A renewable energy company that has received billions in U.S. taxpayer support despite federal investigations and former employees’ allegations of illegal business practices is in dire financial straits as shareholders allege securities fraud and investors drive down its stock price.
The Spanish firm Abengoa is facing a federal lawsuit from shareholders who say that the company misled investors about its financial plans. It has faced numerous lawsuits in the past two years from contractors who say they were stiffed out of millions of dollars in payments.
Three former Abengoa employees have described a pervasive culture of illegality at the company in interviews with the Washington Free Beacon. All three say that executives hired Spanish nationals for jobs required to go to American workers by the terms of its multi-billion-dollar federal loan guarantees.
The shareholders behind this month’s lawsuit, filed last week, claim that the company violated federal securities laws when its CEO, Santaigo Seage, told investors on July 31, "the company has no plan to ... tap the capital markets in any manner."
Three days later, Abengoa announced plans to sell $600 million in stock.
"As a result of the news, the price of Abengoa's ADS plunged over $5 per share, or 46 percent, from its closing price of $11.06 on July 31, 2015, to close at $6.00 on August 4, 2015 on unusually heavy trading. This represents an $8.1 billion loss in market cap in the span of two trading days following the unfavorable news," the lawsuit claims.
Since the lawsuit was filed, at least eight other law firms have looked to get in on what could become a class action against the company by its investors.
The company’s stock has continued to slide since then. It was trading just above $4.00 per share on Wednesday afternoon.
Investors are spooked, according to market watchers.
"An increasing number of market participants view a default of the company as a likely scenario and don’t believe in Abengoa’s ability to successfully execute the capital increase," according to Felix Fischer, a credit analyst at Lucror Analytics.
"Investors are building bets against the Spanish renewable energy company," the investment research service Zacks noted last week. "Contracts insuring Abengoa’s debt were the most traded in the world last week and signal a 94% probability of default within five years, up from 65% in January."
When the Free Beacon interviewed a pair of former Abengoa managers last year, one predicted that the company would go under. "This company eventually will go bankrupt. The question is at what expense to the United States people and government," said Mike Alhalabi, formerly the senior lead mechanical engineer at Abener, a subsidiary of Abengoa.
The cost to U.S. taxpayers could be enormous. Abengoa has received nearly $3 billion in loan guarantees from the Department of Energy, as well as more than $100 million in federal grants.
The bulk of those grants supported a bioenergy facility in Kansas, where the Energy Ernest Moniz, the secretary of energy, and Gov. Sam Brownback (R.) attended a ribbon-cutting ceremony in 2014. While they hailed the new biofuel plant, two federal agencies were reportedly investigating the company.
Both the Department of Labor and U.S. Immigration and Customs Service have been tight lipped about the investigations, but Alhalabi and other former Abengoa employees have alleged extensive violations of U.S. labor and immigration laws and the terms of their stimulus loan guarantees that required them to give priority to American job applicants.
According to Lydia Evanson, formerly the human resources director at another Abengoa subsidiary, the company routinely hired Spanish nationals to fill even menial jobs at its stimulus-funded projects.
At first she thought that the company’s executives simply did not understand the terms of its agreements with DOE or applicable laws, she told the Free Beacon last year.
"What I came to realize, and it took me a while because I didn’t want to realize it, is that they understood. They knew the law. They didn’t care," Evanson said. "I really came to believe that they’re so politically connected that it’s just hubris and arrogance."
Another former Abengoa employee echoed many of Evanson’s and Alhalabi’s allegations in an interview on Tuesday.
"All the office workers are from Spain, which in this environment is a lot of staff. You’re talking about hundreds and hundreds of workers," said Moe Karrit, a former lead electric design engineer at Abener. "They hate Americans. They make fun of Americans," he said.
He also predicted that the company would hit dire financial straits, but not before extracting as much taxpayer money as possible.
"They’re trying everything to prolong [bankruptcy] as much as they can before declaring, ‘goodbye, you pay the bill,’" Karrit said. "Nobody’s catching them right now, but it’s starting to be obvious."
More than 20 of Abengoa’s contractors have filed complaints alleging that the company failed to pay them more than $40 million in fees, the Arizona Republic reported last year. Karrit says delaying or refusing payments to contractors is de facto company policy.
"I’ve seen contractors not getting paid for six months," he said.
In a Wednesday email, Alhalabi backed up those allegations. "Not only it is their normal practice not to pay the invoices, but also to drag their feet hoping to settle for a fraction on the dollar," he wrote.
Abengoa did settle in 2013 after one contractor filed a lawsuit in federal court seeking more than $317,000 that it said was never paid.
The company did not respond to a request for comment on this story.