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  • Energy Department-Backed Company Under SEC Investigation

    In its push to get electric vehicles on the road, the Obama administration has partnered with a company in dire financial straits that is also under investigation by the Securities and Exchange Commission for insider trading.

    San Francisco-based green technology company ECOtality received roughly $115 million in two separate Energy Department grants to build 14,000 electric vehicle charging stations in 18 cities. President Obama cited ECOtality in last year’s State of the Union address as a success story of his stimulus law. Ted Karner, president and CEO of ECOtality subsidiary eTec (now called ECOtality North America) watched from the crowd as the First Lady’s guest.

    Energy Secretary Steven Chu boasted that his department was “working very closely [with eTec] to get EVs on the road.”

    But the administration’s poster child for its electric vehicle project is riddled with financial and legal problems. According to ECOtality’s 10Q filing from the second quarter of this year, the SEC opened an investigation into allegations of insider trading.

    On October 28, 2010, we and our ECOtality North America subsidiary, as well as certain individuals, received subpoenas from the SEC, pursuant to a formal Private Order of Investigation, in connection with a fact-finding inquiry as to trading in shares of our common stock from the period between August 1, 2008 and August 31, 2009.

    The “certain individuals” under investigation are not public record, and the SEC said it could not provide the names of people involved in an ongoing investigation. ECOtality likewise declined to comment. But as the form notes, both ECOtality and its subsidiary – in addition to the unnamed individuals – are targets of the investigation.

    In addition to its legal troubles, ECOtality’s financial health is tenuous. In the first six months of 2011, the company reported a net loss of more than $12 million, according to its 10Q. More than half of its income during that period came from its Energy Department grants.

    ECOtality attributes its increasing losses (they increased by about $3 million from the previous year) to “the ramp up of activity and associated costs incurred under the DOE Contract in 2011.” The electric vehicle project for which ECOtality received federal money is behind schedule, according to Karner. As of last month, only about 3,000 electric vehicle charging units had been installed. Karner said the company would be requesting an extension of the program to accommodate the slow pace of production.

    The extension of the company’s work on the EV project raises concerns about its financial health, given the large costs apparently associated with the project and its lack of other sources of income.

    The wisdom of large government expenditures on electric vehicles is itself a dubious policy, as Heritage’s Nick Loris pointed out:

    It should not be the focus of the Department of Energy to work to get EVs on the road.  The world petroleum market is a multi-trillion one.  That should be enough incentive for innovators, venture capitalists and entrepreneurs to get EVs on the road because if they make economic sense they’ll capture part of that market share and make billions. The economic reality is that PHEVs are not ready for primetime, and the best indicator for when they will be is when the government stops using taxpayer dollars to subsidize their production and consumption.

    Posted in Scribe [slideshow_deploy]

    14 Responses to Energy Department-Backed Company Under SEC Investigation

    1. DanJ1 says:

      It's only going to get worse for this company. The real reason they're behind schedule is that nobody wants these charging station. There's no market for them. Consider Costco removing their charging stations a while back. This quote from a NY Times article:

      “We were early supporters of electric cars, going back as far as 15 years. But nobody ever uses them,” said Dennis Hoover, the general manager for Costco in northern California, in a telephone interview. “At our Folsom store, the manager said he hadn’t seen anybody using the E.V. charging in a full year. At our store in Vacaville, where we had six chargers, one person plugged in once a week.”

      Charging stations at a local community college by my home are always open even though they occupy prime parking spots.

      It's just another example of the Obama administration trying to pick winners and losers and this one is a huge loser.


    2. lights on says:

      Extremely unnecessary! Exposes gross incompetence and misinformation of matters government takes accountability for. Adds significant weight on the power grid we're told CAUSES "man made global warming!" no facts to back Chu's urgency and force! another government investment headed foreseeable crisis. Another waste of extraordinary, innocent, hard earned money from people of much sounder judgment who were once free to invest the money they personally earn the way they decide that infringes on NO ONE ELSE!

