FBI Said Probing Solyndra for Possible Account Fraud

Thursday, 29 Sep 2011 06:42 PM

 

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 The FBI is investigating Solyndra LLC for possible accounting fraud and the accuracy of financial representations made to the government, according to an agency official.

The FBI is examining possible misrepresentations in financial statements, according to the FBI official, who requested anonymity because the investigation is continuing.

Solyndra, which made cylindrical-shaped solar panels, filed for bankruptcy protection on Sept. 6 and fired about 1,100 workers with little notice, about two years after winning a $535 million U.S. loan guarantee from the Energy Department.

The company’s offices in Fremont, California, were raided by Federal Bureau of Investigation agents on Sept. 8. The Justice Department hasn’t said why Solyndra is being probed.

“The company is not aware of any wrongdoing by Solyndra officers, directors or employees” related to the Energy Department loan guarantees or other actions and “is cooperating fully” with the U.S. Attorney in San Francisco, according to a Sept. 20 statement from Solyndra. David Miller, a company spokesman, didn’t immediately return a phone call and an e-mail seeking comment Thursday.

Solyndra’s collapse has prompted congressional scrutiny of President Barack Obama’s administration, which issued final approval of the loan that also won support from officials in the administration of George W. Bush.

White House Pressure

Republicans on the House Energy and Commerce Committee, which has investigated the loan since February, have said the administration pressured federal loan officers to expedite the review of Solyndra’s application so it could be promoted as a stimulus success story.

The company was the first to receive a guarantee under the stimulus act and was the largest award given to a solar manufacturer under the program.

Democrats, who dispute claims politics played a role, joined Republicans in criticizing Solyndra Chief Executive Officer Brian Harrison for what they said were misrepresentations of the company’s finances in meetings with lawmakers.

“When Mr. Harrison was in my office in July, he said that Solyndra’s future was bright, with sales and production booming,” Representative Henry Waxman of California, top Democrat on the Energy committee, said at a Sept. 23 hearing on where Harrison was a witness. “I’d like to know why he told me that in July, and then filed for bankruptcy one month later.”

Harrison, Stover

Harrison and Chief Financial Officer Bill Stover invoked their Fifth Amendment rights against self-incrimination and refused to answer questions at the hearing.

Harrison joined Solyndra in July 2010, after Solyndra had received its loan guarantee and its auditor had warned its financial difficulties were deep enough to raise questions about how long it could survive.

Companies seeking guarantees were required to estimate project costs, list private investors and provide a model detailing cash flows for the life of the project, according to the 2006 Energy Department solicitation for loan guarantees.

Solyndra submitted an application in 2006 and added details in October 2007 after the company was identified by the Bush administration as a potential candidate for a guarantee.

It is unlawful for applicants for federal loan guarantees to make untrue, misleading or incomplete statements, according to James F. Bowe Jr., an energy regulatory lawyer with Dewey & LeBoeuf in Washington, who isn’t involved in the Solyndra case.

IPO Withdrawn

The company withdrew a planned initial public offering in June 2010, citing adverse market conditions. A month earlier, Obama toured the new manufacturing factory that U.S. aid helped to build and said Solyndra was a testament to “American ingenuity and dynamism.”

By December, the company was almost out of cash and sought to restructure the loan agreement with the Energy Department. The department at the time knew the company had failed to set aside $5 million in the first of six payments into a reserve fund, Damien LaVera, an agency spokesman, said in an e-mail. The new deal eliminated the payments, he said.

The agreement made the government’s debt subordinate to $75 million in private investment in a last-ditch effort to save the company, Energy Department officials have said.

Harrison replaced Solyndra founder Chris Gronet as chief executive. Gronet remained chairman until Aug. 19, when the company announced his departure, 12 days before it halted operations on Aug. 31.

Gronet, a former executive at Applied Materials Inc., expressed anger when action on the loan guarantee was postponed in January 2009, Energy Department e-mails show.

“I was appalled to learn on Friday that our application is being delayed yet again,” Gronet wrote in an e-mail to Steve Isakowitz, the Energy Department’s chief financial officer, in the early morning hours on Jan. 12, 2009.

He later spurned an apology from David Frantz, director of the loan program under Bush, according to an e-mail sent later that day.

“I find the response completely unacceptable,” Gronet wrote. “An apology from David is not enough.”

© Copyright 2014 Bloomberg News. All rights reserved.

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