President Joe Biden and Vice President Kamala Harris’ efforts to sell their green agenda and infrastructure plan are being complicated by a thorny conflict of interest for Energy Secretary Jennifer Granholm — who stands to gain a windfall from stock options in a private electric vehicle company.
Last month, Biden took a virtual tour of Proterra, a company Granholm holds millions of dollars in vested stock options in and previously sat on the board of. During the tour Biden praised employees and the CEO for their work in the electric vehicle space.
“Chairman, let me say something quickly to you. The fact is you’re making me look good,” Biden told the company’s head executive, before pledging to come back in person at a later date. “I used to have a friend that said it’s always great to do well and do good — you’re doing both pal. You really are.”
Despite the hundreds of electric vehicle-related companies in the United States, Harris also toured a partner of Proterra, and the Proterra’s CEO Jack Allen later took part in a session at the administration’s US Climate summit.
That Granholm even promoted electronic cars as part of the administration’s climate push is already ethically questionable, experts say, but Biden and Harris’ direct highlighting of Proterra is even more problematic as it could increase the company’s value when it goes public — and increase Granholm’s profits.
“Proterra was selected for the virtual visit that day because it is the leading U.S. manufacturer of electric buses, employing 600 workers at its South Carolina and California plants,” a senior administration official said of Biden’s visit. “Neither Secretary Granholm nor the Department of Energy were involved in selecting the Proterra plant.”
‘Money in the bank’
Visits such as Biden and Harris’ can be a boon to companies such as Proterra, says Jonathan Macey, a professor of corporate law, securities law and finance at the Yale Law School.
“That’s like money in the bank,” he said, adding that Biden’s comments did a big favor for anyone with a vested interest in the company.
Asked about the conflict of interest in a recent interview, the former Michigan Democratic governor said she “had nothing to do with” Biden’s tour. She also again committed to divesting her stock options — something she pledged to do within 180 days in the ethics agreement she signed when joining the administration.
But despite the fact that the company is slated to go public soon, her plan to follow through on this promise has not been disclosed.
Last week, Sen. John Barrasso of Wyoming, the top Republican on the Senate Energy and Natural Resources Committee, called for an investigation into any potential conflicts of interest in Granholm’s Proterra investments and the administration’s promotion of electric vehicles. Proterra makes also electric buses, as well as a slew of products related to electric vehicles including batteries and electric charging systems.
“Given that status, the up to $5 million in value of investment that Secretary Granholm continues to hold in Proterra, Inc. is positioned to increase in light of her personal and substantial involvement in an aggressive, wide-ranging and tireless public relations campaign to promote electric vehicles, batteries and charging infrastructure; her leadership in promoting President Biden’s American Jobs Plan, including its proposal to spend $174 billion ‘to win the EV market,'” Barrasso wrote.
“Secretary Granholm has acted in full accordance with the comprehensive ethical standards set by the Biden administration,” an Energy Department spokesperson told CNN. “She is in the process of divesting all holdings in the company within the 180-day period permitted by her ethics agreement.”
Granholm did not issue a direct response to CNN’s requests for comment.
Granholm soon stands to see a substantial payday as Proterra is scheduled to go public in the first half of 2021, according to a company statement. In her ethics agreement, the former governor pledged to divest her Proterra stock options “as practicable but not later than 180 days after” her February confirmation — a timeline that falls within the 180 days.
Also in the agreement, Granholm vowed not to “participate personally and substantially in any particular matter that to [her] knowledge has a direct and predictable effect on the financial interests of Proterra” until she has divested or obtains a written waiver.
“The high-risk areas would be things such as anything regulating electric cars, because that would of course increase or decrease the demand having to do with electric charging stations,” said Richard Painter, the chief White House ethics lawyer under George W. Bush. “The only alternative is to stay entirely away from the automotive industry, from electric vehicles, and any other area where these (Proterra) batteries might be useful.”
But Granholm has repeatedly promoted electric vehicles since taking office. Last Thursday, the Energy Department released a statement that the agency had awarded $19 million for projects “in traditionally fossil fuel-producing communities” in the US to promote production of items important to “the clean energy economy,” which Granholm said included electric vehicles and batteries.
“The very same fossil fuel communities that have powered our nation for decades can be at the forefront of the clean energy economy by producing the critical minerals needed to build electric vehicles, wind turbines and so much more,” said Granholm in the statement.
On April 23, Granholm announced that the Energy Department would be putting forward new goals to “lower the cost of next-generation clean energy technologies, including: clean, renewable hydrogen; battery cells for electric vehicles and energy storage; and industrial and atmospheric carbon capture.”
Proterra declined to comment on Granholm’s stock options with the company, how going public would impact that or the energy secretary’s divestment plan.
“Generally when a company goes public, the shares are underpriced, and the share price goes up after the IPO, so people can sell at a profit,” said Macey adding that when a company goes public its stock options becoming more liquid and easier to sell. “The fact is that when you go public, the shares become liquid, that will make the stock options more valuable.”
While the 2012 STOCK Act limits federal officials from taking part in an Initial Public Offering (IPO), Proterra is going public through a new and less regulated maneuver — merging with a special purpose acquisition company (SPAC). This potentially creates an ethical gray area, which neither the White House nor the Energy Department have explained how Granholm will handle.
A SPAC is a shell company with the sole purpose of buying a private company and taking it public through an acquisition. While an IPO takes time as the company’s financials are scrutinized, banks do underwriting and then government regulations take effect, SPACs are able to skirt around most of this because they have no underlying operating business, and therefore no assets beyond the investors’ funds.
While a federal official cannot participate in an IPO, there is no language specifying whether or not it is prohibited to participate in a SPAC.
Granholm is not the first high-profile government official to come under fire for their stock options.
In 2017, incoming Secretary of State Rex Tillerson, the former CEO of ExxonMobil, made an arrangement with his former company that allowed Tillerson to divest millions in Exxon shared and receive a substantial tax break.
Last year, when the White House appointed Moncef Slaoui, a former Moderna executive, to lead Operation Warp Speed, the businessman resigned from the company’s board and divested millions in stock options. Slaoui faced criticism for the gains his stock made before he divested. A spokesperson for the Department of Health and Human Services said at the time he would be donating those funds to cancer research.