Suntech Power Holdings Co, forced to put its Chinese solar unit into bankruptcy last month, began that slide into insolvency in 2009 when customers linked to the founder couldn’t pay their bills and the company booked the sales as revenue anyway, regulatory filings show.
Seven buyers backed by an investment firm funded by Suntech and its founder, Shi Zhengrong, accounted for 29 percent of Suntech’s uncollected bills as 2009 ended, according to correspondence between the solar company and the US Securities and Exchange Commission. Those customers hadn’t yet received enough money to proceed with their projects and Suntech, once the world’s largest solar-panel maker gave them more time to pay, the letters show.
The SEC correspondence provides clues to Suntech’s prospects and a road map to business practices that left the company vulnerable to a 560 million-euro ($720 million) fraud and a $541 million bond default. Anyone with Internet access could have learned that Suntech was booking revenue from sales to related companies with unbuilt projects in the fledgling solar industry, while also guaranteeing loans to those related companies. It relied on a former sales agent to secure one guarantee with bonds it never saw.
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