Exclusive: China's fraud-hit Suntech strikes more trouble in Italy

Wed Aug 29, 2012 9:54am EDT
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By Steve Scherer and Stephen Jewkes

BRINDISI, Italy (Reuters) - An Italian court has filed criminal charges against an investment fund controlled by China's Suntech Power Holdings, the world's largest maker of solar panels, accusing it of illegally building solar farms to milk state subsidies.

The charges, together with other legal actions still being prepared against the fund, could eventually result in 80 million euros' ($100 million) worth of subsidy-backed solar farms being dismantled, an Italian prosecutor said, extending the problems of Suntech's Global Solar Fund (GSF), which invests in European solar power projects.

The charges and pending litigation have not been disclosed by U.S.-listed Suntech STP.N, whose problems in Italy appear to go well beyond the limited statements it has so far made in official filings.

Suntech has lost more than 40 percent of its market value since July 30, and is being sued by several U.S. law firms on behalf of shareholders, after revealing that a GSF shareholder and executive, Javier Romero, had used $700 million in fake German bonds to help guarantee some of the fund's financing.

The class-action lawsuits say Suntech, which owns 80 percent of the fund, failed to properly disclose the financial workings of GSF and to monitor its business practices.

The Italian charges add to questions over the Luxembourg-based fund's affairs, the extent to which Suntech supervised it, and how much shareholders were told about the scale of its troubles in Italy.

Suntech is also scrambling to find new financing to cover a convertible bond due early next year at a time when the entire solar industry is in the middle of a slump.

"Suntech management had the opportunity to disclose all potential problems associated with GSF when they announced the suspected fraud with the German bonds," said Mark Bachman, a solar technologies analyst for Avian Securities in Boston.   Continued...

A man walks past Suntech Power Holdings headquarters in Wuxi, Jiangsu province March 26, 2010.REUTERS/Stringer