Spanish Firm Under Federal Investigation Wins $230 Million in DOE Subsidies

Former employees describe pervasive illegality at company under investigation by DOL and USCIS

Spain's King Juan Carlos talks to Abengoa Chairman Felipe Benjumea / AP
October 17, 2014

A Spanish renewable energy company under investigation by at least two federal agencies unveiled a new biofuel production facility on Friday that will receive hundreds of millions of dollars in federal subsidies.

Former employees of the company have alleged that it routinely engages in violations of U.S. immigration, environmental, and workplace safety laws and uses taxpayer funds to hire foreign workers in violation of federal regulations.

The company, Abengoa, received a $132.4 million loan guarantee and a $97 million grant to build a new biofuel plant Hugoton, Kansas. Energy Secretary Ernest Moniz and Kansas Gov. Sam Brownback attended its ribbon-cutting ceremony on Friday.

The announcement of additional subsidies came even as U.S. Customs and Immigration Service and the Department of Labor conduct investigations into potential legal violations by the company.

Both agencies have policies against commenting on ongoing investigations.

In addition to direct taxpayer support for the company, Abengoa benefitted tremendously from federal mandates for biofuels, according to CEO Manuel Sanchez Ortega.

"This would have been simply impossible without the establishment of the Renewable Fuel Standard," Ortega said, referring to a federal regulation that mandates the use of certain levels of bio energy in transportation fuels.

"This is a proud and pivotal moment for Abengoa and for the larger advanced bioenergy industry—and further demonstrates our longstanding commitment to providing sustainable energy alternatives in the United States," Ortega said.

If Abengoa is committed to providing Americans with renewable energy, it is less determined to employ American workers in doing so, according to former employees who described illicit hiring practices at the company during interviews with the Washington Free Beacon in July.

The two former employees described pervasive violations of U.S. immigration laws as Abengoa imported workers from Spain and Uruguay and put them to work at facilities in California and Arizona without acquiring the proper visas.

Both employees estimated that hundreds of Abengoa employees had illegally worked in the United States without the proper immigration documentation.

In addition to potential immigration law violations, those hiring practices violated the conditions of the $2.6 billion in DOE loan guarantees used to finance the construction of two parabolic trough solar plants in the American southwest.

Under the conditions of the loan guarantees, Abengoa was required to implement "a ‘local to global’ hiring practice, which targets local communities first to fill open positions before considering regional, national, or international candidates," according to an internal DOE assessment of Abengoa’s Mojave Solar plant.

That provision was designed to ensure that federal support put local communities back to work at a time when unemployment was at its highest point in decades.

"In order of consideration, Mojave Solar would search for qualified candidates from Barstow, Victorville, and Adelanto, other small nearby communities, San Bernardino County, California, nationwide, and if necessary, internationally."

Mike Alhalabi, a former senior lead mechanical engineer at Abengoa subsidiary Abener who worked on the Mojave facility, said the company routinely skipped right to international hiring, preferring to bring in workers from its native Spain.

It did so even for menial jobs, Alhalabi recalled.

"They [hired] people to move furniture around and they were all Spanish," he said. "I mean, this is work that you can hire Americans to do. Why would you bring people from Spain to move furniture around?"

Potentially illegal hiring practices caught the eye of another employee, who said the company was well aware that it was violating U.S. immigration laws.

"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," said Lydia Evanson, the former human resources director at an Abengoa subsidiary in Arizona.

"I really came to believe that they’re so politically connected that it’s just hubris and arrogance," Evanson said.

Alhalabi also saw political connections at work. He noted the involvement of former vice president Al Gore, whose company, Generation Investment Management, bought a stake in Abengoa in 2007.

"Behind the scenes, what brought Abengoa to the United States, based on my research, [was] Al Gore," Alhalabi said in an interview. "He promised to bring U.S. dollars to the company."

Alhalabi also singled out Sen. Diane Feinstein (D., Calif.), saying she was part of Gore’s team working behind the scenes to support Abengoa’s activities in her home state.

Feinstein in 2010 asked then-Interior Secretary Ken Salazar to expedite an environmental review of one of its stimulus-backed solar plants, despite concerns that it could impact endangered species in the area.

The month after she sent a letter to Salazar making the request, Interior’s Fish and Wildlife Service signed off on the project.

Salazar attended Friday’s ribbon-cutting ceremony for Abengoa’s new biofuel facility.

The company’s political connections are emblematic of an industry that remains reliant on taxpayer subsidies, according to William Yeatman, a senior fellow specializing in energy policy at the Competitive Enterprise Institute.

"It could not be more clear that this company could not survive without access to government favors from political friends," Yeatman said, citing its reliance on the Renewable Fuels Standard and continued financial support from DOE.

"Alas, the same can be said for the green energy industry as a whole, which would fast wither and die absent a steady diet of taxpayer and ratepayer subsidies," Yeatman said.

In addition to its DOE subsidies, Abengoa received $185 million in financing in 2012 and 2013 through the U.S. Export-Import bank as former New Mexico Gov. Bill Richardson (D) sat on the boards of both the federal agency and the company it was subsidizing.

Despite extensive federal support for the company, Alhalabi described a culture of disregard for workplace safety and environmental contamination. Concern over high costs has led to lackluster engineering work at the company’s Mojave facility that could result in an "environmental disaster," he said.

DOE did not respond to questions about alleged violations of federal laws, and whether that had been taken into consideration when approving additional federal financing for Abengoa.

Update: Following publication of this story, the DOE sent the following comment:

"All of the loan guarantees issued by the Department of Energy are evaluated and underwritten to protect taxpayer interests. For each transaction, LPO’s team of financial, technical, environmental and legal professionals conducts rigorous due diligence that is, at the very least, comparable to, if not more stringent, than what is done in the private sector. This includes compliance with all applicable federal, state, and local laws. Thanks to this due diligence, the Department has successfully supported more than 30 innovative energy projects in the U.S., leveraging $50 billion in investment, with losses of approximately just 2% of the portfolio."