ECOtality’s Revolving Door

Electric vehicle manufacturer hires DOE official after receiving more than $100M in federal funds

ECOtality charging station / AP
July 30, 2013

A former top Energy Department official has taken a position on the board of a company that received millions in taxpayer money from the department through a stimulus program that has come under criticism from Congress and independent watchdogs.

San Francisco-based ECOtality announced in a July 9 filing with the Securities and Exchange Commission (SEC) that it has appointed Brandon Hurlbut, former chief of staff for recently departed Energy Secretary Steven Chu, to its board.

Hurlbut led DOE’s transition from Chu to current Energy Secretary Ernest Moniz. He also served as the White House’s deputy director of cabinet affairs and worked for President Barack Obama’s 2008 campaign.

Hurlbut marks a high profile addition to a roster of political connections that helped ECOtality secure more than $100 million in taxpayer financing for its electric vehicle charging stations.

ECOtality secured a $99.8 million award in 2009 to install nearly 15,000 electric vehicle chargers throughout the country. The contract was integral to the president’s stated goal of getting a million electric vehicles on the road by 2015.

"During my service at the Department of Energy, I was committed to the president’s goal to accelerate electrification of our transportation sector," Hurlbut wrote in a statement on the move.

"I was proud to support a DOE team that made substantial progress on that goal," he added. "I believe the future is bright for the electric vehicle industry where ECOtality is a leader."

Hurlbut is now a partner at Boundary Stone Partners, a Washington, D.C., consulting firm that advises companies on public policy issues. He did not respond to a request for comment made through Boundary Stone’s website.

ECOtality has adopted an explicitly political business strategy in an effort to secure federal subsidies that continue to account for the bulk of its revenue.

"I’m a political beast," then-CEO Jonathan Read said in a July 2007 shareholder conference call. "Playing the political card is something that when the time is right we’re going to play very hard."

The next year, then-presidential candidate Obama rolled out his plan to get a million electric vehicles on the road by 2015.

"We believe the focus by the Obama administration [on electric vehicles] will provide strong funding opportunities for us and our core technologies," ECOtality said in an SEC filing a month after the 2008 election.

ECOtality, then doing business as Electric Transportation Applications, shifted its lobbying focus in late 2008 to include the White House, in addition to Congress and the DOE.

The company also hired Ziemba Waid Public Affairs (ZWPA). The firm had close ties to Homeland Security Secretary Janet Napolitano and then-Rep. Harry Mitchell (D., Ariz.). Mitchell also employed Colin Read, the son of ECOtality’s CEO at the time, on his congressional campaign.

ZWPA boasted that it was integral in securing ECOtality’s initial $99.8 million stimulus award through the stimulus-financed EV Project.

Mitchell would request nearly $2 million for "alternative fueled or electric hybrid" vehicles for the public transit system in Tempe, Ariz., where ECOtality planned to build 17 EV charging stations.

Executive pay at ECOtality was also tied to political benchmarks. Compensation for then-CEO Jonathan Read increased ten-fold from 2008 to 2009, due in large part to his success in securing federal support for ECOtality.

"Our performance target for 2009 was to secure executed stimulus contracts valued at $20,000,000 or more on or before Oct. 1, 2009, which was achieved," the company explained in an SEC filing.

"As a result of these stimulus contracts, Mr. Read received a bonus of 673,506 shares of our common stock for achieving the first management incentive target," the filing added. Read’s 2009 compensation, including the value of those shares, exceeded $4 million.

Though Read stepped down in September, federally funded green energy projects continue to comprise most of ECOtality’s revenue stream, according to its latest quarterly financial filing.

"We anticipate the majority of our revenue in 2013 will be derived from the DOE Contract based on deliveries of chargers and the reporting of in-kind costs relating to cost share of EV Project participants," the company reported in a Q1 2013 report.

The EV Project award received congressional scrutiny last year, as House investigators probed DOE’s decision to fund its construction of charging stations even as its North American subsidiary was under investigation for insider trading.

Donald Karner, a top executive at ECOtality North America (eTec), was subpoenaed by the SEC in December 2011. The agency sought records involving 18 ECOtality employees and investors related to insider trading allegations.

That prompted an investigation by Rep. Andy Harris (R., Md.), who at the time chaired the House Science, Space, and Technology Subcommittee on Energy and Environment.

Citing the SEC investigation and ECOtality’s slow pace of construction—at the time of Harris’ probe, it had completed less than half of its initial goal of installing 14,690 EV chargers—Harris held a hearing to examine apparent problems in the administration’s push for electric vehicles.

Many of those problems are attributable to a lack of demand for electric vehicles, according to a report released last week by DOE’s inspector general. The report faulted both ECOtality and DOE for problems in the execution of the EV Project award.

"The Department and ECOtality had not always effectively managed the Recovery Act award," the IG found.

Rep. Lamar Smith (R., Texas), chairman of the Science Committee, said the report renewed concerns over ECOtality and the administration’s electric vehicle push.

"I remain troubled by DOE’s poor management of Stimulus funding," Smith said in an emailed statement. "The IG’s report illustrates a lack of proper documentation for how the agency oversees taxpayers’ dollars."

"Due to a less than expected demand for electric vehicles and the failure of anticipated demand for chargers to materialize, the Department and ECOtality made various decisions to modify the project plan with a goal of meeting installation targets," the report stated.

"However, neither the Department nor ECOtality had adequately documented its consideration of alternatives or the impact on award objectives before making significant changes to its Recovery Act award."

Problems with the execution of the EV Project included major delays in its implementation and a reduction in the number of chargers ECOtality would be required to build under the agreement.

By the time DOE and ECOtality finalized the conditions of the contract, the company had already spent $70 million of its $100 million award, the IG found.

"Once ECOtality had spent nearly 70 percent of its Recovery Act funding," the report noted, "it would have been difficult to disallow cost-share contributions or direct expenditures if these items were later deemed to be unallowable by the Department."

The department also reduced the number of chargers to be built from 14,690 to 13,200, which, despite making project goals more achievable, "increased travel and administrative costs for the award."