At the former AstroPower facility in Delaware.

 
I first heard this now confirmed rumor from a confidential source yesterday.

GE Solar, part of GE Energy and in turn a business unit of the General Electric Company (NYSE:GE), has laid off the second and third production shifts as well as some engineering staff at the their Newark, Delaware USA, manufacturing site.

The apparent driver is inventories of silicon solar modules filling the warehouse.

Per a GE spokesperson:

We did have a staff reduction.  The market for the solar technology manufactured at the Newark, Delaware facility has seen a sudden and dramatic decline, which required us to align our output with the market demand.

The Newark plant will continue to manufacture solar modules, but operations in this area will be reduced from three shifts to one shift, requiring fewer workers. Today, the plant employs approximately 200 people. This staffing reduction impacted 86 employees.

My source also indicated a rumor is circulating of a possible plant shutdown. Whether GE might be considering a Solar exit or relocation of production is unclear.

Just another leg in the unwinding of the AstroPower saga?

And juxtaposed to “G.E.’s Green Chief: Bullish on Clean-Tech Future” by Kate Galbraith for the New York Times Green Inc. Blog.

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“Barnett and Stiner agreed to permanent injunctions; payment of civil penalties in the amount of $65,000 and $40,000, respectively; and other sanctions.”

It has been a while since I posted AstroPower Saga Continues: Fraud Claims Referred to FBI.

Per this Litigation Release No. 20938 issued on March 10, 2009:

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20938 / March 10, 2009

Accounting and Auditing Enforcement Release No. 2946 / March 10, 2009

Securities and Exchange Commission v. Allen Barnett, et al., Civil Action No. 1:09-cv-00457 (D. D.C.) (EGS) (filed March 9, 2009)

SEC BRINGS SETTLED ACTIONS AGAINST FORMER CEO AND CFO OF ASTROPOWER, INC. FOR THEIR ROLES IN FINANCIAL FRAUD

Dr. Allen Barnett  Photo Credit: University of Delaware

Although I don’t like quoting verbatim to excess, according to the SEC Complaint in this matter, Dr. Allen Barnett and Thomas Stiner:

made material misstatements, engaged in fraudulent accounting practices, and signed filings made with the Commission that they knew, or were reckless in not knowing, contained materially false and misleading financial statements. The Commission alleged that at the direction of Barnett and Stiner, and in contravention of Generally Accepted Accounting Principles, AstroPower improperly recognized approximately $4 million in revenues from four transactions executed over the course of the second and third quarters of 2002. According to the Complaint, as a result of improperly recognizing revenue from these transactions, AstroPower’s net income was overstated by approximately $160,000 or 80% for the second quarter of 2002, and approximately $440,000 or 113% for the third quarter of 2002. The Commission alleged that these material misstatements of revenue and net income were included in Commission filings that Barnett and Stiner signed.

When considering the amounts involved, this fraud case approaches pathetic proportions save for its impact. Furthermore:

Without admitting or denying the allegations in the Complaint, Barnett and Stiner consented to the entry of final judgments enjoining them from future violations of these provisions of the federal securities laws, prohibiting them from acting as officers or directors of any public company, and imposing civil penalties.

Stiner, without admitting or denying the Commission’s findings, also consented to the institution of settled administrative proceedings pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice suspending him from appearing or practicing before the Commission as an accountant, based on the anticipated entry of an injunction against him.

I have to wonder if these sanctions, without any admission of wrong doing, are sufficient considering the severe impact of their behaviors on AstroPower stakeholders.

For further though similar coverage, please see “Sun Goes Down on Solar Company Execs” by Stephen Taub at CFO.com or “Former CEO and CFO of AstroPower, Inc. Settle Fraud Charges” at the Securities Law Prof Blog.

My prior posts can be found under the AstroPower and the related Blue Square Energy categories.

I still see two open issues.

• To date, I have not seen an official resolution or statement regarding Peter Aschenbrenner under SEC investigation in AstroPower Saga as first observed in Solar Light Flashes: November 15, 2007. Mr. Aschenbrenner continues as the SunPower Corporation (NASDAQ:SPWRA, NASDAQ:SPWRB) Vice President, Corporate Strategy.
• From the classic GUNTHER Portfolio post, AstroPower: Decline of a solar photovoltaic star remains an untold tragedy?:
  
  In a final twist to the AstroPower saga, AstroPower Liquidating Trust, operated by Bridge Associates, has sued KPMG for mismanaging company audits.

