AUSTIN (CN) - A Texas city claims in court it was duped into approving a "feasibly impossible" $2 million wind farm by a businessman who colluded with a state employee to get the project funded.
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The City of Jonestown sued CM Alternative Energies and its owner Charles Anthony Malouff Jr., in Travis County Court.
Jonestown, pop. 2,600, is about 30 miles northwest of Austin.
The city says it was awarded a federal stimulus grant in November 2010 to build 19 wind turbines, with the Texas comptroller's office tasked with administering the grant.
Jonestown claims it hired CM Alternative Energies in December 2010 to install the turbines, to advise it in the grant application process and ensure its compliance with grant reporting requirements.
"CM Alternative Energies Inc. turned in invoices for approximately $1,836,400.00 for the project. These invoices were paid from grant funds," the city says.
"Unbeknownst to the city, on or around early August of 2010, approximately four months prior to the city entering into the agreement with CM Alternative Energies, Inc., the Travis County District Attorney's Office received a complaint alleging misconduct by defendant Charles Anthony Malouff Jr., and a former Texas State Comptroller's Office employee in relation to the Grant and the related Grant application, upon which the Travis County District Attorney's Office initiated an investigation.
"On the 10th day of October, 2011, an arrest warrant for defendant Charles Anthony Malouff Jr. was issued alleging that he had committed a first degree felony of securing the execution of documents by deception," the complaint states.
A Travis County sheriff's deputy, and former CM Alternative Energies employee, Toby Miller, alerted authorities to Malouff's misconduct by filing a complaint with the Travis County District Attorney's Office, according to a Travis County investigator's affidavit in support of Malouff's arrest warrant.
Miller told the investigator that while he was still employed by CM Energies, Malouff had written the grant application for the Jonestown wind project, according to the affidavit.
Miller said the federal government had awarded the city $100,000 to conduct an environmental assessment of the project prior to approval, and the city hired CM Energies to do the study.
"Miller reported that throughout the entire process, Malouff seemed to know a great deal of things that were not readily available to others concerning the grant," according to the affidavit. "Miller reported that Malouff was overseeing the feasibility study despite an ongoing personal relationship with the grant administrator Mary Jo Woodall, who is assigned to the Texas State Comptroller's Energy Conservation Office."
Miller also told the investigator that Woodall was telling Malouff exactly what to ask for to get additional money for the project, according to the affidavit.
Miller added that during the project's permitting process, CM Energies surveyed 25 sites in Jonestown for placement of the wind turbines, and put information about each site into "packets" for submission to regulators.
"As time drew closer to submitting these sites for approval, Malouff asked to see the copies of the packets that had been prepared by the employees so he could proofread them," the affidavit states.
"Miller reported that in Malouff's proofreading, he deliberately changed wording of the packets so that it contained information that was patently false or deleted information deemed necessary and placed there by the aforementioned employees."
Miller says when he found out about Malouff's changes he told the company's lawyer, "who refused to allow his 'proofreading' changes to be made permanent," according to the affidavit.
"Miller reported that Malouff was outraged by not being able to make the falsifying changes he wanted. Miller believes, based upon his observations, Malouff attempted to change, falsify and/or alter information in documents that were submitted to state and federal agencies in an attempt to sway the permitting process," the affidavit states. "Miller reported that on Aug. 2, 2010, he was informed by another employee that they were being ordered by Malouff to change the information in the packets that they were submitting to the Department of Energy."
Miller told the investigator "he believed it was inappropriate for the subcontractor, Malouff, to be writer of the grant and that it is inappropriate for the administrator of the grant, Woodall, to assist the writer/subcontractor in reporting on the grant by altering documentation that is already presented to a federal agency," according to the affidavit.
Jonestown says that despite receiving the $1.8 million in grant funds, CM Energies failed to install the 19 wind turbines, and despite Malouff's relationship with Woodall, his company did not submit all the required documents to comply with the grant.
"The city has since learned that the project, as presented to the city by Mr. Malouff, was feasibly impossible or impractical because the technology presented and represented by defendant Charles Anthony Malouff Jr., was only experimental," Jonestown says in its complaint.
After the project fell through, the city says it sued Malouff, CM Energies, and several other businesses and people involved with the project, in Travis County Court, seeking protection of equipment purchased with grant money for the project.
The court granted the city a temporary injunction on Dec. 15, 2011, "providing for the protection and storage of the equipment and goods related to the agreement," which is still in effect, the city says.
Jonestown seeks damages for breach of contract, fraud and unjust enrichment. It also wants the court to declare that CM Energies and Malouff "are divested of any and all ownership rights or rights of possession in the equipment and goods for the wind energy systems."
The city is represented by Barbara Quirk with McKamie Krueger in Austin.
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