Solyndra: Examining the allegations

BY DAVID R. BAKER
SAN FRANCISCO CHRONICLE

The accusations started flying as soon as Solyndra shut its doors.

The solar startup based in Fremont shook Silicon Valley and Washington on Aug. 31 when it fired most of its staff and closed the gleaming new factory it had built with a $528 million federal loan.

Within hours, congressional critics accused the Department of Energy of rushing Solyndra’s loan, which had been part of President Obama’s economic stimulus package. Republicans suggested Solyndra got the money because its biggest investor had raised campaign funds for Obama.

Solyndra’s bankruptcy prompted investigations by a congressional subcommittee and the Department of Justice. Thousands of e-mails from the government, the company and its investors have been made public.

Four months later, the most sensational allegations — particularly those of cronyism — remain unproven, though the public documents do provide support for some of the accusations.

Allegation: Solyndra won the loan because of political ties.

Solyndra’s largest investor was Argonaut Ventures, which operates on behalf of the George Kaiser Family Foundation. Kaiser, an Oklahoma oil man, was a campaign contribution bundler for Obama in 2008.

Solyndra’s loan came from a Department of Energy program established under President Bush in 2005. Solyndra applied for the money in 2006. The program had not yet issued loans by the time Bush left office, but Energy Department officials were actively considering several applications. They viewed Solyndra as the likely recipient of the first loan, the program’s former executive director told congressional investigators. Before Obama took office in 2009, the former director said, the program’s staff had set a timeline for issuing a conditional loan guarantee.

Several Energy Department officials interviewed by congressional investigators said they were unaware of Kaiser’s link to Solyndra until they read about it in the media, according to a Nov. 16 memo by Democrats on the House Energy and Commerce Committee, whose oversight subcommittee has been investigating Solyndra.

Kaiser visited the White House in March 2009, before Solyndra’s loan was approved, and met with Pete Rouse, who was senior adviser to the president at the time, as well as officials involved in economic policy and energy issues. Kaiser told congressional investigators that they discussed energy policy and early childhood education — one of his charitable pursuits — but not Solyndra.

The company received conditional approval for the loan on March 20, 2009, and final approval that September.

Allegation: Solyndra received preferential treatment after the initial loan guarantee because of political ties.

Solyndra’s fortunes started falling in 2010 as the company found its innovative, tube-shaped solar modules undercut by far cheaper panels made in China. As its financial picture darkened, Solyndra sought help from the Energy Department to modify the terms of its loan. The company also wanted to persuade the Department of Defense to buy its modules.

Some within the company wanted the White House’s assistance with both departments. Steve Mitchell, managing director of Argonaut and a member of Solyndra’s board, suggested having Kaiser contact Obama’s chief of staff. But Kaiser rebuffed the idea in an e-mail. “I would see an appeal as only a last resort, and even then, questionable,” he wrote on Oct. 6.

The director of the George Kaiser Family Foundation chimed in, asking why Solyndra’s lobbyists couldn’t handle the job themselves. Mitchell finally conceded.

“I think the company is hoping that we have some unnatural relationship that can open bigger doors,” Mitchell wrote. “I’ve cautioned them that no one really has those relationships anymore.”

Later that month, Kaiser sat next to Obama at a fundraising dinner in Las Vegas. In an e-mail the next day, Kaiser told the director of his family foundation that they talked about early childhood education, as well as how Chinese government subsidies for solar firms were hurting American solar manufacturers.

“I never mentioned Solyndra directly,” he wrote.

Allegation: Politics caused the Energy Department to rush Solyndra’s loan.

E-mails from early 2009 show that as the Energy Department moved closer to giving Solyndra conditional approval, the White House pressed for faster action. White House staff wanted Obama to announce Solyndra’s conditional loan guarantee during a planned trip to California in March.

“If you guys think this is a bad idea, I need to unwind the WW (West Wing) QUICKLY,” Ronald Klain, then chief of staff for Vice President Joe Biden, wrote in a March 7 e-mail to officials at the Office of Management and Budget, which was reviewing the deal’s terms.

