Green companies sue Energy Dept. for ‘cronyism,’ leaking confidential business information

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Michael Bastasch DCNF Managing Editor
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The government watchdog group Cause of Action filed two lawsuits against the Department of Energy last week on behalf of two green businesses arguing that the department relied on political connections instead of merit-based reviews to award loan guarantees, and leaked the confidential business information to government-backed competitors.

“This case is about fighting government cronyism,” Dan Epstein, executive director of Cause of Action. “It is a rather fluid story of when you have a start-up company, that’s a small business … looking to get a piece of the American dream. And because the government is involved in the business of picking winners and losers, they fundamentally not only shut down that dream, but destroyed the company.”

Cause of Action is representing the companies XP Vehicles, which applied for a DOE loan to mass produce an SUV-style electronic vehicle that would start at less than $20,000, and Limnia, an advanced technology energy systems company that made critical technology for XPV.

The lawsuit alleges that alleges that XPV’s 2008 application for a DOE loan guarantee was derailed by political cronyism, delayed consideration, and eventually denied by the DOE while more politically-connected companies like Tesla Motors and Fisker Automotive received loans.

The now dissolved XP Vehicles application for a $40 million  was denied in August 2009 after the company had found out earlier that year that it’s competitors — Tesla and Fisker — received special assistance from DOE staff with the loan process.

“When [XPV] had asked for the same treatment as Fisker and Tesla were being given by the Department of Energy, [XPV] was denied that,” Epstein told TheDC News Foundation, adding that another loan applicant told XPV that there was “political decision-making involving [a politically connected individual] who had consulted on Department of Energy projects.”

Tesla Motors got a $465 million DOE loan in June 2009 and Fisker Automotive got a $528.7 million loan that year as well. Fisker has had trouble meeting DOE sales targets and has also had problems with their vehicles catching fire.

Cause of Action is also suing the DOE for leaking confidential business information from their second client Limnia to its government-backed competitors General Motors and Ford.

Limnia was sharing patented technological information with the DOE-run Sandia National Laboratories under Non-Disclosure Agreements regarding the company’s innovative energy storing systems and pressure membrane technology.

However, Limnia alleges that Sandia National Laboratories leaked this confidential business information to GM and Ford, which are now contracting with the DOE to do research using the leaked technology.

“Our client was the innovator, the first person to patent this technological system. When our client visited Sandia National Laboratories, he went into the project room and he saw a GM presentation that used virtually the same technology, the chemical process which was patented by our client,” Epstein said.

“It is our client’s belief that GM and Ford, which are now contracting with the Department of Energy to do research using this chemistry, were given that chemistry information and other proprietary information by Sandia National Laboratories,” Epstein added.

However, Epstein said his clients were not bringing direct claims against GM or Ford, and argues that the DOE is liable for leaking the confidential information to Limnia’s competitors.

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