SunEdison’s Internal Probe Blames Misguided Optimism, Finds No Fraud

Joseph Bebon
Written by Joseph Bebon
on April 14, 2016 No Comments
Categories : Featured, New & Noteworthy

An internal investigation at SunEdison says that some of the company’s highly publicized financial problems were caused by the renewable energy firm’s “overly optimistic culture and its tone at the top,” but the report has also determined executives did not commit any “willful misconduct.” Furthermore, the report suggests a former employee may, at least in part, be responsible for SunEdison’s current legal battle with Vivint Solar.

The audit committee and independent directors launched the probe late last year after past executives and employees, both current and former, raised questions about the company’s financial claims previously submitted to the board.

In a regulatory filing, the internal investigators say they have discovered no “material misstatements in the company’s historical financial statements, as well as no substantial evidence to support a finding of fraud or willful misconduct of management.”

Nonetheless, the probe has uncovered several issues, including insufficient processes and controls regarding liquidity management and cash forecasting and inappropriate responses once goals weren’t achieved.

“[C]ertain assumptions underlying the cash forecasts provided to the board by the company’s management were overly optimistic, and a more fulsome discussion of risks and adjustments with the board was warranted,” the filing says.

The company is also facing a lawsuit from Vivint Solar, which officially called off a stalled merger and acquisition deal in March and claimed SunEdison breached the terms of the agreement. Around the same time, SunEdison revealed the U.S. Securities and Exchange Commission and the U.S. Department of Justice are investigating the failed acquisition and other financial issues.

SunEdison’s internal probe report now says a non-executive employee committed “wrongdoing” in regards to termination negotiations of the Vivint deal, and the company later fired the employee.

Of course, the Vivint lawsuit is just one of SunEdison’s recent legal challenges. For example, its own yieldco, TerraForm Global, slapped the parent company with a lawsuit earlier this month over what TerraForm Global said was a misappropriation of funds. Before that, SunEdison settled a separate lawsuit with Latin America Power shareholders for $28.5 million following another cancelled acquisition.

According to several reports, SunEdison is currently on the brink of bankruptcy, due in large part to loads of debt it acquired after going on an acquisition spree. The company’s stock prices have also plummeted over the past year or so.

Meanwhile, the internal investigation report has laid out steps SunEdison’s independent directors will take to fix the issues found during the probe. That includes better controls and processes, more transparency and analysis, and comprehensive training programs. In addition, the report says SunEdison’s recent addition of a new chief financial officer will help the company tackle financial issues ahead, and the independent directors “have also determined to review and alter the board’s delegations of authority to management.”

When reached for comment, SunEdison declined to answer follow-up questions submitted for this story.

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