By Kim McDarison

Sharing within a written statement released this week 34 documents as evidence, Whitewater Finance Director Rachelle Blitch said an investigation she has been conducting since last month shows that the city’s Community Development Authority (CDA) has written off some $758,723 in loans it had extended, while engaging in “a lack of proper documentation, communication, and transparency.” 

Within her findings, Blitch wrote: the investigation uncovered “several critical issues” in the handling of loans made to Meeper Technology, Inc., and related entities owned and operated by the same person.

Citing critical issues, she wrote: “These include a lack of proper documentation, communication, and transparency regarding loan write-offs, multiple loans granted despite evident financial distress and inconsistencies, deviations from standard loan procedures, and a failure to enforce collateral requirements. These findings highlight the need for the CDA to implement more stringent loan oversight and adhere strictly to established policies to safeguard public funds and ensure financial accountability in the future.”

In a followup telephone interview held Friday, Blitch said city staff began investigating the CDA’s loan history with Meeper Technology following a discussion held by CDA members in May, with a board member asking for information explaining why the Meeper Technology loans had been written off. The member asked that the item be placed on a future agenda.

The findings of Blitch’s investigation were released in a memo addressed to the CDA and the city’s Economic Development Director Taylor Zeinert on Monday, June 10.

Members of the CDA include: Neil Hicks, Jeff Knight, Christ Christon, Joe Kromholz, Thayer Coburn, Jon Kachel, and Greg Marjkzak, who serves as the body’s president.

In a memo to Whitewater Common Council members, City Manager John Weidl noted that the investigation completed by Blitch led to the uncovering of “significant mismanagement and misappropriation of over three-quarters of a million dollars in loans, stemming from CDA activity in the 2014 and 2015 range.”

Additionally, he wrote, “the investigation found that during the tenure of certain CDA members, including Larry Kachel, Jeff Knight, Jim Allen, and Stephanie Ann Goettl, loans were made and written off without proper documentation and approval, resulting in losses of approximately 90% of every dollar loaned out, losses,” he said, “far exceeding what we have seen in other communities.”

Weidl wrote: “We have uncovered further potential fraudulent activity related to a grant opportunity. It appears the CDA tried to improperly funnel funds back into their accounts, even though a grant award was obtained by another entity. This will be reviewed during the upcoming audit process.”

In her memo, Blitch said delinquent loans were written off for Meeper Technology in March of 2023.

According to online sources, the Whitewater-based company formed in 2015 and manufactured a wheeled component which could be used with children’s snap-together building blocks.

Blitch said her investigation included the undertaking of a data collection process, which was developed through the review of CDA meeting minutes and videos, along with loan documents, financials, business plans, legal correspondence, policy manuals, and payment histories.

Meeper Technology labeled as  ‘no longer a viable company’ in 2023

Among her findings, Blitch noted that in March of 2023, then-city finance director Steve Hatton, within a memo he wrote to staff, stated that the CDA had determined, according to Blitch, that “Meeper (Technology) was no longer a viable company, and that the loans would be written off.”

Of Hatton’s statement, Blitch wrote in her memo: “I could not find any supporting documentation for this claim.”

Typically, she wrote, a process to write off a loan would include “acquiring official documentation from an attorney certifying the company’s insolvency.”

Upon receipt of such documentation, the matter is submitted to the CDA for review, she stated. 

Blitch found, she wrote, the write-off of loans extended to Meeper Technology, and its CEO Liz Eversoll, was not listed as an action item on a CDA agenda.

In Friday’s followup interview, Blitch said the March 2023 memo from Hatton, which is where the loan is referenced, is a CDA update and not an action item.

Blitch said that Eversoll made a presentation to the CDA to obtain the loan in September of 2022.

Citing September 2022 to March 2023 as a time in which she might have expected to find financial information from the company and its communications with the city, she said, both during the interview and within her memo, that she had confirmed, as part of her investigation, with the city’s IT department “that no communication was received” from Eversoll during that timeframe.

Blitch, within her memo, said that she had verified, through use of the Wisconsin Department of Financial Institutions website, that the company had dissolved on June 1 of this year.

In looking at loans extended by the CDA to Meeper Technology, totaling some $286,820, she said the company had repaid approximately $79,000, of which some $31,000 was identified as principal, and approximately $48,000 was interest.

A breakdown of monies extended to Meeper Technology included a Capital Catalyst loan of $102,000 and two Community Development Block Grant (CDBG) loans of $102,510 and $82,310.

The CDBG loan program was begun in 1982 by the state of Wisconsin for the purpose of providing funding for housing rehabilitation and homebuyer assistance, according to information found on wisconsin.gov. 

Meeper CEO’s additional holdings, and loans

According to Blitch, her investigation further determined that Eversoll held two other Limited Liability Corporations (LLC) — Mobile Mesh Games LLC and V2 League LLC — and a “corporation,”  — SoLoMo Technologies, Inc. — which received loans from the city’s CDA.

