Ex-Holtec CFO accuses company of 'misleading projections' in whistleblower suit

Editor's Note: A term used in the headline and in this story’s lead has been replaced with terms that make it clear to readers that the documents Kevin O’Rourke claims were false and misleading were not Holtec’s “financial statements” as defined by United States Generally Accepted Accounting Principles. The Complaint does not reference those statements, which are subject to audit, and the CFO would have already agreed to them.  The Asbury Park Press did not intend any reader to conclude that the referenced documents were financial statements and regrets any misunderstanding that may have occurred before the Asbury Park Press updated this story. A statement provided by Holtec this week has been included at the bottom of the story.

CAMDEN - Holtec International, owner of the defunct Oyster Creek nuclear power plant, is being sued by the company's former chief financial officer in a whistleblower lawsuit.

In it, former CFO Kevin O'Rourke accuses the Camden-based nuclear parts manufacturer of attempting to coerce him to submit false and misleading information to be shared with a major investor, which allegedly involved hundreds of millions of dollars. The company then fired him when he refused, according to a lawsuit filed in June in state Superior Court, Camden.

Attorneys for O'Rourke allege in the court filings that Holtec fired him after he refused to participate in presenting misleading financial reports to Hyundai Engineering and Construction.

Holtec and Hyundai partnered last year to begin design on Holtec's SMR-160 advanced small modular reactor, a standard design nuclear energy plant that the company sees as the future of nuclear energy.

Holtec also owns a number of non-operational nuclear plants, including the Oyster Creek facility in Lacey, the Indian Point Energy Center in Buchanan, New York; and the Pilgrim Nuclear Power Station in Plymouth, Massachusetts. The company plans to profit from each plant's decommissioning trust fund by taking apart the plants for less money that the balance of the trust funds.

O'Rourke's lawsuit alleges Holtec officials — including company founder, president and CEO Krishna Singh — prepared to present Hyundai with an investment prospectus that included "numerous false and misleading statements … (and) 'make believe' and unsupported financial projections" in August, 2022.

Holtec gave the chief financial officer five days to prepare the prospectus, then fired him when he claimed the "financial projections could not possibly be completed accurately in the timeframe demanded" and noted errors as well as "materially false or fraudulent data" within the document, according to the lawsuit.

Holtec spokesman Patrick O'Brien said: "We have thoroughly investigated these allegations and they are entirely without merit. We look forward to our day in court."

O'Rourke alleged that the prospectus stated that Holtec had never violated a covenant, but at the time, the company was in violation of a debt covenant. The document also stated Holtec had no long-term debt, but O'Rourke believed that to be untrue, according to the lawsuit. The prospectus included untrue information about the company's revenue sources and value of its software, according to the allegations.

"The Prospectus grossly overvalued Defendants’ (Holtec's) manufacturing facilities … (and) grossly overstated the amount of money spent annually on research and development costs," according to the lawsuit. "The Prospectus misrepresented a statement about self-financing a $300 million manufacturing facility build, when in fact Defendants (Holtec) raised the money by selling state tax credits."

The financial projections within the prospectus were either materially false or "completely unattainable and unrealistic," according to the lawsuit.

Last year, a state judge ordered New Jersey's Economic Development Authority to pay $26 million in disputed tax credits to Holtec for the 2018 tax year. The EDA attempted to revoke the tax credits, saying Holtec provided incorrect information in its debarment history and discussion of expansion in South Carolina. The judge ruled against the EDA, citing the company's benefit to Camden, and ordered the tax credits returned.

O'Rourke's lawsuit also alleges Holtec prepared financially misleading statements about its consolidated interim storage facility, or CISF, under review in southeastern New Mexico. The facility, if approved, would collect and indefinitely store radioactive waste and spent nuclear fuel from decommissioned power plants from across the nation.

"According to Defendants’ (Holtec's) own internal projection, the CISF would lose $150 million per year for the next five years," the lawsuit alleged. "However, (CEO Krishna) Singh stated he wanted to represent in the Prospectus that the CISF would 'break even' during that period of time and asked that Plaintiff (O'Rourke) do so."

In May, the U.S. Nuclear Regulatory Commission issued Holtec a license to build the underground CISF in New Mexico. However, New Mexico lawmakers passed a bill earlier this year that would require the U.S. Department of Energy to establish a permanent storage area for nuclear waste first and require state lawmakers' consent for CISF construction.

The lawsuit also alleged that Singh directed O'Rourke to make misleading statements to Hyundai about projected sales from Applied Photonix, a Holtec subsidiary. Applied Photonix focuses on eliminating viruses, spores, molds and other pathogens from air.

"Singh stated the Prospectus should represent that Applied Photonix would have projected annual sales of $100 million within five years, a projection not based on any factual information," according to the lawsuit.

O'Rourke objected on numerous occasions to inaccurate or misleading statements in the prospectus, and told colleagues that "submitting the Prospectus as currently drafted… for Hyundai to view could violate the law, and he would not direct any employee of Defendants (Holtec) to submit the Prospectus," according to court documents.

O'Rourke alleged his supervisor offered to refer the matter to the company chief governance officer, but O'Rourke was never contacted. In addition, he was not included in meetings with Hyundai or about the prospectus, and shortly thereafter was fired, according to the lawsuit.

He is seeking compensation for damages, including emotional pain, suffering and lost wages as well as reinstatement, or other relief the court finds fair. O'Rourke is also asking the court to declare that the financial practices described in the lawsuit violate New Jersey law.

O'Rourke's attorney did not immediately respond to a request for comment on Friday.

As a follow-up to publication last month, Holtec sent the following statement:

“Holtec thoroughly reviewed the issues raised in the complaint when Mr. O’Rourke was an employee. At that time, Holtec explained to him that his concerns were not only unfounded, but were directly contrary to positions and representations he regularly made while at Holtec. Accordingly, Holtec is profoundly disappointed that he nevertheless filed this meritless lawsuit and looks forward to vindication in court. Any indication, in any report in the press, that Holtec’s financial statements are misleading is 100% inaccurate and patently false. Holtec’s financial statements are comprehensively audited and approved by one of the top 5 U.S.-based accounting firms.  Moreover, Holtec has a multi-decades long record of excellent financial strength. Contrary to Mr. O’Rourke’s claims otherwise, the company has no long-term debt, a robust and self-financed research and development program, over $4 billion dollars worth of equipment delivered, and orders for future deliveries of over $7 billion dollars.”

Amanda Oglesby is an Ocean County native who covers Brick, Barnegat and Lacey townships as well as the environment. She has worked for the Press for more than a decade. Reach her at @OglesbyAPP, aoglesby@gannettnj.com or 732-557-5701.

This article originally appeared on Asbury Park Press: Ex-Holtec CFO accuses company of 'misleading projections' in whistleblower suit