Inspector General Says DOE Hid Vital Info from Audit of Bankrupt Ecotality

Blink chargerAfter an Inspector General’s audit earlier this year of now-bankrupt electric vehicle charging company Ecotality, which determined that millions of taxpayer dollars were wasted in a nearly unworkable program, the IG has returned with findings that the Department of Energy withheld information about the project’s problems during his first investigation.

The audit, released by DOE IG Gregory Friedman in July, determined (among other things) that the persistent weak demand for electric vehicles harmed the deployment and timeliness of a $135 million-plus taxpayer funded charging network, which led to excessive grants and project expansion that became virtually unusable under the grants’ guidelines. Investigators discovered that conditions for reimbursement to Ecotality for the EV charging demonstration project were “very generous” and that cost-sharing requirements were extremely lenient.

Shortly after that report was released, on August 7, Ecotality informed DOE that it was in financial distress and that its ability to do business was a going concern. The following day DOE suspended reimbursements to the San Francisco-based company, and instructed them to not incur any further costs. In an August 12 filing Ecotality informed the Securities and Exchange Commission that it had suffered “adverse financial-related developments” that would harm its ability to meet its obligations. Ecotality filed for Chapter 11 bankruptcy on September 16.

The developments that came so quickly after the IG’s audit aroused suspicions that DOE wasn’t forthcoming about everything they knew about Ecotality’s troubles. As a result, Friedman initiated a follow-up investigation to determine whether or not relevant information was withheld. In a report released yesterday, the IG said DOE’s division of Energy Efficiency and Renewable Energy failed to disclose important details that were relevant to the purpose of the audit.

“We found that the Department had not fully disclosed known concerns regarding Ecotality’s ability to meet its EV project obligations to the Office of Inspector General prior to completion of our previous audit,” the IG reported yesterday. “Information that raised questions about Ecotality’s ability to meet its project goals, including completing planned EV charger installations and the collection of EV usage data, was not provided even though the data had a readily apparent connection to our in-process audit.

“The Department became aware of the EV project concerns at about the same time that the Program was preparing a response to a draft of our July 2013 audit report.”

That DOE was ignorant about the severity of Ecotality’s financial duress either reflects their ignorance or their ineptitude. NLPC – with far less detailed information at its disposal than DOE – saw the signs long ago that the former eco-friendly cleaning products company that suddenly became a vehicle-charging “expert” run by a self-proclaimed “political beast” was going to run into problems. Nevertheless, DOE bureaucrats told the IG’s investigators that their failure to disclose information for the audit was “unintended.”

Specifically of concern to the IG was the fact that Ecotality had informed DOE in May that it would not reach the requirement to complete charging station installations by September 2013. In mid-June DOE informed Ecotality it would be required to submit a “corrective action plan” to explain how it would fix the problem.  But almost a month later, when DOE provided comments in response to the IG’s draft report, the agency reported that Ecotality’s installation goals were achievable. Incredibly, the IG reported, “[DOE] officials stated that they did not think that the information was relevant to our audit, which was still in process at the time.”

“The disclosure of issues that could have impacted project completion would have led us to perform additional audit procedures to evaluate Ecotality’s ability to fulfill its obligations under the Recovery Act award,” the IG’s report said. “These issues also could have impacted our overall conclusions regarding Ecotality’s performance under the award.”

The most significant information withheld from the IG, as it moved toward the conclusion of its audit, was that Ecotality (and DOE) knew the company would fall far short of the goals set within the grant agreement. The purpose of the grant was to create in several metro areas a system of electric chargers to serve EV owners, in order to glean information about how they might be used in a widespread build-out and adoption of the technology. Originally 16 months of data was to be collected from all chargers that were installed, but Ecotality’s revised plan sought to reduce the test time to three months. The company also wanted to extend the deadline for full deployment of the chargers and more flexibility as to whether the chargers would be located in residential or commercial locations.

“These changes…would have further limited, if not virtually eliminated, data collection for certain units,” the IG reported. “As noted in our previous audit report, these types of changes would impact the quantity and perhaps the overall quality of usage data gathering and analyses.”

Information the IG received indicated that about 1,000 commercial chargers still needed to be installed and that Ecotality’s rate of deployment for them was ½ to 1/7 of what it should be.

Despite all the warning signs, and DOE’s discontinuance of payments for the $100 million Recovery Act grant after Ecotality’s notification that it was in financial straits, the IG said DOE still continued funding another $26 million vehicle testing grant that had been awarded in 2011. Among the excuses DOE provided the IG for not discontinuing all Ecotality’s funding was that the company “provided assurances that the project was not affected by the company’s financial difficulties” and that DOE instructed Ecotality not to purchase additional vehicles or equipment.

At this point IG staff had to be tearing their collective hair out at either the ineptitude, or hubris, of DOE staff. It’s difficult not to use strong language in characterizing the horrid performance of the Obama administration in holding stimulus beneficiaries accountable.

In context, it looks like the overseers on the DOE staff were running scared. During the conduct of the IG’s audit they also witnessed the scathing House hearing in April about the failed Fisker Automotive loan, in which the start-up EV company’s poor stewardship of DOE’s stimulus backing was laid bare. Also fresh in their minds was the failure of loan recipient Vehicle Production Group, whose collapsing condition was known by the Acting Director of DOE’s Advanced Technology Vehicles Manufacturing Loan Program, yet concealed during that April hearing. And the agency also had to be nervously anticipating an early September House Oversight Committee hearing in which Jonathan Silver, former director of the Department of Energy’s Loan Program Office, would be grilled about the practice of conducting government business on private email accounts.

The picture left for taxpayers is of one in which companies who ingratiated themselves with the Obama administration, who otherwise could not access the financing they needed in the private investment market, were left to spend their money without accountability. The pattern, as revealed in cases such as Solyndra, Abound Solar, Fisker, VPG and Ecotality, was that DOE was anything but transparent because there were too much information that would prove embarrassing.

Ecotality’s carcass has now been auctioned off for $3.3 million, and government’s “investment” in another green-tech company has been squandered. If this administration was truly “the most transparent in history,” could taxpayers bear the sight of it?

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes, an aggregator of North Carolina news.