Green Firms Get Fed Cash, Give Execs Bonuses, Fail
Watchdog: 20 green energy firms that got fed cash are in trouble.
March 6, 2012 — -- President Obama's Department of Energy helped finance several 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.
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, EnerDel 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 energy companies that have gotten federal loan guarantees or grants 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 sharpened the focus on the president's environmental mission, already under scrutiny following the collapse of Solyndra Inc., the first recipient of an Obama green energy loan.
Yet, not long after, the company's momentum suddenly halted.
Last August, SpectraWatt filed for Chapter 11 bankruptcy protection.
"It all happened so quickly," Richard J. Haug, SpectraWatt's President and COO, said in an interview. The company's innovative technology, he said, butted up against changing market and pricing conditions, competition from the Chinese -- and the fact that some early investors did not follow through.
"They couldn't locate any new money," he said. "It was very disappointing."
While the DOE's early grant supported research and development, Haug said, a later funding request was denied. Last March, he said, the company laid off its workforce and effectively shut down. "It became increasingly difficult for us to make any more money. By the end of 2010 we basically dropped down to a cash level … that by March we would be out of business," Haug said.
In March, the big payouts began. Five company executives, including Haug, received six-figure payments in late March or early April 2011, bankruptcy records show. The five "insider payments" totaled more than $745,000.
Haug said the payouts were not bonuses, but accrued vacation and pay for executives that had been spelled out in severance agreements. "There were no golden parachutes," he said. "This was a very straightforward very honest group of people. I'd go to work with them again anytime."
Energy officials noted that their early investment in SpectraWatt was relatively small compared to other project financing. Late last year, the company held auctions to sell off its plant and property.
In recent weeks, several other companies backed by DOE dollars have encountered deep financial woes.
At least six Energy Department loan and grant recipients -- from electric car maker Fisker Automotive to electric-car battery maker A123 Systems to Colorado-based Abound Solar -- have laid off workers or suffered financial woes. Those setbacks come on top of the companies that have already filed for bankruptcy.
Administration officials, from Obama on down, say they continue to support the green energy mission. "There were going to be some companies that did not work out," Obama told reporters in October, after Solyndra's meltdown. "All I can say is the Department of Energy made these decisions based on their best judgments."
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