Pity Secretary Steven Chu. A Nobel Prize-winning physicist, used to interacting with the smartest scientists in the world, he now has to deal with members of Congress. They want him to apologize for the bankruptcy of Solyndra, the solar company which received $528 million in federal loans before going under. He refused.
On November 17, 2011, in a hearing before the House Energy and Commerce Committee, the focus was not on the approval of the loan guarantee, which occurred in September 2009, but the subsequent restructuring in February 2011, which subordinated the federal governments initial funds to the new tranche of $75 million put up by investors.
A number of committee members argued that the Department of Energy had violated Section 1702 of the Energy Policy Act of 2005, which states “[t]he obligation shall be subject to the condition that the obligation is not subordinate to other financing.”
Mr. Chu claimed that the Energy Department general counsel found that this section only applied to the initial loan guarantee, not any restructuring thereof. When asked why the Department of Energy didnt consult with the Department of Justice (as at least one Treasury email suggested), Mr. Chu replied that it wasnt legally necessary to consult with Justice unless there was a provision in the original terms of the loan subordinating taxpayer dollars. It was not made clear why a restructuring of the debt was not subject to the same non-subordination condition as the original loan.
Mr. Chu repeatedly said it was a tough decision at the time, that if they allowed Solyndra to go bankrupt, the government wouldnt recover anything. He said they knew in February 2011 Solyndra would go bankrupt and stop construction of Fab 2 if it didnt receive more funds. Officials apparently figured it would be better to keep funding so that either the factory could become operational and produce revenue or at least reach completion and be sold as a going concern.
Mr. Chus staff did him a disservice in not informing him in more detail about Solyndras problems. After all, they were not a secret to people who followed the solar energy sector. On May 27, 2010, in trade journal GigaOM, reporter Katie Fehrenbacher suggested that the Energy Department guarantee for Solyndra was a mistake. She wrote that Solyndras manufacturing and capital costs far exceeded those of its rivals, and that its technology was uncompetitive.
PricewaterhouseCoopers, Solyndras auditors, also expressed public concern about the company. On April 2, 2010, Reuters reported, “PricewaterhouseCoopers LLP said Solyndras recurring operating losses, negative cash flows, $532.3 million stockholder deficit and other factors raise substantial doubt about its ability to continue as a going concern.” (A deficit means a companys liabilities are greater than its assets, whereas an operating loss occurs when the cost of producing a good exceeds its revenue.)
Solyndra itself, in its public filing (S-1) at the SEC in September 2009, dutifully offered 22 pages of reasons why it might fail. In case anyone missed the point, the report included a table of financial and operating data for 2006-2009, showing six different measures of gross and net losses. Not one positive outcome.
Given Solyndras candor and the skepticism felt at and expressed at OMB, a question of motive arises, a question asked to Mr. Chu throughout the hearing. Why did the government pour more funds into Solyndra, and accept a subordinate status on the loan? Could it be because one of President Obamas campaign contributors, George Kaiser, was a major investor in Solyndra through Argonaut Private Equity?
Mr. Kaiser raised between $50,000 and $100,000 in donations for the president, and donated over $50,000, split between the Democratic Senatorial Campaign Committee and Obama for America, according to Federal Election Commission records.
White House visitor logs for 2009 show that Mr. Kaiser made several visits to key White House staffers before the loan guarantee for Solyndra was approved. On many occasions, he was accompanied by Ken Levit, the executive director of the George Kaiser Family Foundation, and Tony Knowles, who is president of the National Energy Policy Institute, co-founded by Mr. Kaiser. From 2009 to 2011, he made 17 visits to the White House.
Emails released by the House Energy and Commerce Committee reveal that Mr. Levit wrote to Steven Mitchell, a Solyndra board member, on February 27, 2010, “They about had an orgasm in Bidens office when we mentioned Solyndra.”
Some people present at the meetings have denied that George Kaiser talked with administration officials about a loan to Solyndra, and that the talks centered on various other topics. According to Knowles, “Never in any of those meetings was there any attempt by George Kaiser to discuss or promote the financial relationship between the George Kaiser Family Foundation, Solyndra, and the federal government.”
A week later, on March 6, 2010, Mr. Kaiser referenced a meeting in an email to Mr. Mitchell, saying “BTW, a couple of weeks ago when Ken and I were visiting with a group of Administration folks in DC who are in charge of the Stimulus process (White House, not DOE) and Solyndra came up, every one of them responded simultaneously about their thorough knowledge of the Solyndra story, suggesting it was one of their prime poster children.”
Later that year, on October 6, Mr. Mitchell wrote to Mr. Kaiser, “In addition, the consensus is that a meeting with the new White House Chief of Staff is the best avenue to approach the administration for support on the DOE front and for assistance in securing any type of procurement commitments from the government and the military.”
As Soyndra was cratering, Mr. Mitchell detailed in an October 3, 2010, email to George Kaiser his plan to have the Defense Department buy its solar panels over the next three years outside the usual procurement process.
Mr. Mitchell wrote, “We are also planning to ask the DOD to execute a purchase order to buy our panelsï¿½DOD has 3X the rooftops of Wal-mart and is the biggest consumer of electricity in the US (and wants to buy solar panels)ï¿½.the DOD has the capacity to easily sign a 300MW three-year purchase order for our panelsï¿½this would have to be through a “carve out” that occurs outside of the traditional RFP process through GSA.”
So Solyndras backup plan, which fortunately for the taxpayer did not come to pass, was to have the taxpayer funnel even more money into the company through a special Defense Department purchase.
During the hearing, Mr. Chu testified that there was no political influence during the Solyndra application process. Unfortunately, the email evidence suggests otherwise.
Original Source: http://www.realclearenergy.org/articles/2011/11/21/there_is_no_defense_for_solyndras_failure.html