Suit charges cover-up by GT Solar execs

GT Solar knew for months that it was selling defective equipment that could explode and that it was in danger of losing its biggest customer, but covered up the information from investors in launching a half-billion dollar initial public offering on July 24, 2008, according to a filing made in a class action lawsuit against the Merrimack, N.H.-based company.

The day after the IPO was launched, LDK Solar Co., whose business accounted for 63 percent of GT Solar’s sales in the previous fiscal year – announced that it was entering into a three-year contract with GT Solar’s competitor, JYT Corp.

GT Solar’s stock took a nosedive following the news, losing 24 percent of its value and resulting in numerous class action law suits filed in federal court in Concord. They were consolidated in December, with the Arkansas Public Employee Retirement System being appointed the lead plaintiff.

The new 40-page amended complaint, quoting from six unnamed former and current employees, said that management was warned that GT Solar used old and shoddy parts, including “crap” equipment from India, that resulted in cracks in furnaces used to make solar turning them into “ticking time bombs.”

Several employees (including one of the witnesses) who raised such issues were fired, and a letter from a company attorney was allegedly put on the company bulletin board — above the phrase, “loose lips sink ships.” — warning employees not to discuss problems with the furnace.

The company also knew that these problems could cause it to loose customers, including LDK, the lawsuit charges.

The news of an explosion in Taiwan involving GT equipment spread like “fire in the wind” to GT Solar’s customers according to one unnamed witness, the suit said.

According to another anonymous source a Power Point presentation on the threat of JYT was circulated within GT Solar marketing department prior to the IPO, the complaint alleges. However, according the suit, the company prospectus touted its relationship with LDK, and did not disclose production problems or that it was in danger of losing LDK as a customer.

GT Solar could not be reached for comment on the latest allegations, but in the past has said that the complaint was unfounded and would contest it in court.