White House Knew of Solyndra's Financial Woes

Friday, 16 Sep 2011 06:54 AM

 

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WASHINGTON  — The Obama administration was worried about the financial health of a troubled solar energy company even as officials publicly declared the company in good shape, newly released emails show.

An email from a White House budget official to a co-worker discussed the likely effect of a default by Solyndra Inc. on President Barack Obama's re-election campaign.

"The optics of a Solyndra default will be bad," an official from the Office of Management and Budget wrote in a Jan. 31 email to a senior OMB official. "The timing will likely coincide with the 2012 campaign season heating up."

The email, released by the House Energy and Commerce Committee as part of its investigation into a half-billion dollar federal loan to Solyndra, said the budget official wanted White House budget director Jacob Lew to warn Energy Secretary Steven Chu about the risk posed by Solyndra, which was once the poster child for the Obama administration's clean energy program but by early this year was teetering on collapse.

At the time of the email, the Energy Department was pushing to release an additional $67 million to Solyndra. The Fremont, Calif.-based solar panel maker received a total of $528 million in federal loans before declaring bankruptcy Aug. 31 and laying off 1,100 workers.

The Silicon Valley company was the first renewable-energy company to receive a loan guarantee under the stimulus law, and the Obama administration frequently touted Solyndra as a model for its clean energy program. President Barack Obama visited the company's headquarters last year.

Even as Obama declared that "the future is here" during a May 2010 visit to Solyndra, warning signs were being sent from within the government and from outside analysts who questioned the company's viability as a "going concern."

At least three reports by federal watchdogs over the past two years warned that the Energy Department had not fully developed the controls needed to manage the multibillion-dollar loan program.

Emails obtained by The Associated Press show that a White House official dismissed reports about Solyndra's gloomy future. An email from Greg Nelson, a White House official who had been involved in the planning of Obama's May 2010 trip to Solyndra's headquarters, to a Solyndra executive downplayed a July 2010 news story in a trade publication that criticized the company's financial health.

"Seems B.S.," Nelson wrote.

A 2009 report by the Energy Department's inspector general warned that the DOE lacked the necessary quality control for the loan guarantee program, which was created in 2005 to support clean-energy projects that could not obtain conventional bank loans due to high risks.

In July 2010, the Government Accountability Office said the Energy Department had bypassed required steps for funding awards to five of 10 applicants that received conditional loan guarantees.

The report did not publicly identify the companies that were not properly vetted, but congressional investigators say one of them was Solyndra. The company was the first to receive a loan guarantee after the program was expanded under the 2009 stimulus law.

In March, DOE Inspector General Gregory Friedman again faulted the loan program for poor record keeping. A report by Friedman said the program "could not always readily demonstrate, through systematically organized records ... how it resolved or mitigated relevant risks prior to granting loan guarantees." According to the report, the department kept limited or no electronic data on 15 of 18 loan guarantees examined.

Damien LaVera, a spokesman for the Energy Department, said all reviews were completed before any taxpayer money was obligated.

Even so, warnings about the company persisted. A report last year by auditor PricewaterhouseCoopers said Solyndra had suffered recurring losses from operations and negative cash flows, raising "substantial doubt about its ability to continue as a going concern."

But last May, a Solyndra email informed the White House that "things are going well" at the company and that it had "good market momentum, the factory is ramping up and our plan puts at cash positive later this year. Hopefully, we'll have a great story to tell toward the end of the year."

The FBI recently raided Solyndra's headquarters, shortly after Solyndra filed for bankruptcy and laid off 1,100 workers. A U.S. official, who spoke on condition of anonymity because the case under seal, said the search was related to a fraud investigation into whether Solyndra filed inaccurate documents with the government.

Meanwhile, the Treasury Department's inspector general said Thursday it has opened an investigation into the Solyndra loan.

Spokesman Richard Delmar said the inspector general is reviewing the role and actions of the Federal Financing Bank, a government corporation supervised by the Treasury Department. The bank provided the low-interest loan to Solyndra. The loan is one at least 15 loans totaling more than $6 billion made by the financing bank as part of the stimulus program

The FBI has executed search warrants at Solyndra's headquarters and talked to top executives. The Energy Department's inspector general and the House Energy and Commerce Committee also are investigating Solyndra and the DOE's loan guarantee program, which has provided billions in loan guarantees to renewable energy companies.

The loan guarantees essentially make it easier for the companies to get financing, because the government guarantees repayment in the event of default. In Solyndra's case, the loan came from the government itself, but private banks often provide the financing.

The Obama administration is moving to finalize as many as 15 loan guarantees for renewable-energy companies before the stimulus program ends on Sept. 30. Republicans question whether that could lead to more loans to companies that fail like Solyndra.

LaVera said the department won't take any shortcuts during the approval process.


© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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