I noticed former Blue Square Energy CEO Jeff Barnett at the recent Cleantech Forum XXI in San Francisco, California USA. I suspect he did not see me nor care to talk with me anyway.

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The ever trustworthy Steven Church, now with Bloomberg News, reported on the latest developments in AstroPower fraud claims go to FBI, judge rules reprinted in delawareonline: The News Journal. Typical for this saga, there has been a dearth of press coverage.

In Wilmington, Delaware, U.S. District Judge Joseph J. Farnan Jr. ruled the fraud allegations against AstroPower company founder and CEO Allen M. Barnett and CFO Thomas J. Stiner should be referred to the Federal Bureau of Investigation.

Attorneys were ordered to supply the names of former AstroPower employees who have accused Barnett and Stiner of misstating AstroPower revenues and inventories to the FBI.

At a Federal court hearing on Wednesday, May 9, 2007, Judge Farnan said:

There are 10 people with information about possible misconduct, and as far as we know there is no law enforcement investigation.

However, Judge Farnan also said he didn’t know whether the FBI and the U.S. attorney would pursue an investigation.

Per Jennifer Enck, a plaintiff attorney with Schiffrin Barroway Topaz & Kessler, LLP, about 1500 AstroPower shareholders have filed claims for the settlement. Less attorney fees and expenses of about $335,000, shareholders might net $0.10 (10 cents) per share depending on the final number of claims.

If you need background on the AstroPower Saga, please see my previous posts:

Peter Aschenbrenner under SEC investigation in AstroPower Saga
AstroPower: Decline of a solar photovoltaic star remains an untold tragedy?

So far, I have not seen any updates on the SEC investigation of Mr. Aschenbrenner, nor have I seen any new disclosures in recent SunPower Corporation (NASDAQ:SPWR) SEC filings.

Perhaps the Securities and Exchange Commission (SEC) and the FBI need to join investigative efforts in this matter?

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Well, you can tell I have been distracted by personal issues to not notice this blockbuster and underreported news: SunPower sales up; SEC investigates employee (free registration may be required). This story was first reported by Sarah Jane Tribble at the Mercury News with contributions from Troy Wolverton.

Per an amended Current Report 8-K/A filed by SunPower Corporation (NASDAQ:SPWR) with the SEC on January 25, 2007, Peter Aschenbrenner was sent a Wells Notice from the Securities and Exchange Commission (SEC) on December 12, 2006. The Wells Notice relates to Mr. Aschenbrenner’s role as Sr. Vice President, Global Operations, with AstroPower and alleges improper revenue recognition and insider trading. Here is the relevant section from the amended filing buried on page 50:

From April 1994 through March 2003, Mr. Aschenbrenner served as senior vice President of Global Operations at AstroPower, Inc., a solar product manufacturing company that filed for bankruptcy in February 2004 and was acquired by the General Electric Corporation. By letter dated December 12, 2006, the SEC enforcement staff notified Peter Aschenbrenner (in what is commonly referred to as a “Wells Notice”) that it intended to recommend that the SEC take legal action against him. The Wells Notice alleges that Mr. Aschenbrenner played a role in AstroPower, Inc.’s allegedly improper recognition of revenue and that Mr. Aschenbrenner committed insider trading. Under the SEC’s rules Mr. Aschenbrenner is permitted to make a submission to the staff in which he seeks to persuade the SEC that no such action should be commenced. Mr. Aschenbrenner reports that he has obtained an extension of time to file his response, and that it is now due on February 8, 2007. The transactions at issue in the Wells Notice predate Mr. Aschenbrenner’s tenure with the Company, and the SEC’s inquiry is not directed at, and does not concern, the Company or any other member of the Board or management.

If you need a primer on the AstroPower story, please review my epic forensic post: AstroPower: Decline of a solar photovoltaic star remains an untold tragedy?

Given the notice and this historical article at Solarbuzz, AstroPower Announces Management Changes; CEO And CFO Resign, citing Peter Aschenbrenner leaving AstroPower in the same time frame, it appears Mr. Aschenbrenner is one of the two other management employees removed by AstroPower’s Board of Directors as announced on May 27, 2003. Was the other unnamed management employee also sent a Wells Notice?

Per the Mercury News, SunPower has not disclosed when they learned of the Wells Notice to Mr. Aschenbrenner:

SunPower spokeswoman Julie Blunden declined to disclose when Aschenbrenner told SunPower executives about the notice, but called it a “personnel matter.”