Between 2014 and 2015, she wrote in her memo, SoLoMo Technologies, Inc., and Mobile Mesh Games LLC each received a Capital Catalyst loan in the amounts of $102,000, and the two companies each received a CDBG loan of $102,510. Mobile Mesh received an additional CDBG loan of $21,710. 

Also, she noted, Eversoll’s company, V2 League LLC, received a Capital Catalyst loan of $102,000 and a CDBG loan of $51,560.

When combining loans made to the three aforementioned companies with monies lent to Meeper Technology, the companies held by Eversoll received a total of $871,110 in loans facilitated through the CDA, Blitch stated. 

Loans were extended between September of 2014 and July of 2015 to the four companies held by Eversoll, she wrote.

Blitch noted by phone on Friday that unorthodox lending behaviors undertaken by the CDA were identified between 2014 and 2016.

In 2015, Blitch wrote, the CDA “discussed updating loan limitations to ensure adequate funding for applicants. They revised the loan limitation to a total of $150,000 per entity.”

Meeper Technology and Mobile Mesh were back before the CDA looking for money in January of 2016, Blitch noted, with the CDA approving loans that exceeded the companies’ borrowing limits.

Blitch wrote that, having reviewed a CDA meeting video from 2016, she found that the body discussed the performance of the two companies —Meeper Technology and Mobile Mesh — including the hiring of “an additional employee and significant growth.”

However, she wrote, documents submitted by Mobile Mesh in August of 2016 “revealed they received no revenue other than a $10,000 grant in the previous 18 months.”

The company’s financials were not complete, Blitch wrote in her memo, but, she added, she did “flag,” as a matter of her investigation, some items found in a spreadsheet. Among them, she stated, the company had reported a net loss of $125,131 in 2015, and, she wrote, “salaries and payroll taxes do not tie out,“ adding the notation: “payroll tax overstated,” for both 2015 and 2016.

Blitch said Meeper Technology reported a “significant loss,” noting that in 2015, it reported a negative gross profit of $8,604, which, she wrote, “means it cost them more to make the product than what they sold it for.”

In 2015, the company reported a net loss of $202,888.

Blitch wrote: “They also reported wages of $111,822.56 for the year, however wages, through August of 2016 were only $31,052.27, yet there was a higher volume of sales in 2016 and still (the company) had a net loss of $116,911.”

Following a standard and consistent process

Blitch said that as she explored the history of Meeper Technology, and other companies held by Eversoll, she also looked for “additional loans to determine if a standard and consistent process was followed.”

She wrote: “Several other businesses that received funds had specific contingencies. For example, the CDA required a first-position mortgage on some properties.” She cited Jimmy’s Classic Italian Beef as falling within that category, and “personal guarantees for amounts significantly lower than $100,000.” She cited Slipstream and Thermodata as examples. She also noted the contingency of longterm leases at the Whitewater Innovation Center, citing Thermodata as an example.

“One business received $50,000 up front with the option for two additional draws of $25,000 each, with repayment due in five years instead of ten, and the CDA required a first-position repayment status,” she noted, citing EdViewRate as the example.

In September of 2016, Blitch wrote, the CDA approved an agreement for Mobile Mesh to extend its due dates for principal and interest payments from 12 to 24 months “without any stipulations or additional requirements.”

The action was “in direct conflict with the CDA’s 2013 Whitewater Seed Accelerator Fund or Capital Catalyst Policy Manual, which, Blitch said, states: “Loan payments may be deferred for a maximum of twelve monthly payments.”

She noted that of the $226,220 in loan money Mobile Mesh received from the CDA, it made one payment in August of 2016, in the amount of $1,000, which was interest. The company officially dissolved in December of 2020.

While looking for consistencies in the manner in which the CDA executed its policies, Blitch said she looked at another company — The Learning Depot — which, in October of 2014 requested an extension on its loans. Blitch noted that the extensions were approved with the conditions that the financials would be reviewed and that the company would remain current on its payments.

Blitch, of Friday, said she was not aware on whether The Learning Depot had maintained the conditions of its extension, noting that her purpose in looking at the loan was simply to see if the extension had been treated in a manner that was consistent with CDA policies and with the treatment of other loan extensions.

Following activities associated with SoLoMo Technologies, Blitch stated that in September of 2016, the CDA approved a payment deferral from 12 to 24 months, extending the due date to January of 2017.

That same month, the CDA signed a “subordination agreement with Quad Graphics for up to $3,000,000, enabling SoLoMo to secure additional funding,” Blitch wrote, adding that the company received a total of $204,510, but the CDA did not receive any payments before the company dissolved in December 2017.

Again citing the Capital Catalyst manual, Blitch wrote that the CDA is charged with seeking “the best possible collateral position to ensure that Seed Capital Fund loans are adequately secured.”

However, she wrote, “the only agreements signed were General Business Security Agreements.”

