The Biden administration authorized a battery recycling company to receive a massive taxpayer-funded loan for a New York facility in February 2023, months after the company had allegedly started to defraud investors.

The Department of Energy’s (DOE) Loan Programs Office (LPO) and its director, Jigar Shah, pushed Li-Cycle, a company now in dire financial condition, to apply for a LPO loan to help build its Rochester, New York, facility as early as September 2022, according to The Wall Street Journal. The DOE announced its conditional commitment to loaning $375 million to the company in February 2023, just months after Shah’s meeting.

However, in a class-action lawsuit, investors are now accusing the firm of making false statements or withholding key information about the status of the Rochester facility starting as early as June 2022, months before the reported discussions about the loan or the announcement of conditional approval. The company announced on Oct. 23 that it had paused construction on the Rochester facility.

Li-Cycle now finds itself in poor financial shape; its stock, down more than 88% year-to-date, currently trades at about 70 cents per share, according to data from Google Finance. Its third quarter earnings report shows that the firm took a quarterly net loss of $130.5 million, managed to generate just $4.5 million of revenue and now appears to be on the hook for up to $350 million in total debt, according to Stock Analysis.

It remains unclear when or if construction will resume on the Rochester project, but some analysts are highly doubtful that the facility will ever become operational.

“If they’re not bankrupt in six months, I’ll be surprised,” George Conboy, one such analyst and chairman of Brighton Securities, told the Rochester Business Journal on Tuesday regarding the company’s condition. “No one in their right mind would loan them money.”

Shah’s office finances green energy investments with loans that private market lenders would not issue, according to its website. The LPO received a major cash infusion from the Inflation Reduction Act, President Joe Biden’s signature climate bill, and it now has hundreds of billions of dollars at its disposal. Li-Cycle is a company that aims to provide lithium-ion battery recycling services. (RELATED: Top Biden Energy Official Says It’s Unsustainable To Replace Gas Cars With EVs, Suggests Ways To Decrease Driving)

Shah reportedly met with Li-Cycle CEO Ajay Kochhar in September 2022 to pitch Kochhar on an LPO loan package to finance construction of the company’s Rochester facility, according to the WSJ. Kochhar was hesitant due to his concerns that the company would be unable to repay the debt, but Shah told him that the company would be making enough money in a few years’ time to render these concerns moot, according to the WSJ.

Shah told Kochhar to “get [his] ass to Pittsburgh” for a green energy business conference that was set to start shortly after the two met in September 2022, according to the WSJ, citing sources familiar with the conversation.

Shah’s former trade group, the Cleantech Leaders Roundtable, hosted an event on Sept. 22, 2022, in Pittsburgh; it is unclear whether this event was the one Shah reportedly referenced in discussions with Kochhar. Shah has drawn scrutiny from elected Republicans, including Wyoming Sen. John Barrasso, for continuing to attend Cleantech Business Leaders Roundtable events given the authority of his position in the government and possible appearances of ethical impropriety.

A few months after the September 2022 discussions, in February 2023, the DOE announced that the agency had reached a conditional commitment to provide Li-Cycle with a $375 million loan for the Rochester facility if it could reach certain future milestones. However, the company has not yet received its first advance on the loan, according to its third quarter financial report.

Senate Majority Leader Chuck Schumer touted the company and the loan package upon the announcement, saying that “$375 million will now supercharge Li-Cycle here in Rochester, with 270 good-paying jobs, to become one of America’s largest suppliers of recycled materials for batteries.”

The suit alleges that the company had either withheld information or made false statements pertaining to the status of the Rochester facility as early as June 2022, months before Kochhar and Shah reportedly met and the DOE’s announcement of conditional approval for the loan package.

It is unclear how much, if anything, Shah or the LPO and third-party advisers knew of the company’s problems, or whether they were at all aware of any of the activity alleged in the lawsuit, when they were working with Li-Cycle to reach a conditional loan commitment. However, Shah has asserted to Congress in the recent past that LPO’s due diligence process is robust.

“LPO conducts rigorous due diligence that is comparable to, if not more stringent than, what might be done in the private sector,” Shah stated in co-authored written testimony to the Senate Committee on Energy and Natural Resources on Oct. 19, four days before Li-Cycle announced the construction pause. “For all potential project sponsors and borrowers, LPO employs robust Know Your Customer policies, background checks, and other measures to ensure a clear understanding of the potential borrower.”

The lawsuit, filed in the U.S. District Court for the Southern District of New York, seeks damages for investors who were affected by alleged securities fraud that occurred between June 14, 2022, and Oct. 23, 2023.

Specifically, the suit alleges that Li-Cycle made false claims or deliberately withheld information about whether the Rochester facility was experiencing increasing construction costs, that those ballooning construction costs exceeded the total projected cost of the project and that, because of these cost problems, the company would have to stop construction to reevaluate its strategy.

“Government programs are normally designed to have checks and balances, with distributed areas of responsibility, to protect taxpayers and prevent more Solyndras. But Jigar Shah has seemingly thrown all of these out the window in his rush to shovel green funds out the door, appearing to operate as frontman, salesman and the government’s final decision-maker, all in one,” Michael Chamberlain, executive director of Protect the Public’s trust, told the Daily Caller News Foundation. “To say this is wholly inappropriate would be an understatement… once again, leadership in the most ethical and transparent administration in history has chosen to push their policy agenda over their commitment to long-standing and well-founded guardrails.”

The DOE, Li-Cycle, Schumer’s office and the White House all did not respond immediately to requests for comment.

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