Matthew Mosk stories from The Center for Public Integrity

Energy-backed firms award bonuses, file bankruptcy

2012-10-05T12:04:27-04:00

President Obama’s Department of Energy financed a fleet of green energy companies that later fell into bankruptcy — but not before the firms doled out six-figure bonuses and payouts to top executives, a Center for Public Integrity and ABC News investigation found.

Take, for instance, Beacon Power Corp., the second recipient of an Energy Department loan guarantee in 2009. In March 2010, the Massachusetts energy storage company paid cash bonuses of $259,285 to three executives in part due to progress made on the $43 million energy loan, Securities and Exchange Commission records show. Last October, Beacon Power filed for Chapter 11 bankruptcy.

Ener1 subsidiary EnerDel, maker of lithium-ion battery systems, landed a $118.5 million energy grant in August 2009. About one-and-a-half years later, Vice President Joe Biden toured a company plant in Indiana and heralded its taxpayer-supported expansion as one of the “100 Recovery Act Projects That Are Changing America.”

Two months after Biden’s visit, corporate parent Ener1 paid $725,000 in bonuses to three executives — including $450,000 to then-CEO Charles Gassenheimer, who led Biden on the tour. This January, Ener1 filed for Chapter 11 bankruptcy protection.

At least two other firms that benefited from Energy Department funding — one a $500,000 grant, the other a $535 million loan guarantee — handed out hefty payouts to executives and later went bankrupt.

The Department of Energy, asked about the payments examined by the Center and ABC, said it is troubled by the practice and intends to convey that message to loan recipients.

"We don’t begrudge companies or their executives for their success, but it is irresponsible for executives to be awarded bonus compensation when their workers are losing their jobs,” said department spokeswoman Jen Stutsman. “We take our role as stewards of taxpayer dollars very seriously, and as such, we will make clear to loan recipients our view that funds should not be directed toward executive bonuses when the rest of the company is facing financial difficulty.”

The bonuses and bankruptcies come against a growing wave of trouble for companies financed with Energy Department dollars. Of the first 12 loan guarantees the department announced, for instance, two firms filed for bankruptcy, a third has faced layoffs and a fourth deal never closed.

The nonprofit Citizens Against Government Waste counts nearly 20 government-backed energy companies that have run into financial trouble ranging from layoffs to losses to bankruptcies. An outside consultant hired by the White House said the Energy Department’s loan pool includes $2.7 billion in potentially risky loans and suggests the agency hire a “chief risk officer” to help minimize problems.

To watchdogs, the pattern of firms awarding bonuses only to file for bankruptcy raises questions about how well the Energy Department chose its winners, and how thoroughly it kept an eye on them once selected.

“Giving a bonus to the executives under these circumstances is rewarding failure with our money with no chance of getting it back,” said Leslie Paige, spokeswoman for the nonpartisan Citizens Against Government Waste.

“Taxpayers need some representation here. They didn't really get it.”

The setbacks have intensified the glare on the president’s environmental mission, already under scrutiny following the collapse of Solyndra Inc., the first recipient of an Obama green energy loan.

Solyndra, bankruptcy records show, was among the companies to dole out thousands in executive payments — in its case, just months prior to its late August collapse and early September bankruptcy. As a criminal investigation and House inquiry continue into the company’s implosion, the government must navigate bankruptcy proceedings in hopes of recovering a piece of its $535 million investment.

In interviews, executives with companies backed by public dollars defended the payments as proper. Some said bonuses were granted for work done in a previous year, before financial storm clouds had fully developed, and that the executive cash infusions were sometimes linked to broad corporate milestones.

One company executive said the Energy Department explicitly allows for federal funds to be used to pay out executive bonuses.

DOE does not set salaries and benefits of companies it backs, “but we do closely scrutinize all of the expenses submitted by the companies before they are reimbursed to ensure that taxpayer dollars are being used appropriately,” said spokeswoman Stutsman. “Funds are paid out as the work is actually completed.”

Secretary Steven Chu declined an interview request. The department has long defended the green energy movement as a way for government to help spur development of cutting edge products that aid the environment and economy. Sometimes, they say, investments in potential game-changing technologies simply don’t work. The potential default rate, they say, is within the parameters set by Congress.

Yet some members of Congress — already concerned about lucrative paydays at bankrupt Solyndra — say they’re particularly troubled that failed companies, backed by Energy Department funds, would pay bonuses at all.

“Any company that's going into bankruptcy or any executive that ran a company into bankruptcy shouldn’t be getting bonuses in the first place,” said Sen. Charles Grassley, R-Iowa, former chairman of the Senate Finance Committee. “In the case where there might be federal grants or federal loans, I would be very concerned.”

Grassley added: “The purpose of our grants for energy or almost any other grant of government is for the purpose of innovation. It's not for the purpose of feathering the nest of a private company executive.”

Bruce Kogut, director of the Sanford C. Bernstein Center for Leadership and Ethics at the Columbia Business School, said it is not uncommon for corporate bonuses to be awarded when executives meet key achievement milestones.

“The problematic issue,” professor Kogut said, is giving out bonuses “near the time of bankruptcy.”

Solyndra executives, bankruptcy records show, pocketed thousands in payments just months before the company dismissed 1,100 workers. At least 17 company executives received two sets of payments — ranging from $37,000 to $60,000 each payment — on the same days in April and July 2011. The insider payments, reported last year in the San Jose Mercury News, came as the company catapulted toward bankruptcy in early September. A Solyndra spokesman did not reply to interview requests.

Solyndra’s crash last August put a sharp focus on the selection process the Energy Department follows in awarding taxpayer dollars. The administration backed the upstart firm despite concerns even from some government officials worried about Solyndra’s financial viability, email records show. And, energy officials committed to the financing before all due diligence was in hand.

Bankruptcies and bonuses

Not as well-known are three other firms backed by Energy Department dollars — ranging from $500,000 to $118.5 million — that also suffered financial downturns. As with Solyndra, each corporate entity rewarded executives prior to its bankruptcy filing.

One example: Ener1, whose subsidiary EnerDel won the $118.5 million Energy Department grant in 2009 to help expand its manufacturing plant. The company also received supportive write-ups on the DOE website.

Vice President Biden’s January 2011 visit to the company’s Greenfield, Indiana, plant was part of the government’s “White House to Main Street Tour.”

“This Administration is forging a new path forward by making sure America doesn't just lead in the 21st Century, but dominates in the 21st Century,” Biden said after a tour with Ener1 CEO Gassenheimer. "We're not just creating new jobs — but sparking whole new industries that will ensure our competitiveness for decades to come — industries like electric vehicle manufacturing."

A White House report listed the EnerDel project as No. 67 among the “100 Recovery Projects that are Changing America.”

In March 2011, Gassenheimer was awarded a $450,000 bonus, SEC records show. Two other Ener1 executives pocketed bonuses of $225,000 and $50,000 for a total payout of $725,000.

In January 2012, one year after Biden’s visit, Ener1 filed for bankruptcy, citing $73.9 million in assets and $90.5 million in debts.

Energy officials noted that while the bonuses were paid to executives from Ener1, the government grant went to a subsidiary called EnerDel, which was not part of the bankruptcy case. But the two are closely related — bankruptcy records show EnerDel now provides all of the employees for the parent company. And the distinction is new for the Energy Department — a press release touting Biden’s visit referred to the parent company Ener1 as the recipient of administration support, not EnerDel.

Gassenheimer, reached for an interview, said he could not comment. He is no longer with Ener1.

A company spokesman said the bonuses were paid through Ener1, the corporate holding company, not EnerDel. DOE said the subsidiary’s project is on schedule, and an Ener1 spokesman said the battery company aims to get back on its feet through reorganization.

Beacon Power’s bonuses were specifically linked to executives’ progress in landing the company’s $43 million Energy Department loan guarantee in 2009.

Securing the loan was among the measures used to establish how much executives would pocket in bonuses, company SEC filings show. “The DOE loan application was approved by the credit review board, making us the first public company and the second of 16 applicants to receive the commitment,” the document notes.

President and Chief Executive Officer F. William Capp received a $133,256 cash bonus in March 2010. Two other company officials pocketed combined bonuses that month of $126,029.

In an interview, Capp said the company’s pay structure was reasonable and that executives took pay cuts in a bid to help Beacon Power survive.

“The record is clear on that. The executives have not enriched themselves,” Capp said. “We all agreed to take a 20 percent reduction in pay just to make the funds last longer in order to keep the team together. There’s hardly been self-enrichment.”

Last week regulators approved Beacon Power’s sale to an equity firm that should help it repay $25 million of the $39 million Beacon had drawn down from the loan. The company, under new ownership, plans to continue operating the 20-megawatt flywheel energy storage plant in Stephentown, New York, a project the department said would “ensure the reliable delivery of renewable energy to the electricity grid.” It hopes to build a second plant in Pennsylvania.

Capp blamed the bankruptcy on a variety of factors, including government fears about restructuring loans after Solyndra filed for bankruptcy. His firm, he said, got swept up in “Hurricane Solyndra.”

‘It all happened so quickly’

Other energy companies struggled in the storm.

Among them: SpectraWatt, a New York state manufacturer of silicon solar cells. In 2009, SpectraWatt secured a $500,000 grant from the DOE’s National Renewable Energy Laboratory Photovoltaic Technology Pre-Incubator program. In March 2010, U.S. Labor Secretary Hilda L. Solis and a local congressman toured the company’s Hudson Valley Research Park in Hopewell Junction, N.Y., highlighting the wave of coming green jobs.

