Solyndra loan controversy
Encyclopedia
The Solyndra loan controversy is a political controversy involving U.S. President Barack Obama's administration
's authorization of a $535 million loan guarantee to Solyndra
Corporation in 2009 as part of a program to spur alternative energy growth. Solyndra and the White House had originally estimated that this government financing for Solyndra would help to create 4,000 new jobs. In early September 2011 the company ceased all business activity, filed for Chapter 11 bankruptcy
, and laid-off nearly all of its employees.
Critics claimed that the Obama administration had unduly influenced the loan. Others have noted the Solyndra loan guarantee was a multi-year process begun during the George W. Bush
Administration.
passed the Energy Policy Act of 2005
, a bill intended to address a variety of developing energy problems in the United States
. The bill was signed into law by George W. Bush
on August 8, 2005. Amongst other things, the bill authorized the Department of Energy
to offer loan guarantees to help finance promising energy projects. Advertising of this program in August 2006 resulted in the Department of Energy receiving 134 preliminary applications for the program, including one from the Fremont, California
-based Solyndra Corporation in order to build a new manufacturing facility "Fab 2" for its unique solar panel technology.
In October 2007, the Department of Energy had completed vetting of the applications and had narrowed the number it was still considering to 16, one of which was the application from Solyndra. The remaining 16 were invited to submit full applications for the program, and Solyndra did so in May 2008. The Department of Energy began evaluating Solyndra's application on January 9, 2009 and determined that the project had merit but that additional issues would need to be resolved before approval could be granted.
After Obama took office, analysts in the Energy Department and in the Office of Management and Budget questioned the loan, as one Energy official wrote in an e-mail of "a major outstanding issue:" cash flow predictions showed that the Fab 2 subsidiary (the entity receiving the loan guarantee) it would be low on cash in September 2011, possibly needing help from the parent company until the cash flow recovered in subsequent months.
One White House budget analyst nixed a planned Presidential announcement of the loan guarantee on a March 19 trip to California, writing in a March 10, 2009 e-mail "This deal is NOT ready for prime time".
On March 20, 2009, the Department of Energy made a "conditional commitment" to a $535 million loan guarantee to support Solyndra's construction of a commercial-scale manufacturing plant for its proprietary solar photovoltaic panels. The White House and Solyndra had estimated that the loan would help to create 4,000 new jobs. The White House scheduled a press event for September 4 and federal reviewers gave final approval on September 2. After securing the loan guarantee, the Federal Financing Bank, a part of the Department of the Treasury, loaned Solyndra the money on September 4, 2009. Solyndra used the loaned funds to build a new manufacturing facility, Fab 2, in Fremont, California. Construction began in September 2009 and was completed in June 2010. In May 2010, the company was promoted by President Obama in his visit as a model for government investment in green technology
. It was also visited by Energy Secretary Steven Chu
.
In September 2011, the New York Times reported that government auditors and industry analysts had faulted the Obama administration for failing to properly evaluate the company's business proposals, as well as for failing to take note of troubling signs which were already evident. In addition, Frank Rusco, a program director at the Government Accountability Office
, had found that the preliminary loan approval had been granted before officials had completed the legally mandated evaluations of the company.
The New York Times quoted Shyam Mehta, a senior analyst at GTM Research, as saying "There was just too much misplaced zeal at the Department of Energy for this company." Among 143 companies that had expressed an interest in getting a loan guarantee, Solyndra was the first one to get approval. The company reportedly spent nearly $1.8 million on lobbying during the period the loan guarantee was under review. Tim Harris, the CEO of Solopower, a different solar panel company which had obtained a $197 million loan guarantee, told the New York Times that his company had never considered spending any money on lobbying, and that "It was made clear to us early in the process that that was clearly verboten... We were told that it was not only not helpful but it was not acceptable."
The Washington Post reported that Solyndra had used some of the loan money to purchase new equipment which it never used, and then sold that new equipment, still in its plastic wrap, for pennies on the dollar. Former Solyndra engineer Lindsey Eastburn told the Washington Post, "After we got the loan guarantee, they were just spending money left and right... Because we were doing well, nobody cared. Because of that infusion of money, it made people sloppy."
According to the Washington Post, the Obama administration had tried to rush federal reviewers to approve the loan so Vice President Joe Biden
could announce it at a September 2009 groundbreaking for the company’s factory. In addition, according to the Post, the Obama administration continued to allow Solyndra to receive taxpayer money even after it had defaulted on its $535 million loan.
