U.S. DOE rapped over $150 mln grant to Korean battery subsidiary

Wed Feb 13, 2013 3:11pm EST

* Watchdog says underworked staff watched movies, played cards

* Complaint was made in October 2012

* Company has reimbursed DOE for $842,189 in costs

* Obama attended groundbreaking of plant in 2010

By Ros Krasny

WASHINGTON, Feb 13 (Reuters) - The U.S. Department of Energy has been criticized by its own internal watchdog for poor oversight of millions of dollars in grants to a U.S. subsidiary of South Korea' LG Group that have not so far resulted in any products used in vehicles sold to the public.

"Work performed under the grant to LG Chem Michigan had not been managed effectively," Gregory Friedman, the DOE's inspector general, concluded in a report dated Feb. 8 and made public on Wednesday.

Specifically, the report said workers at the Michigan plant, a subsidiary of chemicals company LG Chem Ltd, sometimes had little to do and spent their time watching movies, playing cards and board games, or volunteering at local organizations - all on the U.S. taxpayers' dime.

LG Chem Michigan was awarded more than $150 million in funding under the 2009 Recovery Act to help construct a $304 million lithium-ion battery cell manufacturing plant.

A groundbreaking at the plant, then known as Compact Power Inc, in July 2010 was attended by President Barack Obama and Jennifer Granholm, who was then governor of Michigan.

The project's goal was to design, construct, start up and test a production facility for lithium-ion polymer batteries, create more than 440 jobs, and produce enough battery cells annually to equip 60,000 electric vehicles by the end of 2013.

But LG Chem continues to supply from its South Korean facilities, not from Michigan, the cells that are used by GM in the final assembly for the battery packs used in the electric Chevrolet Volt. And only about half of the expected jobs have been created.

A GM spokesman referred questions to LG.

The report said management at LG Chem Michigan "stated that it had initiated actions to address the issues identified." A U.S. spokesman for LG Chem Michigan could not immediately be reached for comment.

The inspector general said his office received a complaint in October that the company had misused grant funds.

"The complainant asserted that employees ... had little work to do and were spending time volunteering at local non-profit organizations, playing games and watching movies at the expense of the federal government and taxpayers," Friedman wrote.

"The review confirmed the allegations. Specifically, LG Chem Michigan inappropriately claimed and was reimbursed for labor charges incurred by a variety of supervisory and staff employees for activities that did not benefit the project," Friedman added.

"Even though the facility had produced a large number of test cells, the plant had yet to manufacture battery cells that could be used in electric vehicles sold to the public."

LG Chem Michigan so far has far reimbursed the Energy Department for $842,189 in costs that the inspector general found to be "unreasonable and unallowable."

Some of those costs entailed time billed while employees were volunteering at Habitat for Humanity, animal shelters and outdoor nature centers, among others - sometimes on an almost full-time basis.

"The amount of time spent volunteering ranged from one day for certain employees to five days per week for others," the report said.

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