“President Obama and I understand and believe that the first thing we have to do to turn the economy around is provide American families with good jobs,” the labor secretary said, according to a SpectraWatt press release. “That is why we are committed to investing in greening our economy.”

Yet, not long after, the company’s momentum suddenly halted.

Last August, SpectraWatt filed for Chapter 11 bankruptcy protection.

“It all happened so quickly,” Richard J. Haug, SpectraWatt’s President and COO, said in an interview. The company’s innovative technology, he said, butted up against changing market and pricing conditions, competition from the Chinese — and the fact that some early investors did not follow through.

“They couldn’t locate any new money,” he said. “It was very disappointing.”

While the DOE’s early grant supported research and development, Haug said, a later funding request was denied. Last March, he said, the company laid off its workforce and effectively shut down. “It became increasingly difficult for us to make any more money. By the end of 2010 we basically dropped down to a cash level … that by March we would be out of business,” Haug said.

In March, the big payouts began. Five company executives, including Haug, received six-figure payments in late March or early April 2011, bankruptcy records show. The five “insider payments” totaled more than $745,000.

Haug said the payouts were not bonuses, but accrued vacation and pay for executives that had been spelled out in severance agreements. “There were no golden parachutes,” he said. “This was a very straightforward very honest group of people. I’d go to work with them again anytime.”

Energy officials noted that their early investment in SpectraWatt was relatively small compared to other project financing. Late last year, the company held auctions to sell off its plant and property.

In recent weeks, several other companies backed by DOE dollars have encountered deep financial woes.

At least six Energy Department loan and grant recipients — from electric car maker Fisker Automotive to electric-car battery maker A123 Systems to Colorado-based Abound Solar — have laid off workers or suffered financial woes. Those setbacks come on top of the companies that have already filed for bankruptcy.

Administration officials, from Obama on down, say they continue to support the green energy mission. “There were going to be some companies that did not work out,” Obama told reporters in October, after Solyndra’s meltdown. “All I can say is the Department of Energy made these decisions based on their best judgments.”

DOE needs better risk management

2012-02-10T17:58:18-05:00

An outside consultant hired by the White House to assess the Department of Energy’s hot-button green energy loan program suggests the agency hire a “chief risk officer” to better track companies backed by taxpayer-funded loans.

“To enhance the independence of the oversight function, DOE should create a new Risk Management department,” wrote Herbert Allison, the independent consultant.

That conclusion is among the core recommendations detailed in the 75-page report, released Friday afternoon.

The report was intended to help resolve concerns triggered by the political backlash over the Obama administration’s failed $535 million investment in upstart solar firm Solyndra, which declared bankruptcy last fall.

But the review never directly addresses Solyndra’s failure, or another DOE-backed green energy venture that went bankrupt, Beacon Power Corp.

Allison, a longtime official in the public and private sectors who most recently served as Assistant Secretary of the Treasury for Financial Stability, writes that he “did not evaluate the loans to Solyndra and Beacon” because those companies have already failed.

He also notes that his review was less exhaustive than it could have been because it was put on a 60-day fast track by the White House.

“Because of this abbreviated time period, the Independent Consultant’s work plan necessarily omitted activities that might have provided further insights,” Allison’s report notes, “such as a more detailed examination of each loan’s performance and of the financial, operational, regulatory, and market demand risks facing each loan applicant … and more extensive examination of the loan origination and monitoring processes and practices that DOE followed for each of the loans.”

The report evaluated 30 loans, worth $23.4 billion, that closed by late November 2011. Of that, $8.3 billion, or 35 percent, had been drawn down. The money helped bankroll projects ranging from alternative energy and solar manufacturing ventures by startup companies to fuel saving projects launched by major corporations such as Ford Motor Co. and Nissan North America, Inc.

Of that portfolio, DOE had put aside $2.9 billion to cover potential risk. Allison’s review set that risk value at slightly less, $2.7 billion.

The White House considered the report a validation of its efforts, saying it “confirms that the overall loan portfolio as a whole is expected to perform well and holds less than the amount of risk envisioned by Congress when they designed and funded the program.”

“While the portfolio includes loans to a range of projects that carry different levels of risk,” said White House spokesman Eric Schultz, “today’s report finds that the Department of Energy has been judicious in balancing these risks.”

Rep. Henry A. Waxman, the ranking Democrat on the House committee that has been investigating the Solyndra financing and the loan program more broadly, also greeted the report as a sign that the administration’s program is working.

“The report is a repudiation of the partisan attack on the program by congressional Republicans and the oil and coal industries,” Waxman said.

Republican members of Congress leading the investigation see things differently.

“It would be a stunning case of bureaucratic disregard to declare victory because the government is expecting to lose 'just' $3 billion,” House Energy and Commerce Committee Chairman Fred Upton and Oversight and Investigations Subcommittee Chairman Cliff Stearns said in a statement. “One key lesson is that taxpayers should not have been placed in the position to lose one dollar, let alone billions, all because the stimulus allowed companies with shaky finances to apply for and receive taxpayer support without putting up any money.”

Allison did caution that he expects some companies that received loans to come back to the Energy Department to revise the financing terms. He said the rules imposed on the companies, and the complexity of their enterprises, means that “many projects are likely to seek such relief at some point during the term of the DOE loan or loan guarantee.”

Along with creating a chief risk officer, he suggests a new Risk Management unit be created – and that it be separate from the Loan Programs Office and report to senior DOE management. And, the Energy Department should establish an “early warning system” to spotlight major problems early in the process.

The White House said the Department of Energy “is reviewing the recommendations and will carefully identify the best ways to implement them.”

Another green energy company stumbles: Fisker announces layoffs

Delaware,United States — 2012-05-03T11:29:05-04:00

Fisker Automotive, maker of exotic electric sports cars being built with help from a $529 million federal loan, has announced layoffs at its Delaware plant as it tries to persuade the Department of Energy to continue backing it with public money.

The company says 26 Fisker employees have been let go from the Delaware factory where renowned automotive engineer Henrik Fisker promised to one day begin producing affordable electric sedans. A Delaware newspaper also reported that subcontractors working on the car venture have been let go.

"It's temporary," said Roger Ormisher, a company spokesman. "We're being prudent and sensible as a company."

Fisker was one of a handful of auto companies to receive sizeable federal loans to help support the birth of an electric car industry in the United States. As the Center for Public Integrity and ABC News reported in October, Fisker's efforts have been beset by delays — even after the company was touted by Vice President Joe Biden and others.

“Folks, we're making a bet,” Biden said on Oct. 27, 2009 in Delaware. “We're making a bet in the future, we're making a bet in the American people, we're making a bet in the market, we're making a bet in innovation.”

While benefitting from U.S. taxpayer support, Fisker signed a contract with a firm in Finland to assemble its first generation electric vehicle, a flashy $97,000 sports coupe called the Karma.

As the layoffs were announced, Fisker approached the Department of Energy about the targets it must meet to continue drawing federal money. It is not yet clear whether the Energy Department will alter the loan’s terms, or invest more taxpayer dollars in the Fisker venture.

Department of Energy officials said they understand that Fisker has experienced production delays, but said they are not uncommon for a new company. And the department remains hopeful about the company’s future, in part because it has successfully raised more than $650 million in private sector investment to support its ongoing operations.

“Our loan guarantees have strict conditions in place to protect taxpayers,” said DOE spokesman Damien LaVera. “The Department only allows the loan to be disbursed as the company meets certain milestones and demonstrates results.

As has been widely reported, Fisker has experienced some delays in its sales and production schedule -- which is common for start-ups. As Fisker works through those issues and incorporates lessons learned from the production of the Karma, the Department is working with Fisker to review a revised business plan and determine the best path forward so the company can meet its benchmarks, produce cars and employ workers here in America.”

Critics of the Obama administration say they fear Fisker was at risk of becoming the next Solyndra — a reference to the now-bankrupt solar panel firm that received support from a government loan program only to shutter its doors.

When asked directly by ABC News in October if taxpayers should worry about the half-billion dollar federal investment, Henrik Fisker was emphatic: "No, I don't think they need to worry about it." Could Fisker be the next Solyndra? "Absolutely not," he said.

Fisker’s loan commitment, of $528.7 million, was announced in September 2009. The loan was broken in two parts.

In the first, Fisker would use $169.3 million for engineering integration costs to complete its first vehicle, the Karma. Engineering work would take place in Pontiac, Mich., with support from the company headquarters in Irvine, Calif. — and final assembly completed overseas.

The bigger chunk of the loan, for $359 million, would bankroll Fisker's Project Nina, a lower cost plug-in hybrid sedan. “Fisker estimates that up to 75,000-100,000 of these highly efficient vehicles will roll off assembly lines in the U.S. every year beginning in late 2012,” the Energy Department announced.

To date, Fisker has received $193 million in government funds, according to a company statement.

In October, the company acknowledged outsourcing Karma assembly to Finland, but said the bulk of its government funds would be used to launch the second-generation electric vehicle, still under wraps, that would be assembled in a shuttered General Motors plant in Delaware. Some of those hired to prepare the Delaware plant for that effort were among those let go.

That project, the Nina sedan, has been put off until sometime in 2013.

"We have temporarily delayed work at the plant based on ongoing discussions with the DOE regarding funding for the Project Nina program," the company said. "As a result, we have laid off 26 people."

Ormisher said Fisker has delivered between 250 and 300 Fisker Karmas in the United States, and the company is nearing approval to sell the cars in Europe.

Chu denies 'undue political influence' in Solyndra loan

California,United States — 2011-11-17T14:12:07-05:00

Energy Secretary Steven Chu told Congress Thursday he was surprised and dismayed to see emails surface suggesting his department "pushed very hard" for Solyndra to delay announcing its first round of layoffs until after the midterm elections in November 2010.

