A cybersecurity firm filed a $ 110 million lawsuit in New York this week, accusing Spain’s global energy company Iberdrola and its US subsidiary Avangrid of bid-rigging and racketeering.
The 72-page federal court complaint outlines a plan by Iberdrola executives to generate millions of dollars in unnecessary capital spending to profit from its utility customers in New York City, Connecticut and the United States. Maine.
The lawsuit further alleges that much of this equipment has never been used and instead collects dust from warehouses in the area.
Iberdrola rose to prominence around 20 years ago with investments in large wind farms, natural gas and hydroelectric power. In addition to Avangrid, it has subsidiaries throughout Europe, Brazil and Mexico.
But in recent years, the company has come under intense scrutiny. Two of Iberdrola’s defendants named in the trial, Antonio Asenjo and Enrique Victorero, are under investigation in Spain for suspected espionage and fraud.
Lawmakers and environmentalists in the United States have attacked it for price hike tactics, citing soaring Maine electricity bills and frequent and lasting outages since Avangrid took control of the utility company state public.
The latest lawsuit, brought by Security Limits Inc, comes amid a string of high-profile cases of embezzlement in the United States involving corruption and black money groups used to influence elections and officials. The most significant of these criminal cases, an alleged $ 60 million bribery program in Ohio this summer led to the expulsion of the Speaker of the State House and fined $ 230 million to the power company, FirstEnergy.
The complaint also comes as Avangrid seeks to expand its operations in the American West by merging with New Mexico’s largest utility, PNM.
Mariel Nanasi, executive director of the Santa Fe-based environmental group New Energy Economy, has long been a strong opponent of the merger, often voicing concerns about Iberdrola’s criminal investigations in Spain and the possible implications for New Mexico.
âFraud, bid rigging, raising customer rates by making phantom capital expenditures – there is a pattern of misconduct that has emerged,â she said. “Avangrid and Iberdrola are acting outside the law and damn the public.”
The lawsuit was brought in court for the Southern District of New York City by attorneys representing Paulo Silva, cybersecurity expert and CEO of Security Limits Inc. The attorneys there describe events during Silva’s nearly two years at work. as a subcontractor for Avangrid, designing and building secure data centers for its utilities.
Silva alleges that in 2018 he complained about overspending on equipment. Soon after, Avangrid executives began manipulating the bidding process and directing lucrative contracts to five Iberdrola-related companies, he added.
According to the complaint, these companies were accused of purchasing large amounts of equipment for new data centers, for which they charged Avangrid mark-ups of 40% or more. Much of this equipment was never used, according to the complaint, but instead was stored in a warehouse, which had to be expanded three times over several years, according to the lawsuit.
Iberdrola and Avangrid “actually paid to have structures erected to house dust collection equipment which had no discernible purpose other than serving as a vehicle for the [companiesâ] accounting fault, âindicates the complaint.
In response to the complaint, Joanie Griffin, a spokesperson for Avangrid, described Silva as a disgruntled former contractor, bitter about not winning the company’s bids.
“The allegations and claims have no basis, and the company will defend itself vigorously,” she said.
The alleged benefit for Avangrid and Iberdrola stems from a half-century-old utility regulatory strategy designed to encourage the development of critical infrastructure. These regulations allow utilities to charge customers the cost of capital spending – long-term investments in things like equipment – plus an additional 7-15%, which the utility retains as profit.
Under these regulations, Avangrid could have charged its customers off their utility bills for each overpriced and unused piece of equipment, while also making its shareholders much richer. While the civil complaint does not include a full review of Avangrid’s alleged unnecessary purchases, documents filed by the company with the SEC show that when the alleged scheme took place, Avangrid increased its capital spending by nearly ‘a billion dollars.
As technology has changed and improved, utility watchdogs have lambasted these regulations, saying they create a perverse incentive for businesses to invest in unnecessary equipment, while ignoring the regulations. significant maintenance and operating expenses. In Iberdrola’s case, the complaint says the company over-bought some equipment, while leaving significant gaps in the utility’s cybersecurity. These failures have left critical utility infrastructure unprotected against things like cyberattacks, the complaint says.
“The [scheme], and its inherent waste, deprived SLI of valuable contracts that would otherwise have been awarded to it through an unfair bidding process, squandered millions of taxpayer dollars and wrongly enriched the [schemeâs] participants â, concluded the lawyers in the complaint.