In a special report released earlier this month, the Office of the Inspector General at the U.S. Department of Energy found that LG Chem Michigan Inc., formerly known as Compact Power Inc., misused federal money. LG Chem Michigan is a subsidiary of South Korea's LG Chem.
LG Chem Michigan received the award in February 2010 through the American Recovery and Reinvestment Act of 2009 to make batteries for electric vehicles like the Chevrolet Volt. The hope was that it would produce enough batteries for some 60,000 electric vehicles by the end of this year.
But a complaint filed last October led the inspector general to investigate the claims that workers had little work to do.
“We confirmed the allegations,” Inspector General Gregory Freifman wrote. “We found that work performed under the grant to LG Chem Michigan had not been managed effectively.”
These findings are especially shocking as President Barack Obama expressed in his State of the Union address on Tuesday ambitious plans for clean energy and fighting climate change.
“I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good,” Obama said, adding that he wants to rid American families and businesses of the “painful spikes in gas prices.”
LG Chem Michigan was to use the $150 million to help build a $304 million battery cell manufacturing plant in Holland, Mich. About 60 percent of the work is done. It was also eligible to get more than $175 million in tax relief from state and local governments through 2025.
Additionally, more than 440 jobs were expected to be created, but the battery company has reached less than half of that amount, according to the report.
“Our review revealed that LG Chem Michigan inappropriately claimed and was reimbursed for labor charges incurred by a variety of supervisory and staff employees for activities that did not benefit the project,” the IG report stated. “As such, we determined that the department reimbursed the company for questionable labor costs incurred in the third quarter of 2012.”
The office said it was unable to calculate the exact loss to the government, because the company didn’t track labor activities in detail. The IG believed, however, that the total charges, which included nonproductive work, surpassed $1.6 million. Some $842,000 of that amount was reimbursed in compliance with the project’s cost-sharing arrangement.
LG Chem issued a statement to the media, stating that it has taken steps to become compliant.
“We regret this situation occurred, and we are confident that we are now taking every measure to be fully compliant in our use of the project grant funding,” the statement read. “LG Chem Michigan is acutely aware of the disappointment arising from the delays in our start of production. These market-driven delays have been very difficult for our team members, for our community and for our company.”
Energy Department officials said the problems largely occurred because of grant-monitoring issues. The company wasn’t fully aware of its target goals.
Still, the report stated that "until the company begins production at the Michigan plant or develops some alternative use for the plant, U.S. taxpayers will receive little direct benefit from a plant for which they provided at least half of the funding."
You can read the full report here.