‘Complete Lack Of Control’ Threatens Huge US Loan
An Australian satellite company that received financing from the Export-Import Bank is reportedly in default on its contract amid allegations of extravagant travel and compensation for executives.
According to The Age (Australia), “the US government’s Ex-Im Bank is worried” about NewSat, and “has threatened to withhold funds unless NewSat dramatically improves its governance.” (RELATED: Conservatives Split on Export-Import Bank)
In 2013, NewSat secured “a $400 million debt deal with the US and French export credit agencies” that would allow it to purchase a satellite from Lockheed-Martin, making it the first non-government, non-foreign-owned satellite in the country.
In January, however, the company’s contract with Lockheed “went into default because of a late payment issue,” and in February, “it was accused of a $10 million fraud in a Virginia court by its second biggest client, American satellite telecommunications company TrustComm.”
Then, last week, it was revealed that Ex-Im had been given a copy of an internal investigation conducted by Brendan Rudd, who was brought in as a consultant for NewSat in 2014.
Rudd’s review “identified numerous $10,000 dinners and a ‘complete lack of control’ on expenditure related to overseas travel,” as well as “a $1.5 million increase in salary and bonus for [NewSat CEO Adrian] Ballintine in 2012,” before the company had secured any financing or made any sales related to the satellite.
“Even more serious,” The Age asserts,” was [Ballintine’s] failure to deduct tax from bonus payments as a result of incorrect instructions from an advisor.”
Rudd’s report had previously been submitted to NewSat executives last summer, along with a memo from Rudd saying, “I have never seen nor heard of more appalling corporate behavior than at NewSat.” (RELATED: Export-Import Bank Backed Two Russian Companies Hit by Sanctions)
Rudd’s memo concluded that, “NewSat is a good company with good assets and good people, but it cannot survive with … management practices apparently designed to feather the nest of certain individuals.”
The Sydney Morning Herald reports that, “NewSat lost nearly a third of its total market capitalization” following news of the report, which was shortly followed by a statement from NewSat in which “the company admitted it had chosen to ignore Mr. Rudd’s damning findings,” claiming an internal review found them to be “without foundation.”
The statement went on to dispute media portrayals of the TrustComm lawsuit, saying the suit had been “filed,” but not “served.”
Ex-Im officials did not respond to requests for comment by press time, prompting Dan Holler, communications director for Heritage Action, to remark to The Daily Caller News Foundation that, “For an agency begging Congress for a lifeline, one would think Ex-Im would be more forthcoming with information.”
“Of course, when the entire sales pitch to Congress is about small business exporters, talking about a fledgling $280 million loan for a satellite rings hollow,” he added, arguing that, “the government needs to get out of this game and allow the private sector to carry the risk, if it makes sense.” (RELATED: Is the Export-Import Bank Done?)
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