Holtec International sues former executives CBIZ over alleged embezzlement scheme

When energy technology firm Holtec International agreed in January Will pay $5 million to New Jersey to avoid criminal charges Over the tax incentive dispute, the company denied any wrongdoing and accused prosecutors of making “unfounded retaliatory” threats of investigation.

Holtec still maintains it handled everything at a high level, but the company now blames its accountants, saying an outside firm gave bad advice and led to a costly criminal investigation.

And in another twist, Holtec says its own investigation shows that the company was the victim of a years-long scheme of embezzlement and self-dealing that involved two of its top executives and cost it more than $70 million. a lawsuit the company filed this month in Camden County Superior Court..

The case comes in relation to Holtec, which has two manufacturing plants and an engineering facility. A 50-acre campus in Camdenthis week won a separate legal battle with the state After the New Jersey Economic Development Authority awarded $260 million in tax credits in 2014. The private company specializes in nuclear fuel storage and decommissioning of shuttered nuclear power plants.

The New Jersey Supreme Court this week refused to hear an appeal of a lower court ruling that said the state must honor its contract with Holtec. The EDA had withheld millions in tax credits that it claimed were improperly granted based on false and misleading statements Holtec allegedly made on its application.

After years of scrutiny by government officials, Holtec is now going on the offensive.

His lawsuit accuses Lonnie Davis, an accountant at Ohio-based firm CBIZ, of conspiring with the company’s former chief financial officer Robert Galvin and former general counsel Andrew Ryan to siphon funds from Holtec. The trio allegedly manipulated the company into bad investments in marijuana companies in which they had undisclosed financial interests.

According to the complaint, failed investments caused a loss of $60 million.

Davis declined to comment for this article. Galvin and Ryan could not be reached.

“We should have been able to trust and rely on our accounting and auditing firm, as we alleged in our complaint, but they took us in a direction that caused significant financial harm to the business,” said Holtec International President Kelly Trice. in a statement. “We are committed to justice and accountability for CBIZ and former Holtec employees involved in this egregious misconduct.”

Holtec is represented by a team of attorneys, including former New Jersey Attorney General Christopher Porrino. Lawyers declined to comment.

CBIZ denies the allegations made by Holtec. On the same day the lawsuit was filed, Oct. 3, the company filed a federal lawsuit against Holtec in the Northern District of Ohio, asking a judge to declare the statute of limitations for accounting malpractice claims had passed.

It is also alleged that Holtec owes the company $75,000.

“Holtec owes money to CBIZ for unpaid work on a contract originating from 2023,” the company said in a statement.

criminal investigation

The dispute between Holtec and CBIZ stemmed from a 2018 tax credit application under New Jersey’s Angel Investor Tax Credit Program, which encourages investments in emerging technologies.

That year, Holtec invested $12 million in battery maker Eos Energy Storage, an Edison-based green energy company. According to the non-prosecution agreement signed by Holtec this year, investors can be given incentives of 10% of their investments, with a maximum of USD 500,000, within the scope of the Angel Investor program. So even if a company invests more than $5 million, it can only receive tax credits worth $500,000.

Holtec, which had already invested $12 million, was entitled to receive only $500,000, according to prosecutors.

But Davis, the accountant, allegedly advised Holtec to split its investment among Holtec’s subsidiary, Singh Real Estate Enterprises Inc., so that each entity could receive a maximum tax credit of $500,000, or double the total award, according to Holtec’s lawsuit. It is claimed that it will come out.

The complaint says Davis wrote in an email that Holtec “shouldn’t be too sweet” and try to split the investment further. Prosecutors with the state Attorney General’s Office read the email as evidence of Holtec’s “criminal state of mind” to defraud the tax incentive program, according to the lawsuit.

Instead of receiving the tax credits, Holtec was informed that the incident was under investigation. Davis allegedly never told Holtec there was a risk in splitting the investment.

Holtec said in January that the company agreed to pay the $5 million penalty because it would be more expensive to fight prosecution. However, the case file states that although Holtec did not accept liability, its reputation was damaged by a press release issued by the Attorney General’s Office announcing the non-prosecution agreement.

“Today we are sending a clear message: No matter how big and powerful you are, if you lie to the government for financial gain, we will hold you accountable – period.” State’s Attorney Matthew J. Platkin said the settlement was announced.

shadow company

While Holtec was conducting its own internal review of the tax credit issue, the outside accountant discovered that Davis and two of the company’s executives (general counsel Ryan and CFO Galvin) had allegedly formed a shadow company called CBIZ Consulting, which, although shared, had no relationship with CBIZ. The name, address and telephone number of the accounting firm’s Plymouth Meeting office, according to the lawsuit.

The complaint said Davis and Holtec executives falsely attributed the company to accounting firm CBIZ Consulting, allowing the defendants to siphon money and subvert Holtec’s internal controls to enroll a new vendor.

The lawsuit alleges that from 2017 to 2019, Holtec paid CBIZ Consulting $710,000 for services such as “finder’s fees” in connection with investments and “services” that were never actually provided, without knowing that its executives and the outside accountant had financial interests in the organization. It is stated. .

Making matters worse for the energy company, the alleged investments suggested by CBIZ Consulting “were a catastrophic loss,” the complaint said. Holtec says it has lost a total of about $60 million from these companies since 2018.

The trio allegedly directed Holtec to these investments because they had personal financial ties to the companies, the lawsuit states.

CBIZ has no relationship with CBIZ Consulting, the accounting firm said in a statement.

Finally, the lawsuit accuses CBIZ of concealing Davis’ misconduct to protect its own inflated bills.

The lawsuit states that CBIZ “observed hundreds of thousands of dollars in payments to the company misleadingly named ‘CBIZ Consulting’ but said nothing to Holtec management.”