      LET THE MARKET DECIDE! … it always works under proper/appropriate leadership…

      For what excuse today does the President have to bankrupt the coal industry? Initial purpose was directly because of what we now know not to be true. Man-made global warming. Pollution regulation is fine and necessary, rid this country of the corruption of all man made global warming regulations and irrational costs imposed by government EPA standards, regarding this direct conflict of interest and ignorance of reality only by authoritative abuse! Where is the line of government drawn! We have the right to know!! NOW!

    3. Brian Burke says:

      Crony Capitalism does not work. When the system is manipulated, whether by insider traing or government subsidies bad things happen and we all suffer.

    4. RayOne says:

      Henry Norman is fictional.

    5. Marty says:

      Our local community college had three charging stations – up until several months ago. They were removed – parking at the school is at a premium, and there were three spaces tied up with this EV charging station. What person at the community college level, could afford to drive a Volt, a Leaf, or any of the overpriced-yet-highly-subsidized EV's on the market or coming down the pike?

    6. Wait, let me get my curlers straight – is your well-written Mr. Loris pointing out that investors and entrepreneurs are deliberately affecting foreign policy, international trade, and currency markets in a passive aggressive fainting spell rather than competing with the government goad to bring new products to market? Have we become so lazy that the product must advertise competitor-eclipsing success in a perpetual one-day landslide in order to be developed and brought to market? Is it really that scary to affect a supply chain component (energy) rather than to propose a different vehicle altogether? And in a marketplace of a world that expects quicker and more lasting change, do we really expect migration and travel, even if only for eco-tourism and family visits, not just business meetings and supply chain research, to diminish? Hmmm…..who didn't attend their latest industry trade shows?

    7. tracy says:

      I think it will take some time to get us off of our oil dependence and applaud the attempts to do so. The GOP is stuck so firmly up Big Oil's trousers with no regard for change (makes folks very uncomfortable): climate change, changes in energy consumption, etc. Your charge that this is a "Scandal for the Obama Administration" is inflammatory and inaccurate.

      • Bobbie says:

        truth is apparent if you let your brain absorb it.

        why can't the market invite the change like it does for oil? why do you beg for government beyond their constitutional duty? why do you insist government make your choices? your trust in government over your fellow American is inflammatory and insidious.

        • What he ^^^^^ said! The market should dictate the evolution of products, not Big Brother! And to believe that Democrats DON'T take big oil money is to put your blinders on and follow the rest of the liberal lemurs off the cliff.

    8. vincentgoetz says:

      Those chargers will never be used until the criminal element in this country finds a use for them.

    9. Dale Spencer says:

      These ventures that the Obama administration plunges into shows the true character, as Obama is a loser also.

    10. Grant??? Might as well flush that taxpayer money down the toilet. AAnd everyone wonders why the GOP is trying to stop Obama and his endless check writing……..

    11. Ernest says:

      The sad news is that this company was <$3M in sales of industrial fast chargers (for forklifts), on the verge of bankruptcy, with an older obsolete technology and being badly beaten on the market by 2 other US companies. The only thing they had going for them was a small contract with the DOE to test electric vehicles adding monitors and handing them back to government labs. When they were awarded the first $100M everyone in the industry fell out of their collective chairs.

      I actually believe in government assistance for this industry, but the way its being done is insane. Compare this with the UK where monies were approved then pushed down to 5 cities which ran competitive bids. Better decisions are made at the local level. Electric cars are coming, infrastructure is an issue, but picking winners in this fashion perverts the market and creates "chargers to nowhere"

    12. JimS says:

      Running on electric is 8 times more efficient and cleaner than burning OIL each day at a cost of $1 Billion a day and using 45% imported OIL. When companies like this upset big OIL it can be hard.
      I've has a LEAF for 1 year now and it's great and gets better each day. Gas is so last century.

      We have 152 public ECOtality charge locations, many right where we shop and eat but don't need to use then often. We charge 90% Off Peak at night when the power company has excess them dump if we don't use it.

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