On October 7, 2011, The Washington Post reported that newly revealed emails showed that Energy Department officials had been warned that their plan to help Solyndra by restructuring the loan might be illegal, and should be cleared with the Justice Department first. However, Energy Department officials moved ahead with the restructuring anyway, with a new deal that would repay the company's creditors before taxpayers if the company were to default. The California Democratic Party
was listed as one of these creditors that would get repaid before the taxpayers. The emails showed concerns within the Obama administration about the legality of the Energy Department's actions. In addition, an Energy Department stimulus adviser, Steve Spinner, had pushed for the loan, despite having recused himself because his wife's law firm had done work for the company.
On October 6, 2011, Jonathan Silver, the director of the Department of Energy's loan office, stepped down to become a distinguished visiting fellow at Third Way
; Department of Energy officials stated that the decision was unrelated to the controversy.
On October 14, 2011 two senior Treasury officials said that they had never seen a loan restructuring like Solyndra.
On September 19, 2011, Media Matters
reported that in a rush to cover the bankruptcy of Solyndra, many news media outlets have misrepresented or omitted key facts. Among these are the fact that the panel of career officials that remanded the project during the Bush administration is the exact same committee that then approved the loan guarantee transaction several months later after due diligence, the fact that the email stating that the loan was "not ready for prime time" was not a warning about financial risk but was in fact an email concerned with the timing of the announcement and not the merits of the loan guarantee, and the fact that while the George Kaiser Family Foundation made investments, Solyndra had "close ties to both political parties” including the conservative Walton family, which was the second largest investor and is a major donor to republicans.
The House Energy and Commerce Committee, which has been investigating the Solyndra loan, released e-mails showing that in Oct., 2010 Obama fund raiser George Kaiser
expressed his concern to the president about China's subsidies for its solar panel companies. Kaiser was a $50,000 - $100,000 contribution bundler for the Obama campaign in 2008, and his family foundation held about 36.7 percent of the company. The e-mails released by the Energy and Commerce Committee failed to document political influence in the loan decision. The Energy Department's chief lending officer testifed before the committee: "[b]y the time the Obama administration took office in late January 2009, the loan programs' staff had already established a goal of, and timeline for, issuing the company a conditional loan guarantee commitment in March 2009." However Republicans on the panel dispute that version of events, citing Energy Dept. e-mails saying that two weeks before Obama took office a panel had decided to postpone the loan. Kaiser made 16 visits to the president’s aides since 2009, according to White House visitor logs but denies having lobbied for Solyndra.
On October 13, 2011, a report stated that CEO Brian Harrison had resigned the previous Friday and Solyndra asked a Federal court to allow a bankruptcy expert to take control of the company.
Presidency of Barack Obama
The Presidency of Barack Obama began at noon EST on January 20, 2009 when he became the 44th President of the United States. Obama was a United States Senator from Illinois at the time of his victory over Arizona Senator John McCain in the 2008 presidential election...
's authorization of a $535 million loan guarantee to Solyndra
Solyndra
Solyndra was a manufacturer of cylindrical panels of CIGS thin-film solar cells based in Fremont, California. Although the company was once touted for its unusual technology, plummeting silicon prices led to the company being unable to compete with more conventional solar panels...
Corporation in 2009 as part of a program to spur alternative energy growth. Solyndra and the White House had originally estimated that this government financing for Solyndra would help to create 4,000 new jobs. In early September 2011 the company ceased all business activity, filed for Chapter 11 bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
, and laid-off nearly all of its employees.
Critics claimed that the Obama administration had unduly influenced the loan. Others have noted the Solyndra loan guarantee was a multi-year process begun during the George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
Administration.
Background before the loan approval
In May 2005, Chris Gronet founded Gronet Technologies and changed its name to Solyndra eight months later. It was founded to provide an alternative to silicon-based solar panels amidst a worldwide shortage. On July 29, 2005 the United States CongressUnited States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
passed the Energy Policy Act of 2005
Energy Policy Act of 2005
The Energy Policy Act of 2005 is a bill passed by the United States Congress on July 29, 2005, and signed into law by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico...
, a bill intended to address a variety of developing energy problems in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. The bill was signed into law by George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
on August 8, 2005. Amongst other things, the bill authorized the Department of Energy
United States Department of Energy
The United States Department of Energy is a Cabinet-level department of the United States government concerned with the United States' policies regarding energy and safety in handling nuclear material...
to offer loan guarantees to help finance promising energy projects. Advertising of this program in August 2006 resulted in the Department of Energy receiving 134 preliminary applications for the program, including one from the Fremont, California
Fremont, California
Fremont is a city in Alameda County, California. It was incorporated on January 23, 1956, from the merger of five smaller communities: Centerville, Niles, Irvington, Mission San Jose, and Warm Springs...
