LOUISVILLE, Ky. (WDRB) – Kentucky’s former economic development secretary was told as early as August 2019 that Braidy Industries’ then-CEO was misleading the company’s board of directors about investor interest in a $1.7 billion aluminum mill planned near Ashland, according to a third-party investigation the company made public in Delaware court last month.
But there is no evidence the former economic development secretary, Terry Gill, told state officials of ex-CEO Craig Bouchard’s alleged deception last summer or fall, despite Kentucky having invested $15 million in the company in 2017.
A Braidy Industries whistleblower told Gill that an internal document the board used to track the status of potential investors was not accurate, according to the investigation. On August 29, 2019, Gill asked the whistleblower to report the real information directly to him.
Despite that, former Republican Gov. Matt Bevin, who spearheaded the state’s unusual $15 million investment of taxpayer money into Braidy Industries in 2017, continued to publicly project confidence in the company until he left office on Dec. 10, 2019.
“I am as hopeful (about Braidy Industries) as I was three years ago when we started this dialogue,” Bevin told WDRB News on Dec. 3. He added that, for anyone with a few hundred million dollars, it would be “a good investment.”
The disclosure about the red flags Gill received last August comes as state lawmakers are increasingly concerned it may be too late for Kentucky to recover its $15 million at a time when state budgets have been hammered by COVID-19 business closures and slowdowns. An effort in the 2020 General Assembly to have the state’s money invested in the company set aside in reserve fell short.
Braidy Industries is still trying to raise about $500 million from investors before it can finance construction of the mill, while at the same time battling Bouchard in Delaware court as he seeks to regain control of the company that fired him on Jan. 28.
Meanwhile, Braidy Industries is proceeding without a chief executive after interim CEO Tom Modrowski took another job last month, and the company is unable to replace him because of the fight with Bouchard.
Bevin, Bouchard and others heralded the aluminum plant, originally projected to open this year, as the start of the economic revitalization of Appalachia. Braidy Industries has said it would employ 600 people at wages of at least $65,000 a year.
The information about Gill and the whistleblower comes from a 53-page investigative report by Louisville law firm Frost Brown Todd, which was commissioned by the company as part of the legal battle against Bouchard.
The law firm’s report, filed in court last month, accuses Bouchard of misleading board members and potential investors while failing to secure significant funding for the aluminum plant other than from the Russian aluminum giant Rusal, which pledged up to $200 million in April 2019.
Gill referred questions to a public relations representative of Braidy Industries, who said it would be inappropriate to comment because of the court battle.
Bevin did not respond to an email for this story.
Bouchard, for his part, has broadly disputed the company’s “independent” investigation, saying its assertions are “false, unsupported, and/or entirely misleading” and calling it an after-the-fact attempt by the other board members to ignore Bouchard’s contractual right to replace the board.
Gill, who led economic development under Bevin from 2017 to 2019, became Kentucky’s eyes and ears on the Braidy Industries investment as a non-voting “observer” to the company’s board.
Despite leaving state government in May 2019, Gill still holds the Braidy Industries board observer seat today as a volunteer, with Kentucky reimbursing him only for expenses.
‘Grossly exaggerated’ information
Under Bouchard, Braidy Industries’ maintained a “Funding Tracker” document that listed potential investors in the aluminum mill project, the status of negotiations with those investors and a letter-grade prediction of whether the investments would materialize, according to the Frost Brown Todd report.
“Bouchard controlled and exaggerated information provided to the Braidy Board in several ‘Funding Tracker’ documents. Several interviewees believe he did this to present an artificially positive view of investment progress under his leadership,” the report says.
Capt. David Shealy, the Braidy Industries employee who oversaw access to the proprietary data the company made available to potential investors, told Frost Brown Todd investigators that Bouchard told him “on several occasions” to change information in the Funding Tracker documents to reflect “more positive investor interest than existed.”
Shealy, who left Braidy Industries earlier this year, told the investigators that “perhaps only 30% of the information in the Funding Tracker documents remained reliable towards the end of Mr. Bouchard’s tenure.”
The law firm’s narrative says Shealy “became so concerned with the unreliability of the reports” that he informed Gill that the Braidy Industries board “should not rely on the Funding Tracker anymore.”
The report does not say when Shealy went to Gill. Some of the information in the publicly filed version of the report is redacted.
But, according to the report, Gill told Shealy “to report directly to him” the real information about which investors had accessed Braidy Industries’ proprietary data and what they had reviewed. The report cites an email exchange between the men dated Aug. 29, 2019, though the actual emails were not filed publicly.
The Frost Brown Todd investigators spoke to Shealy and to Gill, according to the report. Shealy declined to comment for this story.
Later, although no dates are given, Shealy’s direct reporting of information to Gill “revealed several instances where a possible investor was not frequenting the data room (to access Braidy Industries information), yet Mr. Bouchard was reporting to the Board that they were highly interested and engaging in diligence.”
As a result, the report says, Gill and Shealy “believed Mr. Bouchard grossly exaggerated investor interest in Braidy (Industries).”
WDRB asked the Kentucky Cabinet for Economic Development whether Gill relayed any of that information to state officials at the time, and whether there are emails or other records showing those communications.
The cabinet provided no response to those questions other than to say that Gill and the Braidy Industries board reached out to Larry Hayes, the new economic development secretary under Democratic Gov. Andy Beshear, after Bouchard was ousted in January.
Hayes and Gill met in February, cabinet spokesman Jack Mazurak said in an email.
To be sure, it’s not clear whether Kentucky would have been in position to recover its money had Gill raised alarms last year.
Braidy Industries is obligated repay the state – assuming the company can do so -- under a few conditions. As WDRB first reported in February, Bevin relaxed those terms in May 2018, just before the company held what Frost Brown Todd describes as a “fake groundbreaking” for the aluminum mill.
Under the amended terms, Braidy Industries has until Dec. 31, 2020 to "invest" at least $1 billion in building and equipping the aluminum mill, among other conditions to satisfy, before the state can demand repayment.
State Sen. Chris McDaniel, a member of the chamber’s Republican leadership, pressured Braidy Industries to give public testimony earlier this year and has called on Attorney General Daniel Cameron to conduct a criminal investigation of the matter.
McDaniel told WDRB that he doesn’t know enough to comment specifically on Gill’s action.
“But certainly, I will say that economic development of the previous (Bevin) administration, if they were still around, would have a lot of explaining to do about their role in this,” McDaniel said.