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Celebrity-Backed Bankrupt Carbon Credit Seller Arranges Financing Amid Fraud Charges Against Co-Founder

Despite boasting Cindy Crawford as an investor and Meta as a client, Aspiration Partners faced challenges securing chapter 11 funding

Aspiration Partners, a climate-finance startup backed by celebrities like Cindy Crawford and Robert Downey Jr., has lined up proposed funding to stay afloat in chapter 11 after federal prosecutors charged a co-founder with fraud.

The San Francisco-based company, which has brokered carbon-credit deals with companies including Microsoft and Meta Platforms, failed to secure a lender after contacting roughly two dozen lenders and existing investors, including junior creditor Oaktree Capital Management, chief restructuring officer Miles Staglik said in a filing Monday in the U.S. Bankruptcy Court in Wilmington, Del.

Secured bondholder Inherent Group eventually agreed to lead a group to provide $18 million in financing, which includes $4.2 million in new money for the company now known as CTN Holdings or Catona, he said.

The climate-finance company partners with project developers worldwide, providing investment, project monitoring and other services to help them generate carbon credits. CTN then sells the carbon credits to its customers.

CTN sought protection from creditors Sunday with roughly $170 million in debt. It plans to look for a buyer for its assets, but the pool of potential purchasers might be small due to “significant capital outlays and risks associated with the business, as well as the long-time horizon for realizing a return,” Staglik said. CTN also faces “substantial” shareholder and trade litigation, he said in the filing.

The company had been receiving financing from entities affiliated with co-founder Joseph Sanberg. That source of funding dried up in February. In early March, Sanberg was arrested after the Justice Department filed a criminal complaint alleging that he conspired to defraud two investor funds of at least $145 million.

Staglik said he doesn’t believe the allegations implicate CTN in any criminal activity. He emphasized that current management and employees were unaware of the alleged misconduct and that the business itself is a victim. Sanberg no longer holds any positions at the company and is no longer involved in its operations, but the criminal case has hurt its ability to raise capital to operate, he said.

Sanberg’s defense lawyer, Marc Mukasey, said his client has pleaded not guilty to the charges. “We will buckle down and defend him with vigor and zeal,” Mukasey said in a statement on Tuesday.

The National Basketball Association’s Los Angeles Clippers are one of CTN’s biggest unsecured creditors, owed $30 million for both trade debt and carbon credits.

CTN is represented by law firm Whiteford, Taylor & Preston.

The case, numbered 25-10603, has been assigned to Judge Thomas Horan.

Rolls-Royce in talks over UK subsidies for new engine development

FTSE 100 group believes the £3bn narrow-body project could deliver a step change in British economy

Rolls-Royce is in talks with the British government about taxpayer support to help fund the £3bn development of an engine to power the next generation narrow-body aircraft, primarily used for short-haul flights. 

The FTSE 100 aerospace and defence group has told senior government officials that the project could be a once-in-a-generation opportunity, and has called for state subsidies to help develop a fully-certified engine ready to go into production. 

The aviation group claims the project could create about 40,000 skilled jobs, both at Rolls-Royce and in the wider supply chain, and generate as much as £120bn for the UK economy over the lifetime of the programme. 

Labour has prioritised advanced manufacturing among eight high-growth sectors as part of a new industrial strategy which is due to be published in June. Rolls-Royce believes that, as one of only a handful of companies in the world with the expertise to develop engines for civil aircraft, it should be in pole position for any support.

Rolls-Royce has told the government that there is a “once-in-a-generation opportunity to deliver a step change in growth for the UK economy”, according to people familiar with the conversations, with the development of aero-engines for the next generation of narrow-body aircraft. Rolls-Royce declined to comment on the government talks.

It is not clear how much of the estimated £3bn cost Rolls-Royce was seeking from government but people familiar with the matter said the company was prepared to invest significant sums itself. It has in the past received research and development funding from the state, as well as launch support for previous engines, including its Trent XWB. The company, which also has a facility in Dahlewitz, near Berlin, is also expected to seek support from the German government for the project.

Rolls-Royce currently builds engines that exclusively power widebody aircraft that fly internationally such as Airbus A350 jets and Boeing’s 787. Rolls-Royce left the narrow-body market more than a decade ago when it pulled out of a joint venture with Pratt & Whitney of the US.

Narrow-body aircraft such as Airbus’ A320 and Boeing’s 737 Max are the workhorses of many airlines’ fleets, flying on short-haul routes. They represent a much bigger share of the global market for civil aircraft by volume. 