-based Solyndra Corporation in order to build a new manufacturing facility "Fab 2" for its unique solar panel technology.
In October 2007, the Department of Energy had completed vetting of the applications and had narrowed the number it was still considering to 16, one of which was the application from Solyndra. The remaining 16 were invited to submit full applications for the program, and Solyndra did so in May 2008. The Department of Energy began evaluating Solyndra's application on January 9, 2009 and determined that the project had merit but that additional issues would need to be resolved before approval could be granted.
Loan approval
On January 9, 2009, the Department of Energy's credit committee decided unanimously that although the project "appears to have merit, there are several areas where the information presented did not thoroughly support a finding that the project is ready to be approved at this time." The committee "without prejudice" remanded the project "for further development of information."After Obama took office, analysts in the Energy Department and in the Office of Management and Budget questioned the loan, as one Energy official wrote in an e-mail of "a major outstanding issue:" cash flow predictions showed that the Fab 2 subsidiary (the entity receiving the loan guarantee) it would be low on cash in September 2011, possibly needing help from the parent company until the cash flow recovered in subsequent months.
One White House budget analyst nixed a planned Presidential announcement of the loan guarantee on a March 19 trip to California, writing in a March 10, 2009 e-mail "This deal is NOT ready for prime time".
On March 20, 2009, the Department of Energy made a "conditional commitment" to a $535 million loan guarantee to support Solyndra's construction of a commercial-scale manufacturing plant for its proprietary solar photovoltaic panels. The White House and Solyndra had estimated that the loan would help to create 4,000 new jobs. The White House scheduled a press event for September 4 and federal reviewers gave final approval on September 2. After securing the loan guarantee, the Federal Financing Bank, a part of the Department of the Treasury, loaned Solyndra the money on September 4, 2009. Solyndra used the loaned funds to build a new manufacturing facility, Fab 2, in Fremont, California. Construction began in September 2009 and was completed in June 2010. In May 2010, the company was promoted by President Obama in his visit as a model for government investment in green technology
Environmental technology
Environmental technology or green technology or clean technology is the application of one or more of environmental science, green chemistry, environmental monitoring and electronic devices to monitor, model and conserve the natural environment and resources, and to curb the negative impacts of...
. It was also visited by Energy Secretary Steven Chu
Steven Chu
Steven Chu is an American physicist and the 12th United States Secretary of Energy. Chu is known for his research at Bell Labs in cooling and trapping of atoms with laser light, which won him the Nobel Prize in Physics in 1997, along with his scientific colleagues Claude Cohen-Tannoudji and...
.
In September 2011, the New York Times reported that government auditors and industry analysts had faulted the Obama administration for failing to properly evaluate the company's business proposals, as well as for failing to take note of troubling signs which were already evident. In addition, Frank Rusco, a program director at the Government Accountability Office
Government Accountability Office
The Government Accountability Office is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.-History:...
, had found that the preliminary loan approval had been granted before officials had completed the legally mandated evaluations of the company.
The New York Times quoted Shyam Mehta, a senior analyst at GTM Research, as saying "There was just too much misplaced zeal at the Department of Energy for this company." Among 143 companies that had expressed an interest in getting a loan guarantee, Solyndra was the first one to get approval. The company reportedly spent nearly $1.8 million on lobbying during the period the loan guarantee was under review. Tim Harris, the CEO of Solopower, a different solar panel company which had obtained a $197 million loan guarantee, told the New York Times that his company had never considered spending any money on lobbying, and that "It was made clear to us early in the process that that was clearly verboten... We were told that it was not only not helpful but it was not acceptable."
The Washington Post reported that Solyndra had used some of the loan money to purchase new equipment which it never used, and then sold that new equipment, still in its plastic wrap, for pennies on the dollar. Former Solyndra engineer Lindsey Eastburn told the Washington Post, "After we got the loan guarantee, they were just spending money left and right... Because we were doing well, nobody cared. Because of that infusion of money, it made people sloppy."
According to the Washington Post, the Obama administration had tried to rush federal reviewers to approve the loan so Vice President Joe Biden
Joe Biden
Joseph Robinette "Joe" Biden, Jr. is the 47th and current Vice President of the United States, serving under President Barack Obama...
could announce it at a September 2009 groundbreaking for the company’s factory. In addition, according to the Post, the Obama administration continued to allow Solyndra to receive taxpayer money even after it had defaulted on its $535 million loan.
