University of California Sues 8minute Solar, Seeking $1.22 Billion
Wall Street Journal, Luis Garcia, 1-31-22
The University of California system is suing 8minute Solar Energy LLC and Tom Buttgenbach, its co-founder and chief executive, seeking roughly $1.22 billion over the university’s investment in several renewable-power projects. The public university’s regents allege that 8minute and Mr. Buttgenbach fraudulently induced it to invest $150 million in a collection of projects in early 2020, then Mr. Buttgenbach misappropriated much of the capital and used it to enrich himself, in a lawsuit brought last month in Alameda County Superior Court in Alameda, Calif.
The university made the investment from its roughly $170 billion in assets, which include pension funds and endowments. The lawsuit said that the university is seeking compensation for $405 million in lost returns, and that under California law damages can total three times the amount lost, in this case $1.22 billion.
In a motion filed Jan. 13 in response to the regents’ complaint, lawyers for Mr. Buttgenbach and 8minute said the regents’ allegations were frivolous and have been the subject of an arbitration proceeding initiated by co-investors in the projects. The lawsuit is an “attempt at a do-over” of the arbitration, the lawyers said. In the motion, the lawyers for Mr. Buttgenbach and 8minute asked the court to dismiss the lawsuit and order the regents to join the arbitration under way. A hearing on those requests is set for April 13 in the court near Oakland.
The projects involved include solar facilities in California, Texas and Nevada. They are in various stages of development by 8minute, which has sold most of them as planned. According to the lawsuit, Mr. Buttgenbach allegedly said in January 2020, when discussing an investment by the university, that 8minute would sell the projects within 18 months. A joint venture formed by the company and the investors would earn development fees from those projects after they were sold. Mr. Buttgenbach, however, delayed the sale of some of the projects, according to the lawsuit, which alleged that he had engineered a financial crisis to create a deadlock among his backers that would enable him to seize the investors’ interests in the projects, including the university system’s $150 million.
In August, Mr. Buttgenbach sought more than $4.1 billion in additional funding from investors, including $1.53 billion from the university, to back project development, the lawsuit said. “This amount was entirely unsupported by the prior representations, financial projections, models and budget that Buttgenbach submitted to induce the university to approve its $150 million investment,” the lawsuit says. “At the same time, Buttgenbach unreasonably refused requests from his outside investors to provide any additional validation for this amount.”
The university said it didn’t make an additional investment in the solar projects. The lawsuit said that Mr. Buttgenbach sought to take over the investors’ assets in the projects in November and that 8minute used some of the university’s investment to pay for about $1.7 million in unauthorized expenses unrelated to the projects. The university invested in the projects through a separately managed account run by Upper Bay Infrastructure Partners, a private-equity firm based in New York. Upper Bay also backed the projects with capital from its own funds, with JPMorgan Chase & Co.’s asset-management arm as a co-investor.
Upper Bay and JPMorgan initiated the arbitration with 8minute and Mr. Buttgenbach over issues similar to those cited in the University of California lawsuit, according to people familiar with the matter. The motion filed by the lawyers for 8minute and Mr. Buttgenbach said that Upper Bay and JPMorgan voluntarily withdrew some of their claims, while the arbitrators haven’t issued a decision on those that remain. Upper Bay and JPMorgan withdrew some claims from arbitration so they could sell their interests in the projects, which they are seeking to do, according to people familiar with the matter.
In the motion filed on Jan. 13, lawyers for 8minute and Mr. Buttgenbach said that the university must follow the investment agreement signed by Upper Bay as its representative and submit any disputes to arbitration. The motion said the regents threatened to sue just before a final hearing in the arbitration because they were “apparently unhappy with the tenor” of that proceeding and because the defendants refused to concede to the regents’ “outrageous demands.”
“These are frivolous claims that the Regents of the University of California’s agent and investment manager already asserted on [the regents’] behalf,” 8minute said in a statement, referring to the arbitration. “Importantly, these same allegations were dismissed with prejudice, with [the regents’] consent, and are barred from being adjudicated again.” Lawyers for 8minute and Mr. Buttgenbach called the lawsuit “an extortive settlement attempt through a public smear campaign designed to interfere with defendants’ ongoing business and finance arrangements.”
The company has roughly 50 solar projects under development, according to its website. It continues to attract new backers, receiving $400 million this month from EIG Global Energy Partners in a deal that involved the private-equity firm taking an equity stake in 8minute and extending the company a letter of credit. EIG declined to comment.
Source: https://www.wsj.com/articles/
No comments:
Post a Comment