North Dakota Ethics Commission to launch inquiry into Development Fund problems

North Dakota’s Ethics Commission voted unanimously Wednesday to begin its own inquiry into a state-backed business financing program that drew critical audit findings and lawmakers’ concerns about conflicts of interest and a lack of documentation for millions of dollars in transactions. 

The move is the first of its kind for the 7-year-old ethics panel.

Last month, the Legislature’s audit review committee asked Attorney General Drew Wrigley to investigate the North Dakota Development Fund. He declined to do so earlier this month, citing a legal conflict in his office representing current and former Development Fund Board members in a lawsuit.

Lawmakers seek AG probe after audit finds problems with North Dakota business financing program

That left members of the Ethics Commission pondering a probe of their own.

“I would ask the question: If we don’t initiate, who would initiate it, if it wasn’t us?” Chair Pam Sharp said.

The Development Fund was created in 1991 and offers loans and investments as gap financing to new businesses that might not be able to obtain loans from traditional banks. Its board comprises eight members appointed by the governor.

Audit findings for a 2019-2024 period of the Development Fund included a lack of documentation for millions of dollars in transactions, unverified job data reported by borrowers and inconsistent conflict of interest procedures. Commerce Commissioner Chris Schilken told lawmakers improvements are underway or complete and emphasized the problems predate his and Gov. Kelly Armstrong’s tenures.

Ethics Commissioner Kelly Leben, who is the Burleigh County sheriff, wondered why the attorney general did not refer the matter to another entity to investigate. He wondered about the ethics panel setting a precedent in “self-initiating” investigations.

Commissioner Mark Western, an attorney and professional mediator, said the state constitution provides the panel with the ability to initiate an inquiry or investigation “on matters just like what is sitting here.” He wondered about the consequences of pursuing an inquiry and perhaps finding new details, or doing nothing.

“What does that tell our regulated community? What does that tell the people about our desire to get our fingernails dirty?” Western said.

Commissioner Lisa Edison-Smith, an employment and labor attorney, said the Development Fund situation is unique and important enough for at least an inquiry.

Board of criticized North Dakota business financing program plans meeting to address audit

Leben noted the “uncharted territory” of an inquiry, saying, “I want to make sure we go in with eyes wide open.”

An inquiry could take the form of how the Legislature’s audit committee asks people to attend a meeting and testify, or how Congress does investigations with testimony and staff research, Commission General Counsel Logan Carpenter said.

The panel’s inquiry will begin with commissioners reviewing the audit and making a request for documents from the Development Fund, perhaps in coordination with other state agencies that might be pursuing the matter, Western said.

Wrigley told the North Dakota Monitor his office did not investigate the Development Fund because of the conflict in his office representing fund officials in a civil lawsuit. He also said no one has presented credible evidence of a crime to spark a criminal investigation.

“We have nothing to refer,” Wrigley said.

Development Fund CEO Brian Opp declined to comment on the Ethics Commission pursuing an inquiry.

Sen. Jeff Magrum, who chairs the Legislature’s audit review committee, said he is glad the Ethics Commission “is stepping up to the plate here.”

“I’ll help them in any way I can because I think we need to definitely get to the bottom of this,” said Magrum, R-Hazelton.

Reach North Dakota Monitor reporter Jack Dura at [email protected].