She described the condition as “noteworthy,” that three of the aforementioned  companies owned by Eversoll  — Mobile Mesh, SoLoMo and Meeper Technology — “indicated they had no collateral available to secure the loans, with the only other funding being a small personal equity investment of $10,000, and the remainder sourced through crowdfunding,” which, she noted, included Meeper Technology, Mobile Mesh and V2 League. 

In the case of SoLoMo, she said, the company’s loan application notes only $50,000 coming from grants and loans, and lists the company’s valuation at $5.7 million, but, she wrote, it states “an appraisal isn’t available and their financials show they have a negative owner’s equity.” 

According to Blitch, SoLoMo was the first of the four companies to apply for a loan through the CDA and had been in business since 2012. Financial statements were included with their application.

Again, citing the outcome of her investigation, she pointed to “red flags,” saying: “the total stockholder’s equity, (or) fund balance, was negative $541,453, the total longterm liabilities/loans amounted to $727,626, and the year-to-date (YTD) net income showed a loss of $852,638. Additionally, the financial notes indicated a YTD payroll expense of $1,016,179, which contradicted the income statement showing total YTD expenses (including payroll) of only $997,230. Furthermore, their $500,000 loan from MDC (an apparent lending entity identified by those initials on the company’s financials) was in deferral, and their rent was deferred pending additional capital. It was evident that the company was in distress, and the inconsistencies in their financials raise questions about the legitimacy of their statements.” 

Looking more closely at, V2 League, she said the company received total funding of $153,560, of which $31,664.44, ($22,523.19 of principal and $9,141.25 in interest) was repaid to the CDA before the company dissolved in 2020.

In December of 2018, Blitch wrote, the CDA approved and signed another Subordination Agreement, this time for Meeper Technology to Fordham Capital Partner, LLC, for up to $350,000.

“CDBG loans are required to have personal guarantees under the program, and are required to create and maintain a specific number of jobs, however none of the CDBG loans Liz Eversoll received were required to sign a personal guarantee. The loan agreement for Mobile Mesh outlines the requirements for job creation and maintenance, further indicating the lack of compliance with adhering to policy,” Blitch wrote.

Again citing the Capital Catalyst Policy Manual, she noted that it outlines the process and documentation requirements of the Seed Capital Screening Committee and the Finance and Investment Committee.

She wrote: “According to the manual, a master file should be established for each application, including a recommendation file. However, I was unable to locate any documentation or meeting minutes detailing the committee members, their meeting dates or the recommendations made. This lack of transparency hinders the ability to assess whether the proper procedures were followed in the initial loan recommendations.” 

Next steps

On Friday, both Blitch and Weidl said that information found within the city’s investigation will be discussed during the CDA’s next meeting, which will be held Thursday, June, 20, at 5:30 p.m. in the Whitewater Municipal Building Community Room, 312 W. Whitewater St., Whitewater.

After reviewing the results of Blitch’s investigation and responding to questions on Friday, Weidl said: “I was extremely surprised and concerned that such longstanding members of the CDA — people who are still on the CDA — notable members of the community that have been questioning the direction of the city council and the administration, were part of this. I would have expected, with all their experience that they’ve touted, that these types of grievous errors, and seeming almost overt, with disregard to the policies, would not have taken place. That’s what’s most concerning to me. I’m not terribly interested in assigning blame. I’m extremely interested in figuring out how we can move forward in a way that safeguards the taxpayers’ money.”

He said a first step might be to reaffirm public policies that already exist.

Weidl said Blitch’s research “uncovered that we had policies in place, and had those been followed, it should have, in theory, provided a level of oversight that would have checked some of this activity.”

He cited a recommending subcommittee charged with loan oversight, but, he said, “we can’t find any minutes of that subcommittee actually meeting and going through this information.”

Blitch said the Seed Capital Screening Committee was charged with the oversight and recommendation function, but she was unable to discover, she said, “who those people actually were.

“That’s part of the issue,” she added.

Additionally, she said, the city contracted with an individual at the time to serve similarly to an economic development director, but, she noted, “I don’t know what that person technically did at that point.”

Weidl suggested that the CDA could adopt a process, which, he said, was similar to one required and used by the city’s staff when looking at Tax Incremental Financing options, which includes having financial plans reviewed by a financial advisor. 

Further, he said, the city was in the process of helping the CDA “have its own legal representation. We’ve done and RFP (request for proposals) for it, we’ve received those, and I think at the next meeting they are set to choose an attorney, which should certainly help offer guidance and hopefully provide some of those guardrails.” 

Weidl said learning about some of the CDAs history has been “as educational as it is painful,” but, he said, acknowledging the mistakes of the past was a step in ensuring they are not made again.   

“We wouldn’t have expected all of those loans to mature anyway in the entrepreneurial world, but certainly the percentage of not collected money up against industry standards is another red flag … and taxpayers deserve to know, even when their investments are not being wisely shepherded, and then the organization needs to hold people accountable and move forward,” he said. 

An earlier story about the CDAs financial activities between January and April of this year, is here: https://whitewaterwise.com/board-receives-review-of-cda-financial-statements/.