Lawsuit accusing new MBTA general manager of fraud at prior company dismissed
A federal judge in Texas has dismissed a class action complaint against the new general manager of the Massachusetts Bay Transportation Authority and the Texas energy company that he used to lead.
Luis Ramirez, now the general manager at the T, was chief executive of Dallas-based Global Power Equipment Group from 2012 to 2015, when he abruptly resigned.
Weeks after his resignation, the company announced that it had misreported financial results in 2014. Later, the company said its bookkeeping errors dated back as far as 2011. The mistakes prompted Global Power to restate earnings by a significant amount — $11 million of net income in 2014, for example, was restated as a $47 million loss.
At the time, Global Power’s shares traded in the $12 range but plummeted after the news, and the company has since been delisted from the NYSE.
Shareholders later sued Global Power and Ramirez, accusing him and other company officials of deception through erroneous reporting. The shareholders said the company’s accounting department saw heavy turnover during Ramirez’s tenure, and its training budget was slashed. They also said Ramirez and his chief financial officer did not adequately respond when other managers at the company alerted them to financial irregularities.
This week, the Texas judge disagreed, noting that under Ramirez the company confirmed the extent of the miscalculations before reporting the issues in 2015.
“Ramirez took steps to make sure that financial information was reported accurately,” Judge Barbara Lynn wrote in a decision issued Wednesday. Additionally, she wrote, turnover in the accounting department “may have been simply outsourcing the work instead of ignoring financial reporting.”
Prior to joining the T in September, Ramirez had no experience in public transit. He was hired based on his business acumen and experience with infrastructure investment and management positions with General Electric and Siemens. But his hiring triggered new scrutiny of his tenure at Global Power.
Ramirez has since argued that he and his executive team should be credited with helping uncover the accounting problems at Global Power that might have otherwise gone unreported.
“I take great comfort in knowing that the CFO I brought in and the process improvements that we made while we were there were likely what found the issues,” he told the Globe in September.
State officials have said they were aware of the problems at Global Power and the pending lawsuit when they hired Ramirez.
While the judge dismissed the lawsuit, she did allow the shareholders the opportunity to amend their complaint by next month.
Deborah Pawlowski, a spokeswoman for Global Power, said the decision is “a positive advancement for us.”
Ramirez and the MBTA declined to comment. Attorneys representing Ramirez and the shareholders could not be reached for comment.
In his first few months on the job at the T, Ramirez has prioritized increasing the rate of repair work on the system, communicating more with riders, holding contractors to tighter standards, and boosting safety initiatives for both riders and workers.
Ramirez is the fifth MBTA general manager under Governor Charlie Baker, replacing two straight interim bosses after a national search. He is being paid $320,000 a year, a big raise from past general managers, and has the ability to earn more based on performance incentives. The T has so far declined to share resumes of other candidates who were considered for the job earlier this year.