State Funded Tesla-SolarCity Factory Slips Into Outright Corruption
Tesla’s merger with solar panel provider SolarCity is getting off to a rocky start as the merged company must now deal with corruption charges plaguing one of its solar panel facilities in New York.
Contractors working on a nearly $1 billion ($900 million) project in Buffalo haven’t been paid for work they started in July – the lack of cash has forced the state to lay-off workers. Tesla-SolarCity hopes to use the completed facility as a one-stop shop to produce solar panels, battery chargers, and electric vehicles.
The payments have been held up because of a cascade of corruption charges leveled against LPCiminelli, one of the contractors pegged to manage construction on the so-called Buffalo Billion’s signature project. State officials maintain the payments will be made once the review process is completed.
“Everyone will get paid for their work, but in light of the investigation, the payment process has extra layers of review and takes additional time,” Howard Zemsky, the president of Empire State Development, said in a statement Monday.
Federal agents arrested LPCriminelli executives in November after a lawsuit was filed charging the construction company with criminal bid-rigging and bribery charges. One individual already pleaded guilty.
Investigators believe the Buffalo Billion benefits wealthy developers who frequently donate to New York Democratic Gov. Andrew Cuomo, as well as companies known for feasting on Buffalo tax dollars in the past. SolarCity hasn’t been named in the probe.
Panasonic-Tesla deal to make the Buffalo Billion project home could very well be a means of propping up SolarCity, a heavily indebted company that hasn’t turned a profit since 2012. It spent $438 million this year, nearly 50 percent more than its revenue of $308 million.
The Buffalo Billion project is another embarrassing blip in the Tesla-SolarCity saga, even though neither company has been implicated in the charges. The companies have a sorted history.
Shareholders with Tesla Motors and SolarCity, for instance, approved a highly contentious merger between the two companies Nov. 17. The deal is a boon for the debt-riddled solar panel provider but an anchor around Tesla’s neck.
Investor groups argued prior to the merger that the “hostile reaction” to the SolarCity deal was induced, in part, by the fact that there was so little diversity among the companies’ board of directors.
Donald Kendall, chief executive of investment management firm Kenmont, was the only person on the SolarCity board without deep-rooted ties to Elon Musk, who chairs both companies. Six out of seven members with the solar panel provider had intimatelinks to the company’s chairman.
CtW Investor Group, which holds 200,000 shares of Tesla, wanted Tesla to add two permanent independent directors to the board, separate the company’s chairman and CEO roles, and called for two independent directors to review the proposed SolarCity merger deal.
Tesla has also gotten some push back from the federal government over its sketchy business dealings.
The California-based electric vehicle maker, for instance, got into a scrape with the Securities and Exchange Commission (SEC) in November for using “individually tailored” measurements to add back costs to revenue numbers calculated under a set of financial rules called GAAP, which are used to inform the SEC about a company’s yearly revenue and expenditures.
The SEC allows the use of some non-GAAP metrics, but most exotic figures that adjust expenditures are prohibited. One common non-GAAP procedure is to exclude irregular expenses, such as those related to acquisitions and other unusual circumstances.
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