On October 7, 2011, The Washington Post reported that newly revealed emails showed that Energy Department officials had been warned that their plan to help Solyndra by restructuring the loan might be illegal, and should be cleared with the Justice Department first. However, Energy Department officials moved ahead with the restructuring anyway, with a new deal that would repay the company's creditors before taxpayers if the company were to default. The California Democratic Party
California Democratic Party
The California Democratic Party is the state branch of the Democratic Party in the state of California, headquartered in Sacramento. It is chaired by veteran Democratic politician and former United States Representative John L. Burton, who succeeded Art Torres in April 2009. It is the majority...
was listed as one of these creditors that would get repaid before the taxpayers. The emails showed concerns within the Obama administration about the legality of the Energy Department's actions. In addition, an Energy Department stimulus adviser, Steve Spinner, had pushed for the loan, despite having recused himself because his wife's law firm had done work for the company.
On October 6, 2011, Jonathan Silver, the director of the Department of Energy's loan office, stepped down to become a distinguished visiting fellow at Third Way
Third Way (think tank)
Third Way is a public policy think tank. The organization focuses on policies for private-sector economic growth, national security strategy, a clean energy, education and anti-poverty reform, and divisive culture issues. Third Way describes itself as moderate and progressive. In the media, the...
; Department of Energy officials stated that the decision was unrelated to the controversy.
On October 14, 2011 two senior Treasury officials said that they had never seen a loan restructuring like Solyndra.
On September 19, 2011, Media Matters
Media Matters
Media Matters can refer to:* Media Matters for America, progressive media watchdog group founded by author David Brock* The radio program Media Matters hosted by communications professor Robert W. McChesney...
reported that in a rush to cover the bankruptcy of Solyndra, many news media outlets have misrepresented or omitted key facts. Among these are the fact that the panel of career officials that remanded the project during the Bush administration is the exact same committee that then approved the loan guarantee transaction several months later after due diligence, the fact that the email stating that the loan was "not ready for prime time" was not a warning about financial risk but was in fact an email concerned with the timing of the announcement and not the merits of the loan guarantee, and the fact that while the George Kaiser Family Foundation made investments, Solyndra had "close ties to both political parties” including the conservative Walton family, which was the second largest investor and is a major donor to republicans.
Relationships with the Obama administration
It was revealed that several of the company's shareholders and executives had made substantial donations to Obama's campaign, that the company had spent a large sum of money on lobbying, and that Solyndra executives had had many meetings with White House officials.The House Energy and Commerce Committee, which has been investigating the Solyndra loan, released e-mails showing that in Oct., 2010 Obama fund raiser George Kaiser
George Kaiser
George B. Kaiser is an American businessman. He is the Chairman of BOK Financial Corporation. He is among the top 100 richest people in the world and one of the top 50 American philanthropists.-Early life and career:...
expressed his concern to the president about China's subsidies for its solar panel companies. Kaiser was a $50,000 - $100,000 contribution bundler for the Obama campaign in 2008, and his family foundation held about 36.7 percent of the company. The e-mails released by the Energy and Commerce Committee failed to document political influence in the loan decision. The Energy Department's chief lending officer testifed before the committee: "[b]y the time the Obama administration took office in late January 2009, the loan programs' staff had already established a goal of, and timeline for, issuing the company a conditional loan guarantee commitment in March 2009." However Republicans on the panel dispute that version of events, citing Energy Dept. e-mails saying that two weeks before Obama took office a panel had decided to postpone the loan. Kaiser made 16 visits to the president’s aides since 2009, according to White House visitor logs but denies having lobbied for Solyndra.
Federal investigation
In September 2011, federal agents visited the homes of Brian Harrison, the company's CEO, and Chris Gronet, the company's founder, to examine computer files and documents. Also in September 2011, the U.S. Treasury Department launched an investigation, as well as the FBI.On October 13, 2011, a report stated that CEO Brian Harrison had resigned the previous Friday and Solyndra asked a Federal court to allow a bankruptcy expert to take control of the company.
External links
- Jon Stewart Skewers Obama White House On Solyndra, (with video from The Daily ShowThe Daily ShowThe Daily Show , is an American late night satirical television program airing each Monday through Thursday on Comedy Central. The half-hour long show premiered on July 21, 1996, and was hosted by Craig Kilborn until December 1998...
), NPR, September 16, 2011 - Obama's Solyndra scandal reeks of the Chicago Way, by John Kass, Chicago Tribune, September 18, 2011
- Remarks by the President on the Economy, Transcript of speech by President Obama at Solyndra on May 26, 2010, whitehouse.gov