The federal government must pay $206 million in grant money it did not give to owners of six California wind farms as part of the 2009 economic stimulus package, a federal judge ruled.
Owners of six wind farms near Los Angeles sued the United States in the Court of Federal Claims in 2013, saying the government miscalculated how much it should have paid under a provision of the American Recovery and Reinvestment Act of 2009 that gave grants to owners of renewable energy facilities to help the nation recover from the financial crisis that began in 2008.
The Court of Federal Claims ruling, filed under seal on Oct. 24 and unsealed on Oct. 31, came five months after trial, at which 11 witnesses testified, and one was barred from testifying because he concealed articles he had published by a Marxist journal.
Under the stimulus package, renewable energy owners were entitled to 30 percent of “the basis” of their properties, which the companies understood to mean the purchase price of their wind farms.
The government disagreed, saying it would calculate the value of each farm’s parts and their development and construction costs to determine what it would pay in grants.
This left a $200 million gap between what the wind farms thought they were owed and what the government paid.
Judge Thomas Wheeler ruled that the basis of a property is its cost to its owner and that because the wind farm owners bought the farms, rather than build them from scratch, their basis is the purchase price of the farms.
“If Congress had intended some other definition of ‘basis’ to apply in situations like this, then it should have said so when it drafted the statute,” Wheeler wrote. “In the absence of such guidance, the court finds that plaintiffs have calculated the basis of their wind farm assets in the least imperfect way possible.”
He rejected the government’s argument that the fair value of the properties cannot be determined by the amount the owners paid, because that price included property ineligible for the grants.
He also tossed the government’s claim that the purchase price is a bad measure of basis because it includes going-concern value – the amount a company selling a farm could have made by continuing to operate it instead of selling it.
The plaintiffs were Alta Wind I Owner-Lessor C, Alta Wind I Owner-Lessor D, et al.
When Terra-Gen, which sold the Alta Wind farms, decided to sell, the farms were not yet up and running, so any cash the company could have made was “prospective only,” Wheeler ruled. “In short, there was no going concern value at time of the Alta Transactions because there was not yet a going concern.”
Wheeler was unable to find any trial testimony that backed up the government’s argument that a provision in the sale in which Terra-Gen sold its facilities to the wind farm owners only to lease them right back created “peculiar circumstances” that inflated the purchase price.
Wheeler began his 27-page ruling by justifying his decision to prevent Dr. John Parsons from providing expert testimony for the government in economics, finance and valuation, because he hid writing he did for a Marxist journal in the late 1980s.
Parsons, a professor at MIT, left the five articles he wrote for “Marxist and East German” publications off of his curriculum vitae, despite saying during voire dire that he had included all of his articles and publications since 1985.
“The court based its ruling to exclude Dr. Parsons’ testimony solely on the conclusion that he was untruthful under oath at trial and in his deposition and not in any way on the substance of any articles he authored when he was a college professor,” Wheeler wrote. “The court simply could not rely on the substantive expert testimony of a witness who was untruthful in describing his background and qualifications.”
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