Ahead of its upcoming bond issue, Ormat Technologies Inc. (NYSE: ORA; TASE: ORMT) is wiping its slate clean. The company is announcing a settlement with two former employees who sued Ormat, alleging that the company defrauded the US authorities. Ormat is not admitting guilt as part of the settlement, but is agreeing to pay $11 million to end the affair.
In the past, Ormat asserted that the two ex-employees' lawsuit was "groundless," and that the company would defend its rights by any means. On the other hand, the high estimated costs of conducting the trial, amounting to millions of dollars, and the managerial attention it would require, led the company to compromise with the plaintiffs. The agreement is subject to ratification by the US authorities, but no problem in obtaining this is anticipated.
Managed by CEO Isaac Angel and controlled by FIMI Opportunity Funds, Ormat deals with geothermal energy. The claim, which involves a period before Angel was in his post, was filed by former Ormat employees Tina Calilung and Jamie Kell. They alleged that fraudulent acts led to the company receiving $137 million in grants from the US government as part of an incentive program for energy production.
The claim was filed through a mechanism enabling disclosers of corruption to sue in the government's name for money illegally obtained, and to retain up to 35% of the amount. In its previous financial statements, Ormat estimated the cost of the compensation at up to $375 million. The employees alleged that Ormat had given the authorities false information by stating, among other things, that the Brawley power plant built by Ormat in California had begun operating in 2010, while the lawsuit alleged that it had already begun operating in late 2008, and had posted $2.5 million in revenue.
In the legal proceeding conducted to date, the Nevada District Court rejected both Ormat's petition for an abbreviated proceeding and the plaintiffs' petition to submit another response to the Court. The proceeding entered the state of disclosure of declarations, but has now ended in a compromise settlement.
Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2016
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