However, the time line raises questions about when SunPower and their Board of Directors learned of the notice and if this influenced their decision to remove Mr. Aschenbrenner’s Sales responsibilities and executive officer status per the original Current Report 8-K first filed on January 10, 2007:

In connection with the completion of the Merger, the Board appointed Mr. Dinwoodie as Chief Executive Officer of the PowerLight business, Mr. Wenger as Executive Vice President, Sales of the Company and Mr. Ledesma as General Counsel of the Company. In addition, the Board appointed Peter Aschenbrenner, formerly the Vice President, Sales and Marketing of SunPower, as Vice President, Marketing of the Company. In light of the change in Mr. Aschenbrenner’s responsibilities, the Board determined that he would no longer be an executive officer of SunPower.

In an ironic twist, SunPower’s new Vice President, Sales, (or Vice President, Global Business Units?) Mr. Howard Wenger, is also an AstroPower alumnus, last serving as Vice President, North American Business, for AstroPower, Inc.

I was excited
to notice a few folks from the SEC reading my AstroPower post last year. It is my sincere hope this may have helped or prodded their further investigation of the events leading up to the AstroPower bankruptcy.

And if you are an email subscriber to GUNTHER Portfolio, I apologize for the random mailings by FeedBurner of two old posts in the last week. I have posted a question about this on one of their support forums, but I am wondering if this is instead a New Blogger issue.

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Back in May, General Electric (NYSE:GE) announced the layoff of 85 workers and solar cell production would cease at its Glasgow, Delaware, plant. GE acquired the plant and assets of AstroPower from bankruptcy in March 2004 to form GE Energy, Solar Technologies. As always, delawareonline: The News Journal, in an article by Steven Church, provides the best coverage of events at GE Solar and the former AstroPower. While GE is expanding solar module production using cells from outside suppliers, does this event mark the end of the both recycled wafer and APex™ Silicon-Film™ solar cell technologies developed by solar industry pioneer AstroPower? GE’s Global Research Centers will likely continue solar research programs directed towards high performance and low cost photovoltaic cells in the pursuit of ECOMAGINATION^SM. However, there are no posts regarding photovoltaics at the GE Global Research Blog, From Edison’s Desk.

As the worldwide solar photovoltaic industry expands production at a rapid pace and confronts silicon shortages and solar module demand growth fluctuations, the rapid decline of industry high flier AstroPower may provide some sobering lessons.

First, let’s review a chronicle of events leading to the bankruptcy of AstroPower and the aftermath.

July 31, 2001 – AstroPower, Inc. today announced that it has signed an agreement to acquire Aplicaciones Tecnicas de la Energia, S.A., commonly known as Atersa, a privately held company based in Valencia, Spain.

August 1, 2002 – AstroPower, Inc. Reports Second Quarter Results

AstroPower stunned analysts and investors with their second quarter 2002 results. Revenue was $20.4 million representing (1%) one percent sequential growth and $4.9 million below analyst estimates, sparking nine class action lawsuits. The Stanford Law School Securities Class Action Clearinghouse has the AstroPower, Inc. Company and Case Information. The lawsuits allege that AstroPower misrepresented its financial and business status between Feb 22, 2002, and August 1, 2002. In addition to AstroPower, Inc., CEO Allen Barnett, Ph.D., and CFO Thomas Stiner are named as individual defendants.

April 1, 2003 – AstroPower delays filing of 2002 fourth quarter and annual results to the SEC.

April 21, 2003 – AstroPower, Inc. announced today that it received a NASDAQ Staff Determination letter on April 17, 2003 indicating that AstroPower does not comply with the requirements for continued listing set forth in Marketplace Rule 4310 (c) (14) as a result of its failure to timely file its Annual Report on Form 10-K for the year ended December 31, 2002 with the Securities and Exchange Commission. Accordingly, shares of AstroPower’s common stock are subject to delisting from the NASDAQ National Market. As a result, the trading symbol for AstroPower common stock will be changed from APWR to APWRE at the opening of business on April 22, 2003.

May 27, 2003 – AstroPower’s CEO and CFO resign
The Board of Directors then accepted the resignations of Allen Barnett, Ph.D., the Company’s Chief Executive Officer, and of Thomas Stiner, the Company’s Chief Financial Officer, from their respective executive positions with AstroPower and removed two other management employees.

July 24, 2003 – AstroPower, Inc. Announces NASDAQ Delisting

July 25, 2003 – AstroPower, Inc. Engages Bridge Associates to Provide Interim Management and Operational and Financial Consulting Services

February 1, 2004 – AstroPower, Inc. (OTC: APWR.PK) announced today that it has reached an agreement to sell certain of its U.S. business assets to GE Energy. To facilitate the sale, among other reasons, AstroPower has filed a petition for reorganization under Chapter 11 of the Bankruptcy Code in United States Bankruptcy Court in Delaware.

