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Senator wants answers on misspent LG Chem federal grant funds

8:52 PM, Mar 12, 2013   |    comments
From left, LG Group Chairman Koo Bon-moo, Michigan Gov. Jennifer Granholm and LG Chem CEO Peter Bahn-Suk Kim break ground on a new LG Chem plant July 15, 2010, in Holland, Mich. / AP Photo/Carlos Osorio
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WASHINGTON (Detroit Free Press) -- The Democratic chairwoman of a U.S. Senate subcommittee is asking Energy Secretary Steven Chu to explain what steps he is taking to recover potential overpayments to a Michigan-based battery company that received a $150-million federal grant in four years ago and was the focus of a scathing review by federal inspectors.

Sen. Claire McCaskill of Missouri sent letters last week to both Chu and David Lee, the chief financial officer of LG Chem Michigan in Holland, giving them until March 29 to respond to her questions.

Last month, the inspector general's office for the Energy Department issued a report saying LG Chem had failed to sell a single electric car battery since receiving the grant in 2009 - as well as $175-million worth of state and local tax relief - but had paid $1.6-mllion to employees who spent their time volunteering for animal shelters, watching movies ansd playing video games.

At the time of the report, an LG Chem spokesman said there hadn't been enough demand for electric car batteries to make production in Michigan feasible. GM - which had been the intended buyer of the Michigan batteries - had been purchasing its lithium-ion batteries for the Volt from LG Chem's production lines in South Korea instead of Michigan.

In her letter to Lee, McCaskill said she understood that the company had agreed to refund the government's share of employment costs - which was about half of the $1.6 million paid to employees identified in the inspector's report - but said that the company has received a lot more.

"To date ... LG Chem has received more than $142 million, 94% of the available funds, without meeting any of the grant's objectives," she said. "(It) is possible that the value of unallowable labor costs may be even higher."

She asked Lee to explain what the company is doing to address the problems raised in the report "including the status of any review to determine additional funds which should be reimbursed to the government."

McCaskill's staff said no hearing is scheduled in the Subcommittee on Financial and Contracting Oversight at this point but that she could consider one in the future.

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