Mandarin Capital warned CDB ahead of Suntech fraud scandal
Sino-Italian PE player Mandarin Capital Partners advised China Development Bank (CDB) as early as three years ago that it shouldn't invest in Suntech Power Holdings' southern Italy initiative due to concerns about fraud. The Chinese solar company has since announced that EUR560 million ($690 million) in German government bonds it used to secure financing from CDB were apparently forgeries.
The suspected fraud, which is now being investigated by lawyers, only came to light when Suntech recently decided to exit its 80% stake in the Global Solar Fund (GSF), a vehicle used to support Italian projects that required solar panels.
Suntech guaranteed EUR554.2 million in loans for GSF portfolio companies provided by CDB. GSF Capital, a company owned by Spaniard Javier Romero that held 10% in GSF, in turn put up the bonds as security in case the loans soured and Suntech was forced to pay up. Suntech now believes this security was non-existent and that Romero may have perpetrated a fraud.
According to Reuters, Mandarin was invited by CDB to invest in GSF in 2009. It declined and advised CDB - also an investor in the Mandarin Fund - to stay away from Italy's solar industry.
"GSF smacked of a scam," said Alberto Forchielli, Mandarin's managing partner. "We got suspicious because it did mention a lot of important corporate, banking, legal names associated to the project, a tactic usually adopted by fraudsters in my experience."
Mandarin also sought advice from the head of an affiliated Italian company specializing in cleantech before counseling CDB against financing the project.
Italy has become the world's second-largest solar market after Germany, largely thanks to generous government incentives. However, the boom has led to a series of arrests for corruption and also asset seizures in recent years in the south of the country.
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