E-mails among the budget office staff show they felt rushed. “This deal is NOT ready for prime time,” one staff member wrote on March 10.

The same pattern repeated itself later that year, as the Solyndra loan neared final approval.

White House staff members wanted Biden and Energy Secretary Steven Chu to announce the loan at a Sept. 4 groundbreaking ceremony for the company’s new Fremont factory. The latest unemployment numbers were due to be released that day, and the administration wanted to tout its efforts to create green jobs. Once again, the Office of Management and Budget raced to finish its review.

“I would prefer that this announcement be postponed,” one staff member wrote in an Aug. 31 e-mail, just days before the planned groundbreaking. “This is the first loan guarantee and we should have full review with all hands on deck to make sure we get it right.”

The groundbreaking ceremony and the announcement of the loan went ahead as planned. Budget office officials would later tell congressional investigators that their analyses probably would not have changed if they had been given more time.

Allegation: The Energy Department broke the law when it restructured Solyndra’s loan agreement.

As Solyndra’s fiscal health deteriorated, the company’s two largest investors agreed to give it a $75 million loan — with a catch. Should the loan fail to save Solyndra from bankruptcy, the investors wanted to be repaid first, before the federal government got any of its money back. In February, the Energy Department agreed.

The department’s decision appeared to clash with the 2005 law that created the loan program. Part of that law states, “The obligation shall be subject to the condition that the obligation is not subordinate to other financing.” Officials at the Treasury Department and the Office of Management and Budget questioned whether the loan restructuring violated the statute.

Energy Department officials discussed the issue at length. Susan Richardson, chief counsel for the loan program, wrote a legal opinion dated Feb. 15, arguing that the law’s prohibition on subordinating the government loan applied only to the initial loan guarantee, not to any further rounds of financing.

24 Comments

  1. WriterDude

    So, basically the Chinese “cheat” and subsidize a solar panel factory in order to steal the US solar panel market, run Solyndra out of business, and we let them.

    #1
  2. Mark from Louisiana

    Will Solyndra and LightSquared be obamas watergate?

    #2
  3. AnimuX

    So, through a program setup under Bush in 2005…

    the company applied for its loan in 2006…

    China flooded the market with cheaper panels (as predicted because the USA decided to drill-baby-drill rather than invest earlier)…

    but the loan was finally approved in 2009 so blame Obama?

    #3
  4. Paul O.

    I’m getting sick and tired of the media trying to cover up Obama’s crap. There are many, many videos of Obama pushing loans to Solyndra. What happened to journalistic integrity?

    #4
  5. Dan X. McGraw

    Paul O., several media organizations have done some investigative stories about the Solyndra fallout. I’m not sure what videos you are speaking of, but the San Francisco Chronicle story does mention some of the allegations against the Obama administration and shows the back-and-forth chatter about the approval and the company. The Washington Post also recently did a story about the Solyndra case. (Here is the link: http://www.washingtonpost.com/solyndra-politics-infused-obama-energy-programs/2011/12/14/gIQA4HllHP_story.html). The Post spent a year on it so it’s got a lot of information in it.

    #5
  6. Paul O.

    This article is just one more example of the media doing everything they can to blame anyone and everyone for Obama’s failed Presidency.

    Obama was given his chance. He has failed on all fronts. Well, except his golf game of course becasue thats where he spends most of his time.

    #6
  7. Paul O.
    #7
  8. Mark from Louisiana

    Solyndra was considered for a loan by the Bush Administration and it was rejected. The obama administration reversed that the second week he was in office. That shows how much they researched this company.
    What the story doesn’t tell you is that 80% of the green energy loans made by the Dept. of Energy went to obama campaign contributors and bundlers. Crony capitalism at it’s best.

    #8
  9. Mike E.

    Of course Obama has failed. That shouldn’t be a surprise to anyone. Any president would have failed coming into office with the mess that his predecessor left. The Republicans are standing in the shattered remains of their destroyed glass house and are still throwing stones.

    #9
  10. Mike E.