The group has spent more than £500mn on a demonstrator of its new UltraFan engine, which uses a geared system to improve performance, as well as composite fan blades, and aims to be 25 per cent more efficient than the group’s first Trent engines.

Rolls-Royce said last year it had started work on a “scaled-down” demonstrator of the UltraFan that would be specifically designed to power a next generation narrow-body aircraft. 

Airbus and Boeing have been working on new materials and designs for the next generation of narrow-bodies, which are expected to be launched in the second half of the next decade.

Airbus has said it is talking to all engine makers, including Rolls-Royce. Its immediate focus, however, is on a more radical, open-rotor technology being developed by CFM International, a joint venture between GE Aerospace and Safran of France, which it believes is very fuel-efficient. 

Boeing has not launched an all-new aircraft for more than two decades. Kelly Ortberg, who took over as chief executive last year, told employees last October that despite current challenges “at the right time in the future we need to develop a new aeroplane”. 

Rolls-Royce, which has been the subject of a turnaround under chief executive Tufan Erginbilgiç, would have the financial strength to produce the engines on its own but could still look to partner given the much greater manufacturing volume required for narrow-body aircraft.

Airbus, for example, is targeting a monthly rate of 75 A320 aircraft by 2027. This compares with a monthly target of 12 A350 wide-body jets in 2028. Analysts have in the past said the most likely partner is P&W. 

Shareholders claim audit firm helped hide difficulties at South Carolina power project

Deloitte has asked a US judge to throw out demands that it compensate shareholders who lost money in the collapse of one of the country’s largest nuclear power projects, in a case that has exposed the inner workings of the Big Four audit firm.

Recently filed documents detail Deloitte’s work auditing the South Carolina utility Scana before the company abandoned construction of two nuclear reactors that had fallen far behind schedule and billions of dollars over budget.

The 2017 fiasco led to the cut-price sale of Scana to a rival utility, the bankruptcy of the construction group Westinghouse and jail time for Scana’s former chief executive, who pleaded guilty to misleading regulators.

A class-action lawsuit on behalf of Scana shareholders alleges Deloitte helped the company hide burgeoning problems at the VC Summer nuclear project by signing off on financial statements that indicated it would be completed on time.

In fact, an internal whistleblower at Scana had claimed as early as 2015 that Westinghouse was impossibly far behind, and Deloitte failed to follow other red flags, the lawsuit claims.

Citing internal documents, it says that although Deloitte had experts in power plant construction on staff, the firm did not use them to verify what its audit team was being told by Scana management and Westinghouse. Deloitte’s main construction expert billed just 1.5 hours of work to Scana’s 2016 audit, according to an internal log.

The shareholders say Deloitte’s audit team gave too much credence to Scana’s own internal investigation, which dismissed claims by the whistleblower, Carlette Walker, that management was withholding negative information from regulators.

One of Deloitte’s own construction experts, Heather Sprowls, conducted an internal review of the firm’s work, after the fact, and penned a six-page handwritten memo that concluded the whistleblower investigation had been flawed.

“Derogating its responsibility as an auditor, Deloitte rubber-stamped Scana’s sham investigation into Walker’s allegations, accepting its incredulous finding that Walker’s concerns were ‘unsubstantiated’ without obtaining sufficient corroborating documentation,” the suit claims.

A Deloitte spokesperson said it “stands behind its work and believes plaintiff’s assertions are without merit”. In its motion asking for summary judgment against the shareholders, which is now with Judge Jacquelyn Austin in South Carolina district court, the firm argued that Scana’s filings contained plenty of warnings that Westinghouse could fail to meet construction deadlines.

“Plaintiff cannot take its case to a jury by pretending Scana’s cautionary disclosures do not exist, it cannot prove scienter by ignoring the substantial audit work performed, and it cannot recover damages based on events that bear no causal connection to anything Deloitte did,” its lawyers wrote.

Scana shares slumped as the problems at VC Summer became apparent, and the company was sold in 2018 to Dominion Energy of Virginia at a price some 25 per cent below its peak.

In 2020 the Securities and Exchange Commission charged Scana with misleading investors over the status of the nuclear project. The company paid $138mn to settle the claims, without admitting or denying wrongdoing. Former Scana chief executive Kevin Marsh was sentenced to two years in prison for hiding negative information from industry regulators.

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