Energy-backed firms award bonuses, then file bankruptcy

Discussion in 'Media' started by hvactec, Mar 8, 2012.

  1. hvactec
    Offline

    hvactec VIP Member

    Joined:
    Jan 17, 2010
    Messages:
    1,315
    Thanks Received:
    106
    Trophy Points:
    83
    Location:
    New Jersey
    Ratings:
    +132
    President Obama’s Department of Energy financed a fleet of green energy companies that later fell into bankruptcy — but not before the firms doled out six-figure bonuses and payouts to top executives, a Center for Public Integrity and ABC News investigation found.

    Take, for instance, Beacon Power Corp., the second recipient of an Energy Department loan guarantee in 2009. In March 2010, the Massachusetts energy storage company paid cash bonuses of $259,285 to three executives in part due to progress made on the $43 million energy loan, Securities and Exchange Commission records show. Last October, Beacon Power filed for Chapter 11 bankruptcy.

    Ener1 subsidiary EnerDel, maker of lithium-ion battery systems, landed a $118.5 million energy grant in August 2009. About one-and-a-half years later, Vice President Joe Biden toured a company plant in Indiana and heralded its taxpayer-supported expansion as one of the “100 Recovery Act Projects That Are Changing America.”

    Two months after Biden’s visit, corporate parent Ener1 paid $725,000 in bonuses to three executives — including $450,000 to then-CEO Charles Gassenheimer, who led Biden on the tour. This January, Ener1 filed for Chapter 11 bankruptcy protection.

    At least two other firms that benefited from Energy Department funding — one a $500,000 grant, the other a $535 million loan guarantee — handed out hefty payouts to executives and later went bankrupt.

    The Department of Energy, asked about the payments examined by the Center and ABC, said it is troubled by the practice and intends to convey that message to loan recipients.

    "We don’t begrudge companies or their executives for their success, but it is irresponsible for executives to be awarded bonus compensation when their workers are losing their jobs,” said department spokeswoman Jen Stutsman. “We take our role as stewards of taxpayer dollars very seriously, and as such, we will make clear to loan recipients our view that funds should not be directed toward executive bonuses when the rest of the company is facing financial difficulty.”

    The bonuses and bankruptcies come against a growing wave of trouble for companies financed with Energy Department dollars. Of the first 12 loan guarantees the department announced, for instance, two firms filed for bankruptcy, a third has faced layoffs and a fourth deal never closed.

    The nonprofit Citizens Against Government Waste counts nearly 20 government-backed energy companies that have run into financial trouble ranging from layoffs to losses to bankruptcies. An outside consultant hired by the White House said the Energy Department’s loan pool includes $2.7 billion in potentially risky loans and suggests the agency hire a “chief risk officer” to help minimize problems.

    To watchdogs, the pattern of firms awarding bonuses only to file for bankruptcy raises questions about how well the Energy Department chose its winners, and how thoroughly it kept an eye on them once selected.

    “Giving a bonus to the executives under these circumstances is rewarding failure with our money with no chance of getting it back,” said Leslie Paige, spokeswoman for the nonpartisan Citizens Against Government Waste.

    “Taxpayers need some representation here. They didn't really get it.”

    The setbacks have intensified the glare on the president’s environmental mission, already under scrutiny following the collapse of Solyndra Inc., the first recipient of an Obama green energy loan.

    Solyndra, bankruptcy records show, was among the companies to dole out thousands in executive payments — in its case, just months prior to its late August collapse and early September bankruptcy. As a criminal investigation and House inquiry continue into the company’s implosion, the government must navigate bankruptcy proceedings in hopes of recovering a piece of its $535 million investment.

    In interviews, executives with companies backed by public dollars defended the payments as proper. Some said bonuses were granted for work done in a previous year, before financial storm clouds had fully developed, and that the executive cash infusions were sometimes linked to broad corporate milestones.

    One company executive said the Energy Department explicitly allows for federal funds to be used to pay out executive bonuses.

    DOE does not set salaries and benefits of companies it backs, “but we do closely scrutinize all of the expenses submitted by the companies before they are reimbursed to ensure that taxpayer dollars are being used appropriately,” said spokeswoman Stutsman. “Funds are paid out as the work is actually completed.”

    Secretary Steven Chu declined an interview request. The department has long defended the green energy movement as a way for government to help spur development of cutting edge products that aid the environment and economy. Sometimes, they say, investments in potential game-changing technologies simply don’t work. The potential default rate, they say, is within the parameters set by Congress.

    Yet some members of Congress — already concerned about lucrative paydays at bankrupt Solyndra — say they’re particularly troubled that failed companies, backed by Energy Department funds, would pay bonuses at all.

    “Any company that's going into bankruptcy or any executive that ran a company into bankruptcy shouldn’t be getting bonuses in the first place,” said Sen. Charles Grassley, R-Iowa, former chairman of the Senate Finance Committee. “In the case where there might be federal grants or federal loans, I would be very concerned.”

    Grassley added: “The purpose of our grants for energy or almost any other grant of government is for the purpose of innovation. It's not for the purpose of feathering the nest of a private company executive.”

    Bruce Kogut, director of the Sanford C. Bernstein Center for Leadership and Ethics at the Columbia Business School, said it is not uncommon for corporate bonuses to be awarded when executives meet key achievement milestones.

    “The problematic issue,” professor Kogut said, is giving out bonuses “near the time of bankruptcy.”

    Solyndra executives, bankruptcy records show, pocketed thousands in payments just months before the company dismissed 1,100 workers. At least 17 company executives received two sets of payments — ranging from $37,000 to $60,000 each payment — on the same days in April and July 2011. The insider payments, reported last year in the San Jose Mercury News, came as the company catapulted toward bankruptcy in early September. A Solyndra spokesman did not reply to interview requests.

    Solyndra’s crash last August put a sharp focus on the selection process the Energy Department follows in awarding taxpayer dollars. The administration backed the upstart firm despite concerns even from some government officials worried about Solyndra’s financial viability, email records show. And, energy officials committed to the financing before all due diligence was in hand.
    Bankruptcies and bonuses

    Not as well-known are three other firms backed by Energy Department dollars — ranging from $500,000 to $118.5 million — that also suffered financial downturns. As with Solyndra, each corporate entity rewarded executives prior to its bankruptcy filing.

    One example: Ener1, whose subsidiary EnerDel won the $118.5 million Energy
    Department grant in 2009 to help expand its manufacturing plant. The company also received supportive write-ups on the DOE website.

    read more Energy-backed firms award bonuses, file bankruptcy | iWatch News by The Center for Public Integrity
     

Share This Page