    Fast track a loan to an American company with an innovative product that is selling like hotcakes at the time of the loan- BAD

    Lie to the country in order to start a war costing billions of $ that results in over 4,000 dead Americans- GOOD

    Nothing like good ol’ Republican values

    #10
  11. Ed C

    It’s Nixon’s fault for opening the door to begin with. Now the commies are taking over without firing a shot. You people better learn Chinese and get ready to work for 2 bucks a hour. LOL

    #11
  12. chiefdecoy

    Solyndra is to Obama, as Halliburton is to Bush,,,,,,

    No difference between these two corrupt idots, except a “D”, and an “R”…….

    #12
  13. Paul

    The buck used to stop at the Presidents desk. Obama is like a child blaming all others for his dismal performance. But hey we should have never elected man with next to ZERO experience doing anything but Quanell X type community organizing.

    #13
  14. Mark from Louisiana

    Mike E….Solyndra NEVER had a product that sold like hotcakes, make up another excuse for obama.

    #14
  15. Kave

    Paul O.
    When you post a link from a notoriously far right leaning blogger you lose some credibility.

    #15
  16. tboyinhouston

    Seriously Paul. A link about golfing? C’mon get serious. Where is your Glenn Beck Edition Chalkboard?

    #16
  17. So

    Besides, it’s all Bush’s fault. There must be some valuable assets to turn over to the taxpayers.

    #17
  18. John

    Kave
    Trying to cover for this dismal failure cost you all your credibility. Just what Obama needed for Christmas, another feeble excuse machine.

    #18
  19. Paul O

    Hey Kave, I’m posting to a notoriously far left leaning blog, whats your point?

    #19
  20. The Czech Man

    It goes to show how people can get caught up on something that at times does not pan out. Employee’s quit jobs, gave up very successfull career’s
    on a whim……………now they can pay the piper. I saw personally the start-up but was not there for the fall. Investers should not have been paid first, give the tax payers some of there money back, it can’t get anymore disgusting that this. The election in the fall will tell us just how stupid this country has become if Obama is re-elected!

    #20
  21. Old_Fighter

    This is getting to be “business as usual” for the media in this country! “Spin!..Spin!..Spin!” twist the facts more and more as we get closer to the elections next year! It would be funny if it wasn’t so pathetic! Solyndra, Fast-and-Furious, Chinese stimulus, and, NOW, $1.2 trillion more in debt, “asked” for by Obama at a time when Congress isn’t in session and won’t be able to do a damn thing about it! Take your pick! This is, plainly, no matter how the media spins it, the most corrupt and inept administration and Presidency this country has ever had…AND YET!….other than a few general statements, have we heard any elaboration on these things from our erstwhile GOP Presidential field of candidates? Nope! They just beat the hell out of each other about past personal trivialities that really have no bearing on beating Obama and saving the country!! What a shame!

    #21
  22. texdjd

    Mike E., to put it in simplistic terms you are an idiot. Most knew Solyndra was a bad deal from the start but that ineffective joke of an administration had it rushed for a freakin’ photo op.

    #22
  23. Mike E.

    Ooh, sorry Tex, I guess you’re right. I am an idiot for thinking Obabma’s blunders pale in comparison to Dubya’s. Not sure if the mothers of the 4484 American soldiers who have died in Iraq would agree with you though. Like I said, Good ‘Ol Republican values

    #23
  24. Mike E.

    Mark from Louisiana- When Solyndra received the loan we (yes “we”, I was there) were selling nearly 100% of our output as quickly as it was produced. We also had over $100million in revenue in our first year of shipping product.Then the Chinese flooded the market with cheap silicon panels and our ineffective top management couldn’t respond.

    I agree it was a bad deal from the start, but not because of most of the employees or the product. It was a bad deal becase the loan was given to a company whose top management had no idea how to run a company. The administration should have done a bit more homework before handing over the money. If they had they would have seen that Solyndra had a poor marketing strategy, no contingency plans, and only a plan to build the new factory as quickly as possible no matter what cost. Its a pity because it really was a good product if it had just been marketed right and the 1000+ employees who lost their jobs, including me, were a great group of people.

    #24