Feds: Former owners, company behind Gypsum biomass plant must pay $2.6M
Eagle Valley Clean Energy LLC accused of defrauding a federal renewable energy program
The former owners and their company that developed Gypsum’s biomass power plant have agreed to a $2.6 million settlement to repay a federal reimbursement that the U.S. Department of Justice claimed the company was not entitled to receive.
The office of Jason R. Dunn, U.S. attorney for the District of Colorado, announced the settlement Tuesday.
In the announcement, the U.S. Attorney’s Office said former biomass plant owners Dean Rostrom and Kendric Wait had ownership interests in three companies that built the biomass plant in Gypsum: Eagle Valley Clean Energy LLC, Evergreen Clean Energy Corporation and Evergreen Clean Energy LLC. The $2.6 million settlement resolves allegations that Eagle Valley Clean Energy LLC violated the federal False Claims Act.
Eagle Valley Clean Energy LLC received money from a federal renewable energy program for costs that the company never actually incurred, Dunn wrote in a statement.
Under the terms of the settlement agreement, Eagle Valley Clean Energy LLC paid $2,350,000. Rostrom and Wait each paid $125,000 to the United States.
“This program had important goals: jump-starting the economy during the Great Recession, and helping companies that took real steps to move our renewable energy industry forward. Taxpayers paid for that program,” Dunn said in the announcement of the settlement.
“Companies and individuals who get taxpayer money from government programs like this one, but don’t do what they promised to do, will be held to account and will face consequences,” Dunn said.
What the feds say they did
Federal prosecutors contend that in 2014, Eagle Valley Clean Energy LLC asked the U.S. Treasury Department to reimburse “fees” connected with the Gypsum biomass plant.
Eagle Valley Clean Energy LLC claimed that it contracted with Evergreen Clean Energy LLC to perform what were called “development services,” the feds said. The U.S. Treasury reimbursed Eagle Valley Clean Energy LLC 30% of that fee. However, after receiving the money from the feds, Eagle Valley Clean Energy LLC did not pay Evergreen Clean Energy LLC its fee, the feds’ announcement said.
The fee was “written off,” federal officials said.
So, the U.S. Treasury Department, in effect, reimbursed Eagle Valley Clean Energy LLC for 30% of a payment it never made, federal officials said.
Once Eagle Valley Clean Energy LLC decided that it would not be paying Evergreen Clean Energy LLC the fee for the development services, it was required to notify the U.S. Treasury and return the money it received, the feds said.
It didn’t, and the U.S. attorney’s office alleged that that violates the False Claims Act, Dunn said.
Assistant U.S. Attorney Zeyen Wu, with the U.S. Department of the Treasury’s Office of Inspector General, handled the investigation.
Response to settlement
Evergreen Clean Energy Corp. released a statement following the announcement of the settlement to repay the federal reimbursement. It reads, in part:
“Eagle Valley Clean Energy, LLC and its principals came into this mountain community to build a sustainable energy facility and a stable local employer.
“To ensure the continuing success of the plant and its mission for decades to come, the owners recently decided to sell the company to a strong energy industry player. In connection with the sale, the company became aware of concerns by the federal government of potential financial misconduct related to a federal government clean energy grant received by the company in 2014.
“The company and its principals wholeheartedly deny any such allegation. The company has paid in full all of the costs upon which the federal grant was based. The government has not filed any civil or criminal complaint against the company or its principals, and has not proven any allegation of misconduct.
“Nevertheless, in order to avoid a formal and lengthy government investigation, and to clear the way for a successful sale of the plant, the company and its principals made a business decision to enter into a settlement agreement with the federal government that resolves the government’s concerns by refunding a small portion of the grant money.”
How we got here
Renewable energy companies were among the Obama administration’s stimulus programs. Under the American Recovery and Reinvestment Act of 2009, companies that launched “renewable energy properties,” including biomass power plants, could apply for reimbursements for as much as 30% of the money they spent in bringing those plants online.
As part of its initial financing package to build the Gypsum biomass plant, Eagle Valley Clean Energy LLC received $18.5 million in federal funding from the Obama administration’s renewable-energy plan.
“This settlement reinforces the commitment of the Treasury OIG to pursue cases against those who defraud the U.S. Treasury Department and misuse public funds,” Treasury Inspector General Eric M. Thorson said in the announcement.
In June 2017, a federal jury ruled that Eagle Valley Clean Energy LLC failed to pay Wellons, the Oregon-based company that built the plant, the $10.84 million Wellons was owed.
Late last month, Colorado-based Evergreen Clean Energy sold the biomass plant to New York-based Greenbacker Renewable Energy Company LLC, a publicly registered, non-traded company with more than 6,000 shareholders.
Through the end of July, both the number of transactions and sales volume — the price of those transactions — lagged behind 2018’s numbers by about 10%. According to the most recent data from Land Title Guarantee Company, that situation changed in August.