"I was not part of that decision, and I certainly would not have been in favor of that decision," Chu told a House investigative committee. "I don't believe it's a proper way to do business."

Chu told Congress politics never played a role in the selection of the California company for the first Obama administration green energy loan, and he testified that he never felt pressure from the White House or from Obama campaign donors to pick Solyndra for a $535 million loan. The government-supported solar-panel manufacturer shut its doors earlier this year, laying off 1,100 workers. It is now the subject of multiple federal investigations.

"I want to be clear," Chu said. "Over the course of Solyndra's loan guarantee, I did not make any decision based on political considerations. My decision to guarantee a loan to Solyndra was based on the analysis of experienced professionals and on the strength of the information they had available to them at the time."Chu calmly answered questions from members of a House Energy and Commerce subcommittee that has spent the past nine months investigating the loan. Chu told them repeatedly that the decision to dedicate more than half a billion dollars to the California manufacturing firm was a calculated risk, and a necessary part of building a robust new clean energy industry.

"It is extremely unfortunate what happened to Solyndra," he said. "Was there incompetence? Was there undue outside political influence? I would have to say no."

He said the decision to restructure the loan deal as the company was struggling was a tough decision, but one he felt was in the government's best interest. When asked if that decision was legal — even as it placed the government second in line behind private investors to recoup its losses during a bankruptcy — Chu defended his department.

"We believe there was no violation of the law," Chu said.

Yet the Energy secretary acknowledged the public has likely lost most of its investment. Asked how much of the $535 million the government may recoup in Solyndra’s bankruptcy, he replied: “Not very much.”

The loan to the California energy firm was at one time held up by the Obama administration as a model of the president's plan to infuse start-up clean energy firms with federal support in hopes of sprouting a vibrant new high-tech industry. But as iWatch News and ABC News first reported in March, the model first loan was emerging as a troubling example of a program that was taking big risks with public funds, and was in some instances benefitting investors who had strong political ties to Obama. One of the top investors in Solyndra, Oklahoma billionaire George Kaiser, was also a prolific fundraiser for Obama during the 2008 campaign.

Emails show Energy Dept. sought to hide Solyndra layoffs until after 2010 elections

2012-02-10T17:44:18-05:00

As solar panel startup Solyndra planned a round of layoffs last year after securing a half-billion dollar government loan, the Department of Energy dispatched an unusual request: Hold off announcing the cutbacks until after the mid-term elections.

That request, detailed in a new House Energy and Commerce memo released Tuesday, suggest that political fallout factored in the Energy Department’s handling of the maiden green energy loan guarantee announced under the Obama administration.

Solyndra did make the layoff announcement, the documents say, on Nov. 3 — a day after the Nov. 2 mid-terms.

The company’s layoffs, of 180 full and part time workers, cast a cloud over President Obama’s initial green energy investment and escalated fears — later founded — that taxpayers could lose their investment in the upstart firm. Earlier this year, Solyndra fired 1,100 workers, filed for bankruptcy and faced a raid by federal agents – a free-fall that cast a larger cloud over the Energy Department’s multi-billion dollar loan portfolio.

The disclosure about the timing of the first layoff announcement is detailed, according to the committee memo, in an email from a private firm backing Solyndra, Argonaut Private Equity.

In late October 2010, as Solyndra’s finances withered, executives with Argonaut – founded by billionaire Obama bundler George Kaiser — were in contact with Energy Department officials about a pending restructuring of the company’s government loan.

Argonaut “noted that ― DOE continues to be cooperative and have indicated that they will fund the November draw on our loan … They did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd — oddly they didn‘t give a reason for that date,” said the committee report.

The 2010 mid-term elections were held Nov. 2. Solyndra’s announcement that it was shuttering a plant and laying off workers came a day later.

“Several emails produced by Argonaut to the Committee reference the fact that the layoff announcement was postponed because of the November 2 elections,” said the 14-page memo written by staff of the Subcommittee on Oversight and Investigations.

Earlier in October, Solyndra CEO Brian Harrison emailed the Energy Department to alert it that the company was fielding reporters’ calls about its finances. “Solyndra has received some press inquiries about rumors of problems (one of them with quite accurate information) and we have received inbound calls from potential investors. Both of these data points indicate the story is starting to leak outside Solyndra,” wrote Harrison. He said the announcement of layoffs was coming later that month. In the end, it came after the mid-terms.

Harrison’s email went to Jonathan Silver, then executive director of the DOE Loan Programs Office, and to Chu‘s chief of staff. Silver, the records say, forwarded the correspondence to others including former White House energy czar Carol Browner and Ron Klain, then chief of staff to Vice President Joe Biden. Silver resigned earlier this year amid questions over the Solyndra refinancing.

The Energy Department said Tuesday that the new disclosure does not dispel its point: That the award to Solyndra was made on merit, not politics.

“The Republican report cites internal email from Argonaut about the timing of a press release,” spokesman Damien LaVera wrote in reply to questions from iWatch News and ABC News. “But as the 180,000 pages of documents that the Department of Energy turned over to the Committee indicate, the Department’s decisions about this loan were made on the merits, based on extensive review by the experts in the loan program — and nothing in this Republican Committee memo changes that.”

Yet the newly released records are sure to escalate questions hovering over not only the failed loan, but Chu’s involvement in a deal that the department pushed quickly ahead in the face of abundant red flags.

The loan guarantee was announced in March 2009, just two months into the Obama presidency, and heralded as a sign that a traditionally slow-moving agency could rapidly spur projects benefiting the environment and economy. In its quest to award and later support its first guarantee recipient, the Energy Department ignored warnings from government staffers, outside analysts and even Solyndra’s own auditor that it was, at best, a risky bet.

Earlier this year, with Solyndra swimming in debt, the Energy Department agreed to a refinancing that pushed back the company’s payoff date – and, notably, let investors including Kaiser stand in line first should the company fail. Those investors infused $75 million into Solyndra as DOE refinanced the company’s debt this February. Under a pact between the parties, this round of investors will collect first in bankruptcy, and the government next.

Chu, as secretary, signed off on that agreement.

“On March 3, 2011, Secretary Chu stated in an interview that DOE was ― confident Solyndra could ― ‘repay the loan,‘‖ and that ― ‘sales have been going up‘ in recent months,’ ” said the committee memo.

In truth, Solyndra had been fighting for survival for months.

In late August, the company shut the doors at its Fremont, California plant, fired workers and, shortly after, filed for bankruptcy. The federal raid soon followed. CEO Harrison recently resigned. Solyndra has said it committed no crimes.

Energy officials say they back potentially game changing technologies and that each investment carries a level of risk. Some, like Solyndra, fail.

Thursday, Chu will appear before the Republican-led committee that said it is exploring three key questions:

How did the stimulus program and Chu‘s directive to move quickly in awarding loan guarantees impact the review of Solyndra’s application?
Should DOE have foreseen the coming financial collapse in this case?
Did DOE protect taxpayers in negotiating Solyndra’s loan — and subsequent restructuring?

His testimony comes amid a new inspector general report, issued Tuesday, that calls for a restructuring of key components in the Energy Department. Notably, the report suggests a new item be added to a “Watch List” of significant issues meriting attention. That item: The DOE’s Loan Guarantee Program.

“Given the significance of the funds involved and the Government's exposure to risk, we believe that heightened and continued focus on this program is necessary,” the IG concluded.

Former Obama aide predicted Solyndra scandal — and urged Chu's ouster

2011-11-14T13:21:31-05:00

New internal White House emails reveal that a scathing critique of Energy Secretary Steven Chu by a former Obama political advisor was widely circulated at the highest levels of the administration.

The Feb. 25, 2011 email that sparked the deliberations landed on West Wing desks just as the solar energy firm Solyndra was starting to show outward signs of financial trouble. It was sent by Dan Carol, a former Obama campaign staffer and clean energy advocate who was described by Obama's then-Chief of Staff Pete Rouse as someone whose views "reflect the President's general philosophy on energy policy."

Carol's four-page proposal to restructure the Energy Department included the blunt recommendation that Chu be fired, and that his leadership team also be replaced, calling it time for "serious changes, even if they are uncomfortable to make."

"I would respectfully suggest that the president be strongly encouraged to make major leadership changes as soon as possible," Carol wrote.

Carol also predicted the political fallout that would result from what he saw as inevitable failures of the Energy Department's now-embattled loan guarantee program. He made the dire predictions when advising that Obama replace Chu with someone who was not "too associated … with [the] Silicon Valley business elite."

"Not because they aren't talented," Carol writes, "but because that appointment will be caught up in the wave of GOP attacks that are surely coming over Solyndra and other inside DOE deals that have gone to Obama donors and have underperformed. No reason to fuel that coming storm, and believe me it will come."

The Carol email and the internal deliberations that it spawned became public late last week along with 135 pages of other internal documents that the White House sent to Congress. The document dump was the latest attempt by the Obama administration to respond -- on its own terms -- to a subpoena for all materials that reference the Solyndra loan in any way. Chu is scheduled to testify before a House Energy and Commerce investigative subcommittee about the Solyndra loan this week.

White House officials said the emails received by Congress further prove that politics never entered into the decision to loan money to Solyndra.

As Carol predicted, Solyndra's spiral into bankruptcy has led to a political fracas, with Republicans openly questioning whether the decision to send half a billion dollars to the California solar panel manufacturer was motivated by politics. A leading investor in the company was also a major Obama political fundraiser, Oklahoma billionaire George Kaiser. As recently as this week, Kaiser has reiterated that he made no effort to influence the loan decision making, and the White House has echoed Kaiser's stance.

