After revealing last week that it is under investigation by both the Department of Justice (DOJ) and the SEC, SunEdisons legal problems appear to be getting worse rather than better, as its own yieldco company files a lawsuit against the ailing firm. In the lawsuit, filed with a Delaware court on Monday, TerraForm Global accuses SunEdison of not only misappropriating funds that were supposed to be used for projects in India, but also of ripping out existing board members and management, and replacing them with a sham committee.
The official complaint named SunEdison, as well as three board members Ahmad Chatila, Martin Truong, and Brian Wuebbels, as the defendants, on charges of breach of fiduciary duty, breach of contract and unjust enrichment.
It claims that $231 million dollars of TerraForm Global cash were diverted to SunEdison supposedly in order to facilitate SunEdisons completion of certain renewable-energy projects in India and to secure a transfer of SunEdisons equity interests in these projects to [TerraForm] Global, said the lawsuit.
SunEdison executives had expressed to TerraForm Global that the projects were nearing completion, and that the money was needed to finish them on time, at which point ownership of them would be handed over to TerraForm Global. In reality, the India Projects were under-funded and way behind schedule, according to the lawsuit.
This statement was given extra weight on Monday, as SunEdison began seeking buyers for an estimated 1 GW of unfinished solar projects in India. Analysts believe that those projects may be difficult to sell, as their profitability is far from obvious, however reports have since surfaced that Adani Group may be interested in purchasing SunEdisons India solar portfolio.
TerraForm Global claims that rather than using the money for the India Projects, SunEdison used it to avoid defaulting on a loan, which would have resulted in a cross-default on $8bn of debt. After board members initially rejected the deal, the lawsuit alleges that SunEdison used its 98% of voting power to replace the independent directors with a sham committee that agreed to the deal.
The lawsuit is seeking a constructive trust and an undetermined amount of monetary damages from SunEdison, as well as any other relief as the court may deem just and proper.
Upon news of the lawsuit, shares of SunEdison plunged 50% on the stock market, which just adds to the companys mounting problems, after finding out last month that Vivint Solar is suing for damages, and amidst swelling rumors that the company is about to declare bankruptcy.