The Department of Energy is set to give a $400 million loan to a financially troubled battery company that admitted to defrauding the federal government in 2022, according to court records.
Eos Energy—whose board includes a personal friend of Department of Energy loan czar Jigar Shah—was forced to pay a $1 million settlement to the government two years ago for evading tariffs on Chinese battery imports.
But the company is still on track to receive the nine-figure loan from Shah's office, despite its past violation and other financial concerns.
Last August, Eos Energy's stock plummeted after a report from short-seller operation Iceberg Research, which claimed the company was inflating its $500 million backlog of customer battery orders.
Iceberg's report prompted a class action lawsuit, which is ongoing, against Eos for "wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities."
The news could increase scrutiny of the DOE's loan office, which is already facing pushback from Congress over multiple loan decisions. Lawmakers last year started probing the Loan Program Office's $3 billion loan to Sunnova Energy, a solar company, after the Washington Free Beacon reported on allegations that it pressured elderly, dementia-ridden customers into entering long-term solar contracts.
KORE Power, another company set to receive an $850 million LPO loan, is co-owned by a Chinese battery-maker, the Free Beacon reported.
The DOE inspector general said last year that she was investigating Shah's loan department for potential conflicts of interest with loan recipients. Before joining the Biden administration, Shah founded a trade organization that has helped connect loan-seekers with what is now his office.
Several companies that have received or are slated to receive LPO loans also have prior connections to Shah. One of Sunnova's board members, Anne Slaughter Andrew, also served on the board of the trade group founded by Shah.
Before joining the Biden administration, Shah was also a major investor in Plug Power, a hydrogen company that received a conditional $1.6 billion loan commitment from his office in May.
Audrey Zibelman, a board director at Eos Energy, served on the New York State Energy Research and Development Authority with Shah.
In a LinkedIn post two months ago, Zibelman said she and Shah were "friends." She told the GridTalk podcast last year that she and Shah "know each other from New York" and have "been talking about transactive grids for a really long time."
Zibelman owns over 100,000 shares in Eos Energy, over 30,000 of which she purchased in April, according to Securities and Exchange Commission records.
In 2019, a former Eos Energy consultant filed a qui tam False Claims Act lawsuit against the company on behalf of the U.S. government. The consultant alleged that Eos Energy undervalued the dry batteries it imported from China by over $6 million, defrauding the federal government out of over $1 million in tariffs, according to court records.
The company allegedly imported thousands of dry batteries from China that it claimed were worth only $185 each, when they were actually worth around $2,800 each.
"Eos's top management knew that Eos was undervaluing the dry batteries of the [Customs and Border Protection] entry documents, and had this fact brought to their attention by an employee who was Eos's Logistics Manager," the lawsuit said.
"Yet," the lawsuit went on, "Eos's management did nothing to correct the undervaluation, but instead continued knowingly to cause Eos to import dry batteries from China using entry documents containing the same undervaluation, and thus knowingly to underpay customs duties."
Eos Energy admitted to undervaluing the Chinese imports in 2022 and agreed to pay a $1.02 million settlement to the federal government.
But the company has continued to face financial questions. Last July, Iceberg Research released a report accusing Eos Energy of falsifying its $500 million backlog of customer battery orders—the company's most significant asset.
"We are 100% confident that the backlog is fake," wrote Iceberg, noting that half of Eos's pending orders are attributed to one customer, Bridgelink Commodities, which recently had its assets auctioned off by creditors.
"We wonder how Eos can still present Bridgelink as a major client. The batteries ordered by Bridgelink were intended for renewable energy assets which have now been auctioned off," wrote Iceberg. "Yet, Eos continues to include Bridgelink in its backlog, and is likely to have made the same representations when applying for the Department of Energy loan."
Eos downplayed the report, saying Bridgelink "continues to build pipeline and is actively seeking financing for energy storage projects covered by Eos's multi-year [supply agreement]."
But the response failed to stop the fallout, with Eos's stock plunging 24 percent immediately and 15 percent the next day, according to reports.
Investors filed a class action suit against Eos in August, claiming that the company's "backlog was overstated" and "that such overstatement negatively impacts Eos's ability to secure a loan from the Department of Energy." The suit is still pending.
Eos and the Department of Energy did not respond to requests for comment.
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