Siemens Unit Sues Arco For $150 Million
A unit of giant Siemens, the German conglomerate, has charged in a lawsuit that Atlantic Richfield Co. committed fraud in the 1990 sale of a solar-electric manufacturing facility.
The suit, filed Friday in U.S. District Court in New York, seeks nearly $150 million in damages, including $50 million in punitive damages.
As part of a companywide restructuring in 1989, Arco sold its pioneering Arco Solar Inc. unit, headquartered in Camarillo, to Siemens Solar Industries for $35.9 million. Arco had acquired Arco Solar, a maker of photovoltaic products, in 1977, but had been unable to make it profitable despite an investment of more than $200 million.
Siemens contends that, during negotiations over sale of the unit, Arco failed to disclose that a key product under development would be more difficult than expected to manufacture and “was not commercially viable,” according to the suit. As a result, the lawsuit alleges, Siemens paid substantially more for the solar energy unit than it was worth and was forced to invest more in the operation than it had anticipated.
In a statement, Arco’s general counsel, Francis X. McCormack, denied that Siemens was “hoodwinked into buying Arco Solar.”
“During months of negotiation prior to the sale,” McCormack said, “Siemens personnel had access to Arco Solar’s operations and spent countless hours examining facilities and processes.”
Siemens was already a world leader in solar technology at the time of the sale. The company was marketing Arco Solar products in western Germany and was a joint-venture partner with the Arco unit in the production of thin-film photovoltaic cells at a prototype plant in Munich. Advanced research in thin-film cells was the key technology Siemens hoped to acquire by buying Arco Solar.
The Siemens suit contains excerpts from internal computer mail at Arco Solar shortly before completion of the sale. One computer message quotes an unnamed Arco Solar official as saying that the company will have to “go back to the drawing boards” to solve the company’s problems with thin-film technology and asks whether Arco Solar will have to “explain the situation somehow without having it come out that we have lied to Siemens about the technology all these years.”
