|
|
| Proterra officials shocked as investment evaporated (230422) | |||
 |
|||
| Home > BusChat | |||
|
[ Read Responses | Post a New Response | Return to the Index ] |
|
||
|
Proterra officials shocked as investment evaporated |
|
|
Posted by Gold_12th on Sun Apr 17 16:46:22 2011 Venezuelan pension fund among investors, court documents say[ additional link: " Proterra investor's legal problems " - (117 pages, PDF document) ] The lead investor in the zero-emission, Greenville-made, battery-electric bus that supporters have hailed as the future of transportation turns out to have been the Venezuelan oil worker. It’s one of the ironies of what federal investigators call a huge “Ponzi scheme” that has upended Greenville bus maker Proterra’s startup plan, exposed South American pensioners to losses in the hundreds of millions of dollars and that now involves the upper reaches of Venezuela’s government, according to court documents. The scope of the case is still unfolding, but court documents reviewed by GreenvilleOnline.com contain allegations that a 42-year-old former adviser to Venezuela’s national oil company managed hedge funds in which 90 percent of the money invested came from a pension fund. Court documents and Proterra officials identify the source of the pension money as the Venezuelan oil company, Petroleos de Venezuela SA, or PDVSA. About $20 million was invested in Proterra last year – more than half of the company’s total cash since 2004, said the company’s general counsel, Marc Gottschalk. He said company officials believed the investor was a “solid organization” using funds from an array of international sources. Court documents allege that hedge fund adviser Francisco Illarramendi was trying to produce gains that would conceal earlier fraudulent activity. Connecticut U.S. Attorney David Fein said the case is now the biggest-ever white-collar prosecution by his office. Illarramendi pleaded guilty last month to two counts of wire fraud and one count each of securities fraud, investment adviser fraud and conspiracy to obstruct justice, according to court documents and Fein. His attorney, John Gleason, declined to comment. Proterra executives, in an interview, describe an anguished three months in which they discovered their lead investor was the Venezuelan national oil company, saw an emergency loan fall through and ended up begging in court for enough money to make payroll. In Venezuela, opposition legislators have been blocked from discussing the issues related to the pension fund in the national parliament, The Wall Street Journal reported. The country’s oil minister, Rafael Ramirez, said recently on television that the government is sending lawyers to the U.S. in an effort to salvage funds, according to The Associated Press. Proterra founder Dale Hill said the saga has been one of the biggest disappointments in an entrepreneurial life that has included many. Gottschalk refers to it as an “odyssey of epic proportions.” The Securities and Exchange Commission said in a court-filed complaint that Illarramendi had misappropriated investors’ money since 2006, using the hedge funds for Ponzi activity in which new investor money was used to pay off earlier ones. The gap between assets and liabilities in the hedge funds was as much as hundreds of millions of dollars, and Illarramendi tried to hide it by falsifying documents, making false and misleading statements to investigators and transferring at least $53 million to private companies, according to the SEC complaint and a report by the court-appointed receiver. Proterra had been using $13 million from earlier investors for its first six years of research and development of an electric bus, and received $20 million last year just as the company was transforming into a full-fledged manufacturing operation in Greenville, Gottschalk said. The company attracted taxpayer incentives. It also provided the hope of 1,300 Greenville jobs, and business leaders have said it could play a central role in the development of automotive technology at the International Center for Automotive Research. Gottschalk said Proterra had used an investment bank to find funding, and the bank introduced the company to MK Energy and Infrastructure, a company the SEC said was controlled by Illarramendi. Hedge fund documents filed in court say Illarramendi had previously been director of the emerging markets coverage group at Credit Suisse First Boston from 1994 to 2004, then a senior adviser for PDVSA’s international financial advisory arm. He was a leading member of the teams that helped restructure debt profiles of Argentina and Venezuela while at CSFB, and one of the “key people” responsible for more than $5 billion in U.S. debt issued for the region, according to the hedge fund documents. Court documents identify 17 affiliated entities involved in the case, including the energy firm that invested in Proterra. Another was established to purchase and refurbish antique cars, while another was purportedly involved in operating talent competitions through the Internet, the receiver said in his report. Proterra soon discovered that the investors behind their source of funding weren’t a diverse pool of international sources but the oil company pension fund, plus a few individual Venezuelans, Gottschalk said. “Needless to say,” he said, “We were in a state of shock.” Then, he said, PDVSA offered to directly loan Proterra $5 million to give the company time to find a new investor. It was a surreal process of negotiating an emergency loan for fuel-saving buses with the national oil company of Venezuela, offset by the assumption that PDVSA was serious about preserving value for pensioners, Gottschalk said. Attempts to reach two attorneys in the United States for the PDVSA entities were unsuccessful. Closing day arrived, and the loan fell apart, Gottschalk said. It coincided with a storm of publicity in Venezuela about the fraud, and he suspects key officials in the deal were removed. That left Proterra in “complete financial distress,” and back in court for more emergency funding to meet some, but not all, of its operating costs, he said. Ultimately, an investment fund that had wanted to invest in Proterra all along – but was turned down earlier – came back. A term sheet for $30 million has been agreed upon by both sides and is waiting for the approval of the court-appointed receiver, and by extension PDVSA, Gottschalk said. If the deal is completed, the money could flow in 45 days. “We’ve been stuck in this position of powerlessness,” Gottschalk said. “I’ve felt like a hostage for the last three months.” The receiver said in his report that litigation may be required to recover a significant amount of assets wrongfully transferred or held by third parties. Gottschalk said the pending $30 million investment would include a settlement of the receiver’s interest in Proterra. When asked about the past three months, Hill described how much fuel money Proterra’s buses will save transit agencies and said his disappointment is compounded because what the company is doing is nothing less than “the salvation of transit.” “We’re all just really ornery,” Gottschalk said. “We’re not ready to quit.” source: http://www.greenvilleonline.com/article/20110417/BUSINESS/304170002/1004/NEWS01/Proterra-officials-shocked-as-investment-evaporated |
|
(There are no responses to this message.)
|
|