In 2012 and 2013, the Export-Import Bank unanimously agreed to guarantee loans by Lockheed Martin to a small private Australian satellite company called NewSat, whose president was ecstatic at the news. NewSat’s CEO Adrian Ballintine celebrated:
It is fantastic to receive the support of the U.S. Ex-Im Bank. They are backing our … satellite with a direct loan, with a favorable low-fixed interest rate and long tenure.
The deal is an Australian first for Ex-Im Bank and a major milestone towards the launch of Australia’s first commercial satellite.
His was a company worth $50 million before Ex-Im guaranteed $304 million in loans by Lockheed Martin to provide it with a satellite designed to reach all across the South Pacific and rake in millions. Ex-Im was simply following its charter: make loans no one with any sense would consider making.
Of course, that isn’t exactly what the bank’s charter really says; the mission is to create and sustain U.S. jobs by financing sales of U.S. exports to international buyers. But behind the scenes, the Ex-Im Bank has for years been, according to the Wall Street Journal, a “fount of corporate welfare,” shifting market risk from big companies to the American taxpayer.
Solyndra was a recent example, imploding and taking with it $10 million of Americans’ taxes. NewSat’s implosion could be thirty times larger.
The party ended Down Under long before the company defaulted on a $21 million payment to Lockheed Martin in January. In fact, the first sign of trouble occurred back in early 2014 when the company delayed launch of its new whiz-bang Jabiru-1 satellite into the middle of 2016.
The next sign was concerns by two board members about internal financial shenanigans. They brought in an outside investigator to see what he might find. What he found was astonishing: excessive travel expenses and hotel costs, salaries and bonuses to Ballantine in the millions, tax-dodges with bonuses, and manipulations of company stock. But what really honked them off was the discovery of unrecorded payments of more than $400,000 in “marketing expenses” to a luxury boat manufacturer, Cresta Motor Yachts. Turns out that Ballantine is on the board, and his son Tim owns the company!
The investigator concluded his report: “I have never seen nor heard of more appalling corporate behavior than at NewSat.”
NewSat’s external auditor, Ernst & Young, reviewed the report, rechecked its own numbers, and declared that there “is significant uncertainty as to whether the [company] will continue as a going concern.” This is how accountants issue last rites.