install solar-panel machinery.
"It has to be used for allowable costs related to the project," Mr. Hennessy said. "Again, for us, the collateral on this loan is the machine and equipment. It also could relate to the freight costs associated with delivering it."
Tracking the use of state development money at Willard & Kelsey -- or any company that receives taxpayer funds -- is extremely difficult. The state does not require companies to place loans or grants in separate accounts and monitor how each dollar is spent.
At the Department of Development, a company's progress and use of state funds are monitored through annual reports and on-site visits.
Although the department now requires companies to submit reports every year instead of every three, it still does not require a line-by-line accounting of loan and grant spending after funds are disbursed. The annual reports submitted to the state typically include profit-and-loss statements, balance sheets, and job growth.
The state does require companies to demonstrate that they've purchased equipment or need funding before it awards grants or loans -- it's the follow-up process that leaves some wiggle room.
Under Mr. Strickland, special legal counsel would give the department a recommendation on whether to approve a request. Now the Ohio Department of Development is making that call on its own with the help of JobsOhio, which monitors the health of state loan and grant recipients. JobsOhio was established by Governor Kasich.
"There is more detail surrounding the release of the money," Mr. Hennessy said.
The state also has the option of revoking funding -- a process dubbed a clawback -- if companies do not live up to loan or grant requirements.
Companies such as Willard & Kelsey, which was required in its loan agreement to create 400 jobs by March of this year and hasn't, now face stiffer penalties for not producing results.
Under Mr. Kasich, the state has performed 34 clawbacks to date. During the entire governorship of Mr. Strickland, the state engaged in 46 clawbacks.
The firm today
Willard & Kelsey -- once toured by high-profile Democrats such as Vice President Joe Biden and U.S. Labor Secretary Hilda Solis -- laid off almost all of its 80-person work force in January. The company's aim is to be the lowest-cost producer of solar panels in the world, Mr. Cicak told The Blade in January.
Assembly-line changes to improve the efficiency of the cadmium telluride thin-film solar panels were cited as the cause of the layoffs. Those layoffs were the latest development in a series of delays and financial issues that have created questions about Willard & Kelsey and the government money it has received since it moved into its headquarters on Dixie Highway in 2008.
Officials in the Strickland administration identified money troubles at the company as early as 2009, yet approved a second $5 million loan for Willard & Kelsey. Under Mr. Strickland, the state agreed to defer loan repayments and delay deadlines for company financial reports.
Now, under the control of Mr. Kasich, the state is trying to determine how best to recoup the funds it lent to the company. The loans are in the process of being renegotiated or reduced, and it's unclear how the state will proceed.
Former Lt. Gov. Lee Fisher, who served under Mr. Strickland and headed the Department of Development from 2007 to February, 2009, said in a previous interview with The Blade that he wasn't aware of a misuse of funds at Willard & Kelsey.
Mr. Fisher did not respond to interview requests left on his cell phone for this article.
Lisa Patt-McDaniel was interim director of the Department of Development after Mr. Fisher left and was named its director in September, 2009. The only thing she said she remembered about Willard & Kelsey is deferring loan payments, which was a common occurrence for start-up companies when she was at the department.
"If we would have heard of any misuse of funds, we absolutely would have taken immediate action to get that back," she said.
Contact Kris Turner at: firstname.lastname@example.org or 419-724-6103.