Solar Panel Fallout – Part 2

This was in Sussex County but Union County was similarly gulled into their own version of this Solar Panel fiasco.

Below, pertinent excerpts from the Boxer $500,000 report:

There were no significant objections expressed at the County and, with minimal debate, the measure was unanimously approved. (page 1)

The Morris Model solar project gained national renown, as well as accolades for the MCIA attorney who designed its structure, Stephen Pearlman, Esq. Pearlman was Inglesino[‘s law partner at the time of his November 2010 meeting with Zeoli. (page 8)

In January, 2011, Zeoli became the Director of the Freeholder Board and, as described by Re, Zeoli “ran the Board with an iron fist.” Re stated that Zeoli was interested in the County participating in the solar Project and everything fell into place from there. (page 10)

According to Re, Pearlman did most of the talking at the meeting and pitched the solar energy project as a “cannot lose” project. (page 10)

Biuso said he suspected that he was not consulted because County decision-makers did not want anyone presenting any impediments to the project moving forward. (page 18)

Thus, 9 of the 12 members of the Evaluation Team stood to gain financially if the County were to move forward with the project. (page 21)

In addition, Sunlight would be able to take advantage of a federal government grant made available under the American Recovery and Reinvestment of Act of 2009, equal to 30 percent of the eligible costs of solar energy projects. This grant was known as a “section 1603” grant. As the beneficial owner of the solar projects for federal tax purposes, Sunlight (as opposed to the counties or the MCIA) was entitled to collect this federal grant money. (page 23)

Aspects of the section 1603 grant program were set to expire by the end of December 2011. Therefore, any qualifying project had to close before then and establish that a certain amount of materials for the project had been acquired by that time. (page 24)

While the two companies were trying to manage these challenges, SRECs, whose market p0rice was more than $600 at the time of Sunlight’s proposal submission, fell to approximately $200 in December 2011 and to approximately $50 by October 2012. (page 29)

In August 2014, the arbitration panel concluded that Sunlight was required to pay PPM more than $60 million in damages. (page 32)

Witnesses we interviewed agreed that there was simply no County official or employee who was managing the Solar Project on behalf of the County. (page 32)

County employees who were interviewed as apart of this investigation frequently stated that the project management/construction management function was being carried out on behalf of the County by the MCIA’s energy consultant, Gabel Associates (“Gabel”), who was providing services to the County through the shared services agreement the County had executed. (pages 33-4)

Along those lines, County Counsel McConnell stated in his investigative interview that he began to question what exactly the County was paying the MCIA’s professionals for and what work was being performed by them. “Large sums [of money] were being paid out and [no one] could…justify what for,” he stated. (pages 34-5)

One reason for the lack of County oversight of the project is that no one on staff at the County had the necessary expertise to do so. (page 35)

The information that the County received regarding the project generally was provided by Stephen Pearlman, who was counsel to the MCIA and was providing advice to the County as well, as permitted by the above-referenced shared services agreement. Re described the County’s approach to the Solar Project as “All faith in Steve.” (page 37)

Under New Jersey law, a performance bond must be posted for public works projects, including for improvements being made to public buildings. (page 39)

third, by its terms, the bond covered only those obligations set forth in the Power Purchase Agreement, and not those set forth in other operative agreements. However, PPM, the principal under the bond, was not even a party tot he Power Purchase Agreement. Thus, arguably, the surety could be called upon to save this project only if it could somehow be found that PPM defaulted on a contract to which it was not a signatory. (page 40)

In other words, only when problems on the Solar Project began to threaten the viability of the project did McConnell request and review the executed bond. (page 42)

In his interview, however, Pearlman declined to answer most questions regarding the performance bond, citing the attorney-client privilege in connection with his representation of the MCIA. (page 42)

In the wake of that failure, Pearlman explained, he met with members of the developer community and learned that a considerable portion of developers’ bid price was connected to the cost of posting financial security on the project, which was substantial because of the risky nature of these projects. Pearlman stated that as a result, he became more flexible regarding the nature of the financial security required to be posted on future solar projects. (page 43)

In addition, according to witnesses, shortly before the finalization of the settlement documents the MCIA presented to the County an additional Release of Claims, under which the ?county would release the MCIA itself, as well as Morris County and its “attorney,” “financial advisors,” and “consultants.”   Mcconnell said in his interview that the latter release was added to the settlement at the “last minute,” and that it came from Pearlman. (page 49)

Weinstein noted that McConnell attempted to persuade the MCIA/Pearlman to re-negotiate the terms of the release, but they refused, though Pearlman’s new law firm instead agreed to a 20 percent reduction in outstanding legal fees owed to it by the County. The County then executed the MCIA release. (page 50)

Completion of the construction was further hindered by local governments continuing to drop out of the project. The Solar Project had become a subject of substantial derision in the County by this time, which had an effect on the willingness of third parties to participate in it. (page 51)

In multiple respects, the project was highly speculative, particularly in its dependence on the strength of the volatile SREC market. Yet, no on at the County had a comprehensive understanding of the operation of the SREC market or its speculative nature. No one at the County, moreover, made any effort to become adequately informed about that market or to look for ways to mitigate the related financial risks. Similarly, from a legal standpoint, perhaps in part because of the complexity of the operative legal documents, no one at the County understood the nuances of the solar transaction itself and the various ways in which the County faced legal and other risks. More generally, no on at the County, even though they were acting in good faith, appears to have fully understood the gamble being made with the tax dollars of Sussex County residents. (page 54)

Thus, when only one response was provided by the entire solar marketplace to the RFP on the project, no one involved in the project knew enough to express, or had an interest in expressing, a concern. (page 56)

Instead, the County relied on third parties whose fiduciary responsibilities to the County were unclear. When those individuals made assurances about the project involving minimal risk, County officials accepted those representations at face value, seemingly without question or analysis. The County became completely reliant, for example, on counsel for the MCIA for project information and related legal and financial assessments. (page 57)

County decision-makers failed to understand the significant financial risks associated with guaranteeing the bonds that were being issued for the project. The County guaranteed the debt for this entire program, while the County’s involvement in the program itself was otherwise minimal. (page 58)



4 responses to this post.

  1. Posted by readslikeamofiabook on August 11, 2017 at 6:28 pm

    “Instead, the County relied on third parties whose fiduciary responsibilities to the County were unclear.”

    Unless you’re deaf, dumb and blind, you would know the third parties’ “fiduciary” responsibilities were to themselves alone. Those third parties are laughing all the way to the bank, leaving the taxpayers holding the bag.


  2. Posted by readslikeamofiabook on August 11, 2017 at 6:33 pm

    There was no need to spend $500,000 for a report. The information contained in the $500,000 report was posted here all along on this blog by John Bury FOR FREE.


  3. Posted by readslikeamofiabook on August 15, 2017 at 11:14 pm

    Can you do a James Cryan post soon, brother of Union County Sheriff Joseph Cryan? DUI history etc. removing posts that refer to the history of these two jokers.


  4. Posted by readslikeamofiabook on August 17, 2017 at 10:09 pm

    Usually alcoholism runs in the family


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