SolarCity Corp Drawn Into Federal Corruption Probe Of NY Governor

SolarCity struck an unusual deal with the state of New York to build its 1-million square foot “gigafactory” in the Buffalo area and employ well over 1,000 workers in the area. Now, Elon Musk’s SolarCity has acknowledged that it has received a federal subpoena as part of a probe into corruption in Gov. Andrew M. Cuomo’s administration.

SolarCity is not the target but was subpoenaed

New York state’s desire to see SolarCity build a massive factory in the Buffalo area is the cornerstone of Gov. Andrew M. Cuomo’s Buffalo Billion initiative. Now, the opening of that plant could see setbacks with the the company joining a number of others who have been subpoenaed in a federal corruption probe.

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In late April, the Governor’s office received a subpoena from Southern District U.S. Attorney Preet Bharara who is looking into the contracting and vendor selection process for a number of New York state construction projects.

“When bids are rigged, your people suffer. When cronyism reigns, your people suffer,” Bharara said in February. “When transparency takes a backseat to backroom deals, your people suffer. They suffer in loss of faith. They suffer in higher taxes. They suffer in loss of services. They suffer in opportunities squandered.”

They were hardly alone in seeing a subpoena on April 29th with the Public Service Commission’s Department of Public Service and the New York State Energy Research & Development Authority, the state economic development agency, and the State University of New York Polytechnic Institute all being served on the same day.

SolarCity told Newsday today that “The U.S. attorney’s office did request information from us to aid in the investigation and we will cooperate fully.”

The spokesperson added it was “premature to speculate on any impact the investigation might have on the project timeline.”

In addition to the contractor and vendor selection process the probe is looking into improper lobbying as well.

At issue is the decision to award the construction of the “gigafactory” to construction firm LPCiminelli, which employed the politically well-connected Todd Howe as a consultant.

Unusual arrangement and more

All that Elon Musk touches is not gold, almost, but not all. SolarCity shares have lost over 50% in 2016 alone and Elon Musk was recently forced to transfer well over $225 million from the highly successful SpaceX to keep SolarCity in cash.

SolarCity struck a strange arrangement with New York for the project with NY investing $750 million to build and equip the facility which is hardly chump change. In exchange, SolarCity will lease the facility to New York for $2 per year for the next 10 years. New York will be the owner of the plant and SolarCity has promised to buy the equipment in the future.

SolarCity faces tens of millions in payments to the state if it fails to see the factory open on schedule and fails to hire 1,460 workers in Buffalo and another 500 at the plant withing five years’ time. Addtionally, the company will need to be at full production withing six months of construction being finished.

Failure to meet those employment levels it will pay the state well over $40 million per year that it is not in compliance with the milestones.

Clearly SolarCity has more on its plate than worrying about who is building a plant they are simply putting their name on but a subpoena is a subpoena.