“O-kay,” she said, drawing the word out, making Joe feel like a crank.
“Listen,” he said, “you don’t know all the pieces to this yet.”
“Go on. So when do we get to the Cubans on the grassy knoll?”
Joe ignored her. “With the information Smith had given him about that big ridge where the wind blew all the time that bordered Earl’s ranch, Earl bought the acreage from the Lees. Those poor Lees got the short end of the stick in every regard. So Earl owned the windiest place in the county and the one perfect spot for a big wind energy project. That was the first piece to fall into place.
“Once he had that ridge secured, Earl locked in the agreement with Orin Smith for the company, and suddenly Earl Alden had a three-year-old wind energy operation and land with almost constant Class V to Class VII winds. The reason that was important was because those two things were essential to start working the system—to kick-start a skimming operation on a big scale.”
Schalk said, “Skimming whom?”
“You, me, all the other taxpayers,” Joe said. “Here’s how it worked, according to Smith. Like I said, The Earl was connected. He knew which banks across the country were going to receive federal bailouts because certain politicians didn’t want them to fail. Earl approached those banks with the package for financing a massive wind farm called Rope the Wind. He knew at least one of them would go for it because the banks were being encouraged to lend to renewable energy schemes with bailout dollars, and they knew that even if the deals went bust, they’d be taken care of by the federal government. So no need for caution for these bankers—just open the floodgates to federal money, take their fees, and funnel it right back out the door to the right kind of company. In particular, and you may want to write this down, Smith said Earl got almost all of his financing through First Great Lakes Bank in Chicago. Heard of it?”
“You’re kidding,” she said. “Everybody’s heard of it. This is the one they call the Mob Bank? The one with all the questionable loans that just disappeared? Haven’t they been shut down?”
“They have now. But not before everybody got paid off in fees,” Joe said. “They were connected, too.”
“But that’s not The Earl’s fault,” she said.
“No, it isn’t. But that’s how he financed his company. And he was just getting started.”
He heard her take a long breath on the other end. He said, “Earl took the loan—which was backed by the Feds—and bought a hundred old wind turbines from the Texas remanufacturing company. He paid a million dollars each, Smith said, but applied for tax credits and incentives for new turbines, which run four to five million apiece.”
“Jesus!” Schalk said. “That’s outright fraud. That’s what, three or four million per turbine? Or four hundred million dollars in the clear?”
“You bet,” Joe said. “But who is checking on these things these days? There’s so much of it going on, and so much bureaucracy in the process, no one knows what’s what. I mean, how likely is it the Feds would send out an inspector to make sure the wind turbines were brand-new? And keep in mind, the profits are all paper profits at this point. They’re on a balance sheet, but that’s all. That’s how a guy like the Earl skims. Everything is under the surface.”
“I see your point.”
Joe consulted his notes and said, “So The Earl doesn’t stop there. He’s like a junkie when it comes to skimming. He got a fifty-million-dollar grant in federal stimulus funds from the Department of Energy because his project was about wind. That’s why he bought Rope the Wind, because it had been around for three years on paper and that was one of the criteria for receiving the grant—that the company have a track record. Then he has his people go out and secure power contracts with a bunch of cities and states who have passed laws that mandate that certain percentages of their power must come from renewable energy. With the farm going up and the contracts in place, Earl now owns a genuine electric utility, which gives him the right to condemn the private land owned by the Lees to create a corridor for transmission lines. Even though these places are buying power at a loss and there wasn’t any way of getting the power to them yet, it makes them feel good. So The Earl takes advantage of that.”
“I’m getting lost,” she said.
“Here’s how Smith explained it to me,” Joe said, looking at his scribbles. “It’s like Earl figured out a way to have someone dig a gold mine for him using their money and mining equipment, but he gets to sell all the gold he produces to others at an inflated cost that’s guaranteed by the government. Then he uses grants and new federal programs to guarantee that the mine will always make money or at least never lose it. Then he signs deals with people to buy his gold at a preset price, because they’re do-gooders and market prices don’t matter to them. He used all the grants, subsidies, incentives, and tax credits to bail out the losses of all of his other interests.”
“Joe . . .” she said, objecting, he thought, to the enormity and complexity of what he was telling her.
“I know,” he said. “But in order to understand this, you’ve got to throw out everything you know about how real capitalism works. That’s how The Earl thought. It was all a big poker game where the chips were free to him because he was one of the favored players. And with all those chips, he was able to create a multi-layered corporate entity that was completely cushioned against any kind of risk or loss. He could now protect all of his other assets like big ranches or homes all over the world, because the contracts, tax credits, and guarantees tied to Rope the Wind to offset all his losses and limited his liability.”
Joe paused to review his notes and let her take it all in, and to see if he had left anything out.
She asked, “But why would Orin Smith dump on his partner like that if he stood to make a killing? Why tell you all this?”
Joe said, “I wondered the same thing, but the fact is all these transactions and technicalities benefitted Earl personally, but the wind farm won’t show any real profit for years on its own. It’s designed to suck up subsidies and provide tax credits, not to create power in the real world for real people. It’ll take years to get transmission lines to that ridge to actually move the power to the electrical grid. And remember—there are no true profits until all the overhead is paid for, and that will take decades. Building those things is expensive, even with used turbines they got on the cheap.”
“So Smith is cut out,” she said.
“That’s what he claims,” Joe said. “He says he’ll never live long enough to see a penny. And I have to believe him, because the guy got so desperate for cash that he created the Ponzi scheme that landed him in federal custody.”
“Do you think he had something to do with Alden’s death?” she asked. “Is that what you’re driving at?”
“No,” Joe said. “I don’t think he was involved, even though I’m sure he wouldn’t have stopped it if he’d known about it. But what you should consider, now that we know all this, is how many people would benefit from Earl Alden’s death. I mean, besides Missy.”
“Who do you mean?” she asked cautiously.
“Think about it,” Joe said. “If this scheme was made public—which it might now be—the whole house of cards would fall and dozens of people would be implicated in the fraud. You want me to name them all?”
“No need,” she said sullenly. “You’ve got the owners of the Texas company, who likely knew what Alden was up to because no one had ever bought their entire inventory before. You’ve got the officers, shareholders, and regulators of Great Lakes, who all benefitted from the financing of a crackpot company. You’ve got the mob in Chicago, who’s suddenly lost their own personal bank that doesn’t ask questions. You’ve got the cities and states that signed contracts without investigating whether or not Rope the Wind could actually produce the power they claimed it could produce. You’ve got other wind farm companies—legitimate ones—who didn’t get all that stimulus money because Earl was there first. You’ve got the Lees, who were cheated out of their land. And you’ve got the politicians in Washington, who designed the mechanism to allow for and encourage fraud at this level.”