It is interesting to note that Evergreen Solar (NASDAQ:ESLR), Files Objections Wit
h AstroPower Bankruptcy Court, was also interested in acquiring the assets of AstroPower and felt the sale had not been open and fair.

March 12, 2004 – AstroPower, Inc. (OTC: APWRQ.PK) announced today the US Bankruptcy Court presiding over AstroPower’s Chapter 11 proceeding approved the sale of most of AstroPower Inc.’s US business assets to General Electric Company’s designee Heritage Power LLC. The sale price was $15 million cash plus the assumption of certain liabilities. The sale is expected to close by the end of March.

June 16, 2004 – Registrant filed a Motion with the US Bankruptcy Court in the District of Delaware announcing that it has reached an agreement to sell 100% of the equity of Aplicaciones Techicas de la Encergia, S.L.(Atersa), its Spanish subsidiary, to Elecnor, S.A., (Elecnor) a Spanish concern.

July 14, 2004 – AstroPower, Inc. announced that the US Bankruptcy Court presiding over AstroPower’s Chapter 11 proceeding approved AstroPower’s participation in the disposition by an AstroPower subsidiary of 100% of the share capital of Aplicaciones Tecnicas de la Encergia, S.L.(Atersa) its Spanish operations to Elecnor, S.A.., (Elecnor) a Spanish Corporation on July 12, 2004. The sale closed on July 14, 2004 in Madrid Spain. The sale price was 3.0 million euros. This transaction completes the sale of substantially all of the assets of AstroPower Inc. and its nondebtor subsidiaries.

December 10, 2004 – Bankruptcy or Receivership Final Plan approved.

In a final twist to the AstroPower saga, AstroPower Liquidating Trust, operated by Bridge Associates, has sued KPMG for mismanaging company audits.

So what went wrong at AstroPower? This question may remain unanswered even after all the lawsuits proceed through the courts.

Bridge Associates, the turnaround and crisis management firm brought in to salvage AstroPower, has an informative case summary regarding the still current “engagement”. Bridge Associates summarizes the AstroPower challenge as follows. “The Company discovered a substantial financial reporting misstatement which led to the departure of high level executives. The Company also faced a severe liquidity crisis caused by historical operating losses and significant research and development spending.”

Per Bridge Associates, there are apparently two dimensions to AstroPower’s demise.

1) Allegedly, the company was inflating revenues and profits in the 2002 class period and may even have been incurring losses. In the past, AstroPower had research contract revenue recognition issues. See U.S. sues AstroPower for $7.9 mln in contract dispute.

2) Most likely, although this is pure speculation, Silicon Film production was troubled and wasting company cash and material resources. GE Solar ceasing solar cell production is perhaps the best confirmation that Silicon Film continues to have unidentified manufacturing issues.

While the broad stokes of the AstroPower story seem clear, the details of misstatements, mismanagement, losses, and production issues have still not emerged.

For an uncensored view point, AstroPower fufills (fulfills ed.) legacy is an unflattering, unsubstantiated, and anonymous blog entry by a supposed, former AstroPower employee.

APWR: an electrifying experience provides an individual investor’s post mortem of his failed AstroPower investment and how to recognize the signs of trouble.

Dr. Barnett’s research and professional reputation have not been diminished by the AstroPower saga. In November 2005, Dr. Barnett, as principal investigator and research professor, was chosen to lead a broad consortium of 15 universities, corporations and laboratories, spearheaded by the University of Delaware (UDEL), to develop Very High Efficiency Solar Cells (VHESC) with 50% efficiency within the next 50 months. The Defense Advanced Research Projects Agency (DARPA) is funding the VHESC effort with up to $33.6 million of a potential $53 million research budget.

In Silicon Valley, the highest flying companies tend to stumble around the time they move into a new headquarters “palace”. AstroPower’s troubles may have started before February 2002, when they moved into their new 158,000 square foot facility with America’s Largest Installed Solar Power System. But the former AstroPower headquarters building in Glasgow, Delaware, may indeed be cursed. Since the Christina School District acquired the building wi
th plans to convert it into a middle school, a financial crisis at the district, prompted by a severe budget shortfall, forced the plan to be delayed.

If you have first hand insights into the decline of AstroPower, please submit your anonymous comments or email me – confidential sources will not be identified.

(Full disclosure: I owned shares of APWRE stock when it was delisted from the NASDAQ.)

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