Creditors ask for info on alleged tampering in A123 sale

Milwaukee-based Johnson Controls recently lost out to a Chinese competitor in its bid for bankrupt high-tech battery-maker A123 Systems, but creditors are still demanding details about whether a secret Johnson-led lobbying campaign took place behind the scenes in Washington aimed at derailing the sale.

A123, which went bust after winning approval for nearly $250 million in federal grants, was sold to Wanxiang America Corp. in a recent bankruptcy auction. The American subsidiary of China’s largest auto parts manufacturer, Wanxiang beat out Johnson Controls for most of A123’s assets.

Now, weeks after a Treasury Department-led panel signed off on A123’s sale to Wanxiang, a committee of unsecured creditors formed in the A123 bankruptcy has filed court papers to depose an unnamed Johnson Controls official early next month.

In addition, the committee is calling on Johnson Controls to turn over a host of documents to find out if the company aimed to “delay, impede, condition or otherwise affect” the possible purchase of A123 or its assets by Wanxiang.

The creditors’ lawyers say they want any communications lobbyists may have had with members of Congress and executives at the Directorate of Defense Trade Controls and the U.S. Committee on Foreign Investment in the United States, a Treasury Department-led multiagency panel that can nix foreign takeovers of U.S. companies on national security grounds.

While the secretive panel met on the A123 sale before approving the deal, lobbyists on both sides of the sale appear to have been busy, according to Senate lobbying disclosures and court records.

Johnson Controls hired two firms — Wiley Rein LLP and J.A. Green & Co. — in December, while the creditor committee won permission from a bankruptcy judge to pay another firm, Capitol Counsel, $75,000.

In seeking permission to hire Capitol Counsel, the lawyers for creditors argued that Johnson Controls was “doing everything in its power” to derail the sale to Wanxiang, so creditors needed their own lobbyists.

Capitol Counsel’s lobbyists on the A123 assignment included John O’Neill, a principal at the firm and a former aide to Sen. Chuck Grassley, Iowa Republican.

Mr. Grassley has emerged as one of the most outspoken critics of the A123 sale to Wanxiang. But the hiring of Mr. Grassley’s former aide by creditors backing the sale didn’t seem to have much of an impact on the lawmaker’s opposition.

Following the sale, Mr. Grassley released a statement with Sen. John Thune, South Dakota Republican, saying he remained concerned about the national security implications of the transaction.

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