The new documents offer only a tiny glimpse into the reaction that Carol's email produced inside the West Wing. Numerous senior administration officials were forwarded copies of the Carol proposal and asked by Rouse to comment and respond. Rouse himself wrote on March 14 that he was "not that interested in Dan's criticism of Sec. Chu," but invites other senior officials to weigh in on "Dan's general assessment of the need for greater focus on our energy policy agenda."

"Dan is a clean energy activist who has a clear point of view and is pushing his particular agenda," Rouse writes. "Nonetheless, he is smart and reflects the President's general philosophy on energy policy." Carol is described in internet profiles as an "evangelist for new ideas and approaches to galvanize and build the Green New Deal, working with green businesses, foundations, governments and non-profits." He served as the Content & Issues Director for the Obama for President Campaign.

Administration officials said they continue to try to negotiate with Congress over the terms of the House subpoena for documents about the Solyndra loan. Officials said Friday that, in addition to the new emails forwarded to the Hill, the administration has also agreed to share additional documents "in camera," so as to allow members of Congress to see more if its internal deliberations on Solyndra without making the documents available to the public.

The White House release is the latest move in a long-running tug of war with House Republicans over Solyndra documents. White House officials said they have bent over backwards to provide relevant materials -- those that aim to resolve whether politics entered into the discussions of the Solyndra loans. But House Republicans have argued that they are endowed with investigative power, and have every right to determine which documents are relevant after reviewing all of the materials they have requested.

Last Thursday, the White House failed to comply with a noon deadline set by Congressional investigators to produce all communications related to Solyndra. Last week, White House counsel Kathryn Ruemmler said that the vote by the House and Energy Committee's investigative subcommittee to subpoena all White House records on Solyndra, including emails, documents and memos, "was driven more by partisan politics than a legitimate effort to conduct a responsible investigation."

Obama donor weighed asking White House to save Solyndra, emails say

2011-11-09T16:31:25-05:00

A key investor in the failed solar power company Solyndra, who was also a political donor to Barack Obama, strategized with his top executives about whether and how they should use their contacts inside the White House to help their failing business venture, according to emails surfaced by Congressional investigators Wednesday, ABC News reports.

"The White House has offered to help in the past and we do have a contact within the White House that we are working with," an adviser to billionaire Oklahoma oilman George Kaiser writes in an October 6, 2010 email. "I think the company is hoping we have some unnatural relationship that can open bigger doors — I've cautioned them that no one really has those relationships anymore."

Kaiser replies to Steve Mitchell, a senior executive at Kaiser's venture capital firm, that he should "pursue your contacts with the WH to follow up" but advises him not to directly ask, "Can you help with this?"

The release of the emails came as part of an escalating battle between Republicans in Congress and the White House over a subpoena for all of the internal communications about the $535 million government loan to Solyndra, a California solar panel manufacturer that went bankrupt. The White House has resisted the demand for documents, calling it a fishing expedition and an overreach for documents that have historically been protected. Congress has set Thursday as the deadline for the White House to comply with its demand for documents.

Within hours of the release of the internal emails between Kaiser and his advisers, Congressional investigators and administration officials were already disputing their significance.

Republicans in Congress argued that the emails rebutted the repeated assurances from the White House that Solyndra did not attempt to use political influence to secure its federal loan, or to get the loan restructured when the company started to falter — even though Kaiser had made 16 visits to the White House to meet with top officials.

"Documents recently obtained by the Committee directly contradict those statements," said a statement released by Reps. Fred Upton (Mich.) and Cliff Stearns (Fla.), the Republicans who have been spearheading the investigation.

Administration officials, meanwhile, pointed to language in the emails that suggest Kaiser and his advisors saw no advantage in trying to pull strings for Solyndra inside the White House — and in fact, may have viewed such efforts as detrimental.

"I question your assumption that the WH is the path to pursue," Kaiser wrote in one email. "I would see an appeal as only a last resort, and even then, questionable. We need to discuss."

White House spokesman Eric Schultz said that "even the documents cherry-picked by House Republicans today affirm what we have said all along: this loan was a decision made on the merits at the Department of Energy."

"Nothing in the 85,000 pages of documents produced thus far by the Administration or in these four indicates any favoritism to political supporters," said Schultz. "We wish that House Republicans were as zealous about creating jobs as they were about this oversight investigation."

Ever since Solyndra shut its manufacturing plant and filed for bankruptcy, the Obama administration has faced questions about the methods use to select recipients of billions of dollars worth of energy department loans and loan guarantees. The goal of the massive lending program has been to stimulate the growth of clean energy initiatives such as wind farms, solar arrays, and electric cars.

Republicans have alleged that political favoritism sullied the process by which loan recipients were selected. The Energy Department has always maintained that politics played no role in the loan process, and that loan guarantees were awarded on merit alone.

White House Counsel Calls Solyndra Subpoena Political

White House officials initially said they thought Kaiser's White House meetings concerned his charity work. A review of visitor logs by the Sunlight Foundation showed that Kaiser was accompanied by experts on energy policy to at least three of the meetings. In October, a White House official familiar with an internal review of meetings between Kaiser and such senior presidential aides as Valerie Jarrett and Pete Rouse told ABC News that the White House now firmly believes that Kaiser never broached the subject of the Solyndra loan.

Kaiser has "said publicly that Solyndra was not discussed at these meetings, and we have no reason to dispute that," the White House official said, speaking on the condition of anonymity because he had not been given approval to discuss the matter. "We understand that the conversations in these meetings were focused on the general policy priorities of the George Kaiser Family Foundation, including early childhood education and poverty, health care policy and energy policy."

Earlier this month, the White House rejected the sweeping Congressional demand for documents related to Solyndra, accusing Republicans of playing politics.

White House counsel Kathryn Ruemmler said that the vote by the House and Energy Committee's investigative subcommittee to subpoena all White House records on Solyndra, including emails, documents and memos, was "overbroad," "unprecedented and unnecessary."

"I can only conclude that your decision to issue a subpoena, authorized by a party line vote, was driven more by partisan politics than a legitimate effort to conduct a responsible investigation," Ruemmler wrote to Reps. Upton and Stearns.

"The White House could have avoided the need for subpoena authorizations if they had simply chosen to cooperate," responded Rep. Upton. "That would have been the route we preferred, and frankly, it would have been better for the White House to get the information out now, rather than continue to drag this out.

Upton said the request for documents was "reasonable." "We are not demanding the President's blackberry messages, as we are respectful of Executive Privilege," said Upton. "What is the West Wing trying to hide? We owe it to American taxpayers to find out."

House committee votes to subpoena White House over Solyndra loan

California,United States — 2011-11-03T20:18:46-04:00

Firing a legal salvo directly at the White House, a House committee voted along party lines Thursday to subpoena President Barack Obama’s inner circle for its deliberations over the administration’s failed $535 million investment in a California solar panel maker that was backed by a political fundraiser for the president.

The subpoena, which has not yet been issued, would direct the chiefs of staff of the president and vice president to turn over internal correspondence on the Department of Energy’s loan guarantee to Solyndra Inc.

After securing its half-billion dollar taxpayer financing in 2009, the fledgling firm this year shut its doors, fired 1,100 workers and filed for bankruptcy.

Its collapse gave a black eye to the Energy Department, which has issued billions of dollars in federal support to clean technology firms, and has attracted investigations from the FBI, inspectors general for the Energy and Treasury departments and two House committees.

Energy officials raced to support Solyndra in the face of abundant red flags the company was a risky bet.

New internal emails obtained by iWatch News and ABC News show that Energy officials downplayed concerns even from Solyndra’s own auditor, who last year raised “substantial doubt about its ability to continue as a going concern.”

The House Energy and Commerce Committee’s 14-9 vote fell along party lines, with Republicans demanding the release of the deliberations while Democratic leaders contended the subpoena impedes on executive privilege, a limited legal privacy protection afforded to presidential actions typically in the realm of national security.

The vote is likely to stir a legal challenge that could trigger larger issues for Obama: Will a president known for preaching open government fight the release of records from his own top aides?

“I wish it had not come to this,” Energy and Commerce Chairman Fred Upton, R-Mich., said repeatedly. The subpoena “is a tool we use sparingly, and only as a last resort. Today, it is our last resort.”

Democrats said taking this dramatic legal step was premature given that the White House had reached out to Republicans a night earlier to negotiate.

"Apparently, what the committee really wants is a confrontation with the president, not information for the investigation," said Henry Waxman, D-Calif., the ranking Democrat on the committee.

Issuing an overly broad subpoena "raises the strong possibility of the defense of executive privilege, an area which has much opportunity for the Congress to lose power if we handle it badly," warned Rep. John Dingell, D-Mich. He and Colorado Congresswoman Diana DeGette, the ranking Democrat on the investigations subcommittee, both put forward motions to delay the subpoena, which were defeated along party lines. A day earlier, some Democrats noted, during a Natural Resources Committee meeting, Republicans opposed a motion to subpoena the CEOs of BP, Transocean, Halliburton, and Cameron who refused to testify over the Deepwater Horizon oil spill.

In its Solyndra inquiry, House Republicans sent two previous letters to the White House seeking communications about the Department of Energy loan. The Obama administration has turned over more than 85,000 pages of documents regarding the Energy Department loan portfolio, but withheld internal communications – citing what White House counsel Kathryn Ruemmler called “long-standing and significant institutional executive branch confidentiality interests.”

On Friday, the White House announced it would audit all outstanding obligations in the DOE loan portfolio. That review is being conducted by former Treasury official Herb Allison and expected to last three months.

Yet the debate over the presidential subpoena could attract more attention.

“The committee really wants these documents,” said Mitchel Sollenberger, a former Congressional Research Service analyst who is now a professor at the University of Michigan-Dearborn.

If executive privilege is invoked, Sollenberger predicted Republicans would move to find the president in contempt of the subpoena – as Democrats did when the Bush administration refused to cooperate during controversy over the firing of U.S. Attorneys.

“Will this define his presidency? No. Will this show you what kind of president he is? Yes,” Sollenberger predicted. “Making an executive privilege claim says a lot, particularly the claim that he would make here. This is a domestic policy issue.”

While campaigning for office in the 2008 election, Obama promised a more restrained use of executive privilege.

“Nobody is above the law,” he said, according to press reports at the time. “If there are specific assertions of executive privilege, then, you know, those can be examined. But I think this notion, this blanket notion that you can't subpoena White House aides, where there's evidence of genuine wrongdoing, I think is completely misguided."

"We're a nation of laws, and not men and women,” Obama said, “….that's a precedent I don't mind living with as president of the United States."

The White House did not immediately respond to a request to comment on the committee’s vote.

The committee said it intends to press for the release of emails from top aides, including former White House Chief of Staff Rahm Emanuel, senior advisor Valerie Jarrett, former National Economic Council Director Larry Summers, and Ron Klain, former chief of staff to Vice President Joe Biden.

In a statement, the Republican-led committee said it recognizes Obama’s “personal communications would most likely be covered by an assertion of Executive Privilege.

“However,” added the statement from Upton and Oversight and Investigations Subcommittee Chairman Cliff Stearns, R-Fla., “the committee leaders fail to see why internal White House communications between senior White House advisors about a loan guarantee to a solar panel manufacturer would implicate issues of national security or the other foundations upon which the Supreme Court has recognized Executive Privilege.”

Some emails already released in the committee’s eight-month investigation have proved embarrassing for the White House.

Records released last month revealed how a top Obama fundraiser, Steven J. Spinner, prodded Energy Department officials to move quickly to close Solyndra’s loan in 2009 even as his wife’s law firm represented the company.

Spinner, then an Energy Department staffer, pushed for Solyndra even after receiving an ethics opinion forbidding him from getting involved in matters relating to his wife’s law firm clients. The law firm said Spinner’s wife played no role in Solyndra’s legal work. Spinner has not responded to interview requests.

A new batch of emails and other correspondence, obtained this week, provide further details of how Energy Department officials pressed to support Solyndra even as outside auditors and others raised questions. The emails also show how the Energy Department, in refinancing Solyndra’s loan earlier this year, put private investors — including George Kaiser, an Obama bundler in 2008 — in line before the public in bankruptcy proceedings.

Energy officials have consistently said they back risky, but potentially game changing, technologies that could aid the environment and the economy. They say it’s a risk worth taking, and that politics are not a factor in its awards.

In Solyndra’s case, warnings came early.

The brightest red flags came last year, when Solyndra auditor PricewaterhouseCoopers LLP issued a report as the company prepared to go public.

“The Company has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit that, among other factors, raise substantial doubt about its ability to continue as a going concern,” the auditor concluded March 16, 2010.

The auditor’s conclusion stirred media reports and a wave of concern inside the White House as President Obama prepared to visit Solyndra’s plant that May to herald the project as a case study of the government’s support for innovative green energy projects.

“As you know, a Going Concern letter is not good,” Obama advisor Jarrett wrote Biden aide Klain at 6:11 a.m. May 24, 2010, two days before the president’s visit.

“Thoughts?” she asked, citing the PricewaterhouseCoopers report.

Jarrett sent the note after Steve Westly, a major Obama fundraiser and California clean-technology executive, emailed her about the auditor’s report and the dark clouds over the company, warning that the president’s visit “could haunt him in the next 18 months if Solyndra hits the wall, files for bankruptcy, etc.”

Inside the Energy Department, the emails show, the concerns were cast as little more than the early hiccups of a start-up venture pitching a new product — in this case, unique solar panels for the commercial rooftop market.

Matt Rogers, then a senior advisor to Energy Secretary Steven Chu on Recovery Act issues, downplayed the report.

“The ‘going concern’ letter is standard for companies pre-IPO,” Rogers wrote that May morning, a few hours after Jarrett’s email. “The letter says in short that the company needs more capital to keep going long-term, which is why they are planning to tap the public markets. We will see these with all the pre-IPO companies that we fund and is not a general concern.”

“The good news,” Rogers added, “is that the loans that we made are allowing the company to increase revenues and reduce production costs significantly, helping them remain competitive in a tough market.”

That assessment was echoed by others in the department.

“Our project finance guys have an explanation for this – apparently this is not uncommon (some companies post big early losses while they ramp up — like Amazon),” wrote one Energy Department staffer. “Bottom line is that we believe the company is okay in the medium term, but will need some help of one kind or another down the road,” wrote another. Yet another cited Solyndra’s “remarkable” growth over the two prior years.

Klain, the Biden aide, was convinced. “Thanks!” he wrote to Rogers and others. “This looks fine to me.”

On May 26, two days after Jarrett’s early morning missive, Obama visited Solyndra’s Fremont, Calif., plant.

Yet months later, the company laid off 180 full and part-time workers and cancelled its IPO. By late 2010, it faced a cash flow crisis and further questions about its viability.

On October 25, 2010, Brian Harrison, then Solyndra’s president and CEO, wrote to an Energy Department loans office staffer concerning the reports of its troubles. Harrison said he had recently met with Secretary Chu, but “did not have an opportunity to speak with him privately.”

“The reason for this note is to make you aware that Solyndra has received some press inquiries about rumors of problems (one of them with quite accurate information) and we have received in bound calls from potential financial investors,” Harrison wrote.

“It is our belief that it is better for all parties to get in front of the story and control the messaging rather than get behind the story and on the defensive,” he wrote, saying the company was crafting public statements. “There will be no mention of the DOE,” he wrote.

Solyndra’s financial spiral continued into 2011, prompting investors including Kaiser to back it with a $75 million infusion – and the DOE, simultaneously, to refinance its loan. That refinancing strategy, spelled out in the newly released records, shows how the Energy Department allowed those $75 million investors to stand in line first, with taxpayers second, in event of bankruptcy.

Under the refinancing, the Energy Department began sitting in on Solyndra board meetings.

“Solyndra is experiencing a significant liquidity crisis and has embarked on a restructuring plan premised on cost reduction, new money investment, and conversion of debt to equity,” said a draft restructuring proposal developed by the Energy Department.

“Argonaut,” Kaiser’s company, and “DOE aim to agree on an approach to allow the Company the opportunity to reach cash flow break-even during 2012,” it continued. Since March, Kaiser has declined interview requests. Solyndra said political ties were not a factor in its DOE award, and the White House has noted that some other key company investors have historically backed Republicans.

Solyndra never turned its finances around. On August 31, the company collapsed, firing workers on the spot and spiraling toward bankruptcy, just as some auditors and analysts had feared.

As word of Solyndra’s implosion hit California television stations that morning, Jeff Navin, deputy chief of staff to Secretary Chu, sent a brief note to colleagues.

“It’s just broke,” he wrote.

Republicans call for probe of Obama’s green car program

United States — 2011-11-02T11:08:43-04:00

Republicans are calling on Congressional investigators to expand their probe of the Obama Administration’s “green energy” loan program to include Fisker, the start-up electric car company that received more than $500 million in federal support but is assembling its high-end sports sedan in Finland.

“We need to extend the investigation,” Rep. Tim Murphy, a Pennsylvania Republican who sits on the committee that has been investigating the government’s loan program, told ABC News in an interview for "World News" and "Nightline". “If they couldn’t find someone to build the car in the U.S., then don’t do it. Find another way. Find something else.”

Fisker is one of two start-up electric car companies that combined have been offered $1 billion in federal loans through an Energy Department program meant to create jobs and improve air quality through the fledgling alternative energy industry. The loan program has faced intense scrutiny from Congress since the first loan recipient, the solar manufacturing firm Solyndra, declared bankruptcy last month.

A House Energy and Commerce Committee panel has held a series of hearings and released thousands of pages of documents subpoenaed from the Obama administration that showed there were deep divisions about the wisdom of loaning Solyndra $535 million. ABC News reported Thursday that there are now emerging questions about the progress of Fisker Automotive, which has experienced delays with the production of its $97,000 hybrid electric sports sedan. The company has yet to make public even a picture of its next car — a more affordable family car that is supposed to be manufactured in Delaware.

Fisker received its government loan even after company executives told Energy Department officials that they had hired a company in Finland to assemble their first car, the Karma. Administration officials said they approved the deal on the condition that none of the government loan money would be spent on overseas assembly. They also noted the promise of the second line of cars, which they predict will eventually create thousands of jobs at a shuttered GM plant in Delaware.

“Not a single dollar of the [Department of Energy] DoE loans has been, or will be, spent outside of America," a statement from Fisker spokesman Roger Ormisher said. "All expenditures are reviewed by [PriceWaterhouseCoopers] on behalf of the DoE."

“After receiving the DoE loan,” said the statement, “Fisker made it a priority to create U.S. jobs, which led to the purchase [of] its own assembly plant in Delaware where we plan to establish production of our second, higher volume, line of vehicles.” Fisker officials said that the company has already hired hundreds of workers in the U.S., most in engineering and marketing jobs, though about 100 assembly line workers have been hired to start prepping the Delaware facility.

Press Secretary Jay Carney told ABC News White House Correspondent Jake Tapper Friday that the funds provided to Fisker "are not being used, as I believe the CEO said to ABC, are not being used for its facility in Finland.”

Murphy said the Energy Department’s position amounted to “splitting hairs.”

“Ultimately, American taxpayer dollars went to a Finnish automaker to build high-end luxury automobiles for Hollywood,” he said.

Concerns about the fate of federal loans to companies such as Solyndra and Fisker have become grist for campaign trail attacks aimed at President Obama. Former Massachusetts Gov. Mitt Romney joined those calling on more scrutiny from Congress.

“The U.S. government shouldn't be playing venture capitalist,” Romney wrote in an op-ed first published in the Orange County-Register. “It’s not merely that government bureaucrats are bad at picking winners. The very process invites cronyism and outright corruption.”

Tesla Also Benefitted From Green Energy Loan

ABC News got an early look at both the Fisker Karma, the first 40 of which were delivered to dealers last week, and of the new family sedan being built by a rival start-up company, Tesla, which also benefitted from a green energy loan.

Silicon Valley-based Tesla plans to build 20,000 vehicles a year at a massive shuttered auto plant it bought in California, which is now being prepared for production to start next year. The company was co-founded by internet billionaire Elon Musk, who told Nightline two years ago he was driven by concerns about global warming.

“I think socially it is very much the right time,” he said.

Tesla has already been selling its high-priced Roadster to a niche market that includes George Clooney and Arnold Schwarzenegger. But company executives told ABC News that its future depends on the success of the family sedan, called the Model S, which was only recently unveiled to the public. Priced at around $57,000, it is styled to compete with luxury mid-sized cars including BMW and Mercedes.

“We’re developing a higher volume model, which is going to allow us to build that vehicle at less than half the cost of our first,” said Diarmuid O’Connell, Tesla’s vice president of corporate and business development. He says the company will use the smarts of American high tech wizards to revolutionize the way cars are made, building its new sedan from the ground up.

But some industry analysts, including Alexander Taylor, the auto columnist at Fortune magazine, said that Tesla has put itself at risk by trying to reinvent the way cars are assembled by eliminating outsourcing of components.

“This is a huge learning curve, even for an established company like GM or Ford,” Taylor said. “For a startup company like Tesla, it’s almost impossible to do it right the first time around.”

Tesla’s O’Connell disputes that, calling his company a “disruptive” force in the auto industry, compelling it to pursue electric technology. He said that, even though it has yet to make any profit, the company is meeting expectations and its government loan is not in jeopardy.

“We have a strong track record,” he said. “We’ve attracted private investors. We’re a public company whose records and performance can be judged by anybody.”

However, Tesla has yet to see a profitable quarter, and its own government filings laying out the risks faced by investors acknowledge that a lot could still go wrong. “We have a history of losses and we expect significant increases in our costs and expenses to result in continuing losses for at least the foreseeable future,” the company’s June filing with the Securities and Exchange Commission says.

In an interview on ABC’s Nightline, O’Connell is asked how the company will repay the loan if it doesn’t make a profit.

“We will make a profit. That’s the plan, and we’re executing it,” he said.

The Energy Department has said that projects like those of Fisker and Tesla are risky by their nature, but that the taxpayer backed financing will ultimately pay off.

Yet the Government Accountability Office, the investigative arm of Congress, has already raised questions about the Energy Department’s oversight of the $25 billion Advanced Technology Vehicles Manufacturing loan program.

An audit this year by the GAO criticized the Energy Department for not keeping close enough tabs on its fleet of auto loans — including those to Fisker and Tesla — to ensure they meet benchmarks. “DOE cannot be assured that the projects are on track to deliver the vehicles as agreed,” said the GAO report examining the department’s ATVM program. “It also means that U.S. taxpayers do not know whether they are getting what they paid for through the loans.”

Obama Administration defends Fisker cars from Solyndra comparison

Finland — 2011-10-25T17:31:06-04:00

The Obama administration has defended its decision to allow Fisker Automotive to assemble its high concept electric sports sedan, the Karma, in Finland, even though U.S. taxpayers had made a major investment in the car's development — saying none of the American money was spent on the car's overseas assembly.

But Republican critics this weekend challenged the administration's explanation, saying federal loans should have only supported applicants who would be building their cars on American soil.

"The Department of Energy and Fisker executives are splitting hairs about where the money went," said Rep. Tim Murphy, a Pennsylvania Republican who sits on the House committee that has been investigating the Obama Administration's "green energy" loan program. "Ultimately, American taxpayer dollars went to a Finnish automaker to build high-end luxury automobiles for Hollywood."

The criticism came on the heels of online reports published Thursday by ABCNews.com in partnership with the Center for Public Integrity's iWatch News, and a Friday report on ABC News' "Good Morning America" about Fisker Automotive, the recipient of a "green energy" loan in 2010. The reports quoted auto industry experts who said Fisker's loan invited comparisons to the ill-fated Energy Department loan to Solyndra, because delays and obstacles have hampered progress on the luxury electric car, called the Karma. Solyndra, a solar panel manufacturer that received $535 million in taxpayer support, declared bankruptcy earlier this year. That federal loan is now the subject of investigations by the Justice Department and by inspectors general from the Energy and Treasury departments.

On Saturday, The Washington Post followed with the discovery that the Energy Department quietly eased expectations for Fisker's projected car sales volume after it conditionally approved the loan, and made allowances for scaling back projections in the final loan agreement.

Both the automaker and the Obama administration spent the past few days trying to head off the Solyndra comparisons. They defended the administration's effort to give a boost to start-up companies in the alternative energy sector. And they sought to clarify the decision to allow the loan to be approved even after the company had announced its decision to build the Karma in Finland. While the Department of Energy did set aside about $170 million to finance the development of the Karma, they said, the deal included an agreement stating that none of that money would be spent on the assembly of the car, which was to occur at the overseas factory. They also noted the promise of a second line of cars, which would eventually be assembled by U.S. workers at a shuttered GM plant in Delaware.

"Not a single dollar of the [Department of Energy] DoE loans has been, or will be, spent outside of America," a statement from Fisker spokesman Roger Ormisher said. "All expenditures are reviewed by [PriceWaterhouseCoopers] on behalf of the DoE." Press Secretary Jay Carney told ABC News White House Correspondent Jake Tapper Friday that the funds provided to Fisker "are not being used, as I believe the CEO said to ABC, are not being used for its facility in Finland."

"There are already jobs on the ground in the United States both directly at the plant in Wilmington [Delaware] and at the headquarters on the West Coast," Carney said. "The model that is being built in Finland, relies on suppliers and others here in the United States before it is manufactured … This company is doing exactly what it said it would do."

Some of Obama's political opponents appeared unsatisfied with the explanation that the tax money would be used only on work on the Karma performed in the U.S.

"I'm sure the millions of unemployed workers in every state will want to learn why the Obama administration gave half a billion dollars to finance 'green' cars built in Finland," wrote Sarah Palin, in a Facebook post.

On the campaign trail Friday, former Massachusetts Gov. Mitt Romney also questioned the $529 million loan to Fisker, a company that is being financed in part by a Silicon Valley venture capital firm that has Al Gore as a board member.

"I believe in free enterprise, not in crony capitalism," Romney said. Fisker says the work in Finland is being supported by some of the $600 million in private financing the company has raised. The company's founder, Henrik Fisker, told ABC News that the car could not have been built without the U.S. government assistance. "I wouldn't sit here today with a finished car and with this much being done without that loan," Fisker said.The company's statement also noted that it has created hundreds of jobs in the U.S. for the purpose of designing, engineering and marketing the car, and to supply parts. Though in the statement, the company appeared to suggest that fewer than half of the parts for the car were actually coming from American suppliers. "More than 45 percent of the components of the Fisker Karma sedan are manufactured by approximately 40 suppliers located in the U.S.," it said.

As it worked to answer questions about its decision to assemble the Karma in Finland, Fisker executives were also trying to explain the long awaited conclusions of the Environmental Protection Agency, which certified the car last week. In its fuel efficiency ratings, the EPA said the Karma would get only 20 miles per gallon when drivers engage its gasoline engine. (The EPA found the electric engine has a range of about 32 miles before losing its charge, though Fisker estimates that range at closer to 50 miles.)

The Karma's gasoline engine, incidentally, was purchased from General Motors and is American made.

Energy's risky $1 billion bet on two politically-connected electric car builders

2013-03-15T16:42:06-04:00

Standing in a shuttered General Motors plant in Wilmington, Del., Vice President Joe Biden heralded a half-billion-dollar Department of Energy loan that would transform the idled site into a production line for electric cars.

“Folks, we're making a bet,” Biden said on Oct. 27, 2009. “We're making a bet in the future, we're making a bet in the American people, we're making a bet in the market, we're making a bet in innovation.”

That loan is part of a $1 billion bet the Energy Department has made on two politically connected California electric carmakers producing sporty — and pricey — cutting-edge autos. One is Fisker Automotive, the project heralded by Biden and backed by a powerhouse venture capital firm whose partners include former Vice President Al Gore and a campaign donor to President Obama. The other is Tesla Motors, whose prime backers include a major fundraiser for Obama and Google co-founders Larry Page and Sergey Brin.

An investigation by iWatch News and ABC News found that the DOE’s bet carries risks for taxpayers, triggering concern from industry observers and government auditors.

Fisker is more than a year behind rolling out its $97,000 luxury vehicle bankrolled in part with DOE money. While more are promised soon, just two of its cars have been delivered, including one to movie star Leonardo DiCaprio. And Tesla’s own SEC filings say it has lost money every quarter and states: “We have a history of losses and we expect significant increases in our costs and expenses to result in continuing losses for at least the foreseeable future." While Tesla’s major DOE funding is intended to help it mass produce a new $57,400 Model S sedan, the company has no experience in a project so vast.

There is intense scrutiny of the decisions made by the Department of Energy as it invests billions of taxpayer dollars in alternative energy. The questions follow the administration’s failed $535 million investment in solar panel maker Solyndra. The company’s collapse, bankruptcy and raid by FBI agents generated a litany of questions about how the Energy Department doles out billions in highly sought after green energy seed money.

A key question, experts and investigators say, is whether another Solyndra is in the offing.

In interviews, executives with Tesla and Fisker said comparisons to Solyndra are unfounded. Each said the government’s investments will ultimately pay off by supporting a fleet of electric cars that will ease the nation’s dependence on fuel and benefit the environment.

“It’s absolutely a worthwhile risk,” said Diarmuid O’Connell, vice president of corporate and business development for Tesla Motors. “I absolutely believe it was a good bet for American taxpayers.” Tesla has said its mass production of the sedan will ultimately lead to profitability.

Henrik Fisker, the renowned auto designer who founded the car company that carries his name, said his company holds tremendous promise and has accumulated $600 million in private financing.

When asked directly by ABC News if taxpayers should worry about the more than $500 million in federal funds on the line, he was emphatic:

“No, I don’t think they need to worry about it,” Fisker said.

When asked if Fisker might be the next Solyndra, he said, “Absolutely not.”

On Wednesday, the company disclosed that production of the sedan has been pushed to 2013.

By some key measures, Tesla is ahead of Fisker. More than 2,000 of its first electric cars are on the road, while Fisker is just starting to get its first cars into showrooms. Tesla is further along in advancing a second, lower cost model. While both firms boast of big dollar private investments, Tesla's vulnerabilities are more publicly visible through its SEC filings, in contrast to the privately held Fisker. Fisker is considering going public.

Energy Department officials said such loans, by their nature, are risky because the department is financing innovative, potentially game-changing technologies that could deliver long-term benefits. They said neither firm has missed a loan payment, or sought help from the department to restructure their lending agreements.

Energy officials told iWatch News and ABC News they are closely monitoring the progress of the companies, and despite some concern about delays, they remain optimistic that the two companies can succeed.

"From well established names like Ford to innovative startups like Tesla and Fisker, America's auto industry is being reinvented," LaVera Damien of Energy said in a statement. "While supporting innovative technologies always carries a degree of risk, these investments deliver long-term benefits."

Yet an audit this year by the Government Accountability Office, the investigative arm of Congress, criticized the Energy Department for not keeping close enough tabs on its fleet of auto loans — including those to Fisker and Tesla — to ensure they meet benchmarks. The funding was issued under the $25 billion Advanced Technology Vehicles Manufacturing loan program, one piece of a giant umbrella of DOE loans and loan guarantees going out the door.

“DOE cannot be assured that the projects are on track to deliver the vehicles as agreed,” said the GAO report examining the department’s ATVM program. “It also means that U.S. taxpayers do not know whether they are getting what they paid for through the loans.”

Tesla and Fisker stand in rare company in securing the ATVM loans. To date, records show, more than 95 percent of applicants are still awaiting approval or have been rejected.

Between them, Fisker, at $529 million, and Tesla, at $465 million, have secured nearly $1 billion to jump-start production of their cars. Combined, the companies have already drawn down more than $300 million—Fisker at $192 million and Tesla $110 million, Federal Financing Bank records show.

Such funding delivers cachet to upstart companies like Tesla and Fisker, helping them secure even more private money. And they benefit from a cut-rate government interest loan that for each company has fluctuated from 1 percent to 3 percent.

Industry watchers question whether the Department of Energy had the auto industry know-how to make an informed decision, and they worry that another government-backed failure could damage the very industry the program intended to help.

“I think we'll absolutely end up having our version of Solyndra in the transport world based on the way the DOE has, and seems to still be executing its loan program without enough veteran diligence in the process,” said Chelsea Sexton, an industry expert and advocate for alternative fuel vehicles.

The majority of the DOE funding for Fisker is earmarked for the company to develop a less costly, mass market sedan, the Nina. The car is to be produced at the shuttered GM plant in Delaware. The Energy Department approved the loans for an auto that, even two years later, has not been publicly revealed.

Fisker said the Nina has been designed and built, but it remains under wraps to maintain a competitive edge.

While Tesla is ahead of Fisker — its $109,000 Roadster is already on the road — Sexton also has questions about its prospects even though her husband works for the company. Tesla plans to use the bulk of the DOE loan to develop the less expensive Model S, a car that won’t hit full production until next year.

“None of us with any experience in the industry think there’s any sort of guarantee they’ll make it,” she said. “It looks pretty good right now, they’re building out their plant, things seem to be on track, so we’re all encouraged. But you know, we watched GM and Chrysler go bankrupt.”

Each DOE loan backed two projects for the companies

Fisker’s loan commitment, of $528.7 million, was announced in September 2009. The loan was broken in two parts.

In the first, Fisker would use $169.3 million for engineering integration costs to complete its first vehicle, the flashy Fisker Karma. Engineering work would take place in Pontiac, Mich., with support from the company headquarters in Irvine, Calif.— and final assembly completed overseas.

The luxury Karma, with a base price of $96,895, was supposed to be in showrooms last year, said the Department of Energy press release announcing the government’s loan commitment. “The four-door Karma is scheduled to appear in showrooms in summer 2010,” the DOE said. The company said a shipment of 40 cars just arrived in the U.S.

A month later, in October 2009, Biden traveled to his home state, Delaware, to herald Fisker’s plan to convert the closed GM factory to develop the Nina.

“Thanks to a real commitment by this administration, loans from the Department of Energy, the creativity of U.S. companies and the tenacity of great state partners like Delaware — we're on our way to helping America's auto industry reclaim its top position in the global market,” Biden said.

The plant re-opening followed a heavy lobbying push by Delaware politicians from both parties. In September 2009, Republican Rep. Mike Castle wrote to Energy Secretary Steven Chu, saying the Fisker proposal had “great merit,” and urging Chu to give the company “careful consideration” for the loan.

At the ceremony, the governor and state politicians took turns, along with Biden, to proclaim the project to cheering blue collar workers. They said it would produce thousands of jobs.

While Fisker has hired marketing, design and engineering teams in the U.S., the auto plant jobs in Wilmington right now number about 100. Meanwhile, Finland has gotten 500 jobs to build the Fisker car. Fisker said he remains convinced the Delaware jobs will come.

The Department of Energy loan to Fisker closed in April 2010, and again Biden took center stage in a statement announcing the loan. “The story of Fisker is a story of ingenuity of an American company, a commitment to innovation by the U.S. government and the perseverance of the American auto industry,” said the vice president.

ABC News sent questions to the White House Monday and requested an interview with the vice president. Biden was not made available but his office issued a statement: “The Office of the Vice President did not encourage the Department of Energy to choose any particular company over any other but, like others in the administration, supported the department’s loan program and the creation of car manufacturing jobs in the United States.”

Executives from Tesla and Fisker said they won government support because their projects had the best shot at success. They said the involvement of well-connected figures in their companies should not suggest they attempted to use special influence to secure the loans.

Beyond Biden, more political connections

Both companies have political heavyweights behind them. One of Fisker’s biggest financial supporters, records show, is the California venture capital firm Kleiner Perkins Caufield & Byers. The firm financially supports numerous green-tech firms, records show.

Kleiner Perkins partner John Doerr, a California billionaire who made a fortune investing in Google, hosted Obama at a February dinner for high tech executives at his secluded estate south of San Francisco. Doerr and Kleiner Perkins executives have contributed more than $1 million to federal political causes and campaigns over the last two decades, primarily supporting Democrats. Doerr serves on Obama’s Council on Jobs and Competitiveness. Doerr has not replied to interview requests since March.

Former Vice President Al Gore is another Kleiner Perkins senior partner. Gore could not be reached for comment.

“There certainly have been suspicions around Fisker because their major venture investor is Kleiner Perkins, who has Al Gore as a partner and is certainly politically connected in general,” said industry observer Sexton. “Whether that played a role or not is up to the DOE to explain.”

For months, as iWatch News and ABC News have explored how politically connected companies secured DOE funding, Energy Department officials have been steadfast: Politics never entered the picture. Each funded project was screened by professionals and decided on the merits.

Tesla brings political pull, as well. Steve Westly, who has “bundled” hundreds of thousands of dollars for Obama, sat on Tesla’s board from March 2007 to December 2009, a time period in which DOE announced its loan commitment to the Silicon Valley company. His Westly Group was also a financial supporter of Tesla Motors until Tesla went public in 2010, and Westly himself continues to invest in the company. He now serves on an advisory board to the Energy Secretary.

Westly has declined interview requests since February.

Tesla’s founder and CEO, Elon Musk, is a hearty political contributor who has primarily backed Democrats, including Obama. According to published reports, another Tesla investor is Nick Pritzker, a donor to Obama and a cousin of Penny Pritzker, the national finance chair of Obama’s 2008 campaign.

O’Connell, the Tesla executive, said political muscle played no role in the company’s award of the $465 million in loans, noting that the initial application was filed under Bush — though landed under Obama.

The president has backed electric car makers as part of his long-shot goal of 1 million electric vehicles on the road by 2015. In his budget earlier this year, Obama pitched handing consumers a $7,500 rebate when they buy an electric car. Tesla and Fisker would be among electric car makers to reap a windfall from that rebate, helping them sell cars on the back end after securing nearly $1 billion in government support to build them on the front end.

Tesla’s bet on a sedan

In Tesla’s case, as in Fisker’s, the government loan was broken into two parts.

The first chunk, for $365 million, is to finance a manufacturing facility for the Tesla Model S sedan, Tesla’s lower-cost answer to its earlier $109,000 Roadster.

The other $100 million funded a facility to manufacture battery packs and electric drive trains used by Teslas and other automakers, including the Smart Fortwo city car by Daimler. Tesla points to such partnerships — along with investments from Toyota and Panasonic — as signs that long established companies believe in its cars.

“We have a demonstrated track record on the financial side,” O’Connell said, “that should give great comfort to the American taxpayer, as they think about a loan that’s helped us to accelerate our business model.”

Unlike Fisker, Tesla is a public company. Its SEC filings offer a more sober assessment of the obstacles it faces on the road to profitability.

Tesla has yet to turn a profit and suffered net losses in each quarter. “Since inception and through the three and six months ended June 30, 2011, we had accumulated net losses of $522.8 million,” its most recent 10-K form shows.

It has no experience in high volume manufacturing of electric cars, its filings say — the very project it sees as the path toward profitability. Tesla said it encountered “significant delays” in launching the Roadster — and acknowledges that developing the Model S will be a more complex undertaking. The newer car is the project financed by DOE.

“We have no experience to date in high volume manufacturing of our electric vehicles,” Tesla’s SEC filings say. “Our future business depends in large part on our ability to execute on our plans to develop, manufacture, market and sell our planned Model S electric vehicle.”

The Roadster was produced in small quantities with the body assembled by Lotus in the United Kingdom and final assembly by the company at its facility in Menlo Park, Calif. The Model S, by contrast, will have much greater volume and be manufactured in Fremont, Calif. The company said production will begin next year.

“As a result,” Tesla wrote, “the non-powertrain portion of the production model for the Model S will be substantially different and significantly more complex than the non-powertrain portion of the production model for the Tesla Roadster.”

The company added, “We may experience similar delays in launching the Model S, and any such delays could be significant.”

Industry observers say Tesla’s grand plan to launch the Model S is fraught with challenges.

“They want to scale up production from 1,000 cars a year to 20,000 cars a year, that's going to be a very hard trick for them to do. They want to make most of their own parts; Detroit can't do that because it's too inefficient. And Tesla wants to own its own dealerships. Henry Ford tried that back in the 1920s and gave it up because it was too difficult,” said Alex Taylor, a veteran auto industry analyst and writer.

Sexton, another industry watcher, said questions remain even as Tesla forges partnerships with experienced companies.

“Tesla is burning a lot of cash right now, no question. They're just about sold out on their first car and the second car doesn’t come for close to a year. So they can only burn cash for that next nine months to a year or so,” said Sexton.

O’Connell said the SEC filings present worst case scenarios. He said the company, and its major investors, believe the risk will reap rewards.

“It is a risky venture in the best heritage of some of the other great companies that have grown up in the Silicon Valley,” he said. “This is a place where people propose ideas, finance those ideas, achieve milestones, attract a greater finance, and succeed along the way.”

Still, questions exist over how well the Energy Department is watching companies in its ATVM portfolio. The GAO’s February report said the department lacked the engineering expertise needed to fully monitor progress of loan recipients.

This approach, the GAO concluded, “may not be sufficient to ensure that the vehicles are delivered as agreed because their expertise is largely financial and not technical.”

The GAO suggested the Energy Department take two steps: to accelerate efforts to retain more engineering experts to track progress, and develop more quantifiable performance measures for its ATVM program goals.

Jonathan Silver, then executive director of DOE’s Loan Programs Office, disagreed with both GAO suggestions, saying the department was carefully monitoring progress, had employed engineering reviews when required and was on track. “DOE is very proud of the fact that the program was set up in record time,” Silver wrote. He has since resigned.

Energy Dept. ignored warnings on Solyndra, say treasury emails

2011-10-14T17:42:32-04:00

As it scrambled to save the flagship company of the Obama administration's green energy program, the Energy Department ignored repeated warnings from top Treasury Department officials that it was not following guidelines in refinancing Solyndra's half-billion dollar federal loan, a Congressional hearing Friday revealed.

When the DOE refinanced the government's $535 million loan to the California solar panel manufacturer in February, it agreed to let investors, including a major Obama fundraiser, stand in line before the public to recoup the first $75 million of their investment should the company fail. Solyndra declared bankruptcy six weeks ago.

During a House Energy and Commerce hearing on the refinancing of the loan Friday, Rep. Cliff Stearns, R.-Fla., chairman of the Committee's Oversight and Investigations Subcommittee, asked Treasury Department CFO Gary Burner if he had ever seen another case where taxpayer money was subordinated to that of investors.

"No sir, I have not," said Burner, who has been with the department for 28 years, becoming chief financial officer five years ago.

Internal Treasury Department documents released by the committee also show that officials warned DOE and the White House about the refinancing.

The Office of Management and Budget also raised questions, emails show. In December 2010, as DOE moved to restructure the loan, an OMB official wrote: “There are some questions at the staff level about how DOE is going about the restructuring for Solyndra. At least one involves the legal question of what [the statute] means for their plan to make some of the debt “junior” to the new debt. … I think they have stretched this definition beyond its limits.”

The refinancing is one piece in a long string of favorable terms the government granted to Solyndra, a start-up solar panel firm that secured the Energy Department's first loan guarantee in March 2009 in what was touted as a signature project for the green energy movement. DOE pressed ahead with that financing — and everyone from Energy Secretary Steven Chu to President Obama made personal trips to the California plant — despite repeated red flags the loan was a risky bet.

Now the company has collapsed and Congress, the FBI and the inspectors general of the Energy and Treasury departments are all investigating the loan. The head of the Energy Department's loan program and Solyndra's CEO have both resigned in recent weeks.

Some Energy and Commerce Committee members, including Stearns, contend the DOE violated the Energy Policy Act of 2005 during the refinancing by putting investors in line before taxpayers to recoup any recovered funds. Those investors — including a major fundraiser for President Obama, George Kaiser — provided $75 million to help prop up Solyndra in February at the time of the government's refinancing.

"This seems to me a clear violation of the Energy Policy Act of 2005, which says DOE shall consult with OMB and the Secretary of the Treasury before granting any deviation in the loan," said Fred Upton, R-Mich., chair of the committee. "Putting the taxpayers at the back of the line behind private investors in the event of liquidation is not only a deviation, it is apparently unprecedented."

Questions From Treasury About Loan

Records show Treasury raised questions from the start about DOE's plan. On February 10, 2011, CFO Burner sent an email to DOE officials after learning about the refinancing. "We understand that these adjustments may include subordination of Solyndra's $535 million reimbursement obligation to DOE and possibly the forgiveness of interest. Unless DOE has other authorities, these adjustments may require approval of the Department of Justice," he wrote.

Treasury's questions persisted. In one pointed memo shortly before Solyndra declared bankruptcy this summer, a top Treasury official wrote to the White House to make clear that the decision to restructure the deal did not have Treasury or Justice Department approval -- despite early suggestions that approval from both agencies may be required.

"To our knowledge, that has never happened," wrote Mary J. Miller, Treasury's assistant secretary for financial markets. "While I expect that DOE has a view about why loan subordination can occur without DOJ approval or Treasury consultation, I wanted to correct any impression that we have acquiesced in the steps to date."

In another email in August, a Treasury lawyer weighed in: “But I will bet a quarter that the DOE lawyers have some kind of theory on how whatever restructuring they have done and whatever they are considering doing does not violate these requirements. Can’t wait to hear it.” On Friday, Burner and a second witness, Gary Grippo, Treasury's Deputy Assistant Secretary for Fiscal Operations and Policy, said the department's role was to advise DOE and flag concerns. But they said Treasury could not legally reject the refinancing.

The Department of Energy said its refinancing was legal, and DOE has crafted a six-page memo outlining its justification. Officials say they conducted a "careful analysis" before moving and decided they had "broad authority in a distressed situation to take action that will protect the taxpayer." In the end, the Energy Department said, it decided to back a financially strapped company as an effort to save the project.

"As is typical in cases where distressed companies seek new debt financing, the new financing would have priority, in the event of liquidation, over the company's existing debt — including the DOE loan guarantee (the investors' almost $1 billion of original equity investment was, and remains, subordinated to the debt owed to the government)," the department said in the memo.

"DOE faced a choice: whether to (1) refuse to allow the restructuring, thereby ensuring that Solyndra would close its doors immediately, and that the U.S. taxpayer would recover only a modest amount of the loan; or (2) allow the company to accept the emergency financing, thereby giving it and its almost 1,000 workers a fighting chance at success, and the government a higher expected recovery on its loan," the department wrote.

Questions About Political Influence

In March, The Center for Public Integrity's iWatch News, in partnership with ABC News, began exposing questions about the role political influence may have played in Department of Energy loan projects, including Solyndra's selection as the Obama administration's first loan guarantee recipient. DOE said its recipients won awards on merit, and that it backs innovative and potentially risky projects as environmental game changers.

The House Energy and Commerce Committee has sought information from Solyndra's prime investors, including Oklahoma oil billionaire Kaiser, a "bundler" of campaign contributions to the president in 2008.

Damien LaVera, an Energy Department spokesman, said politics never entered the decision to grant the loan or restructure it earlier this year. LaVera said the department decided it was worth trying to salvage the government's initial investment. "[P]olitical or optical considerations took a backseat to putting the company and its workers in a better position to succeed and repay the loan," he said.

Last week, Jonathan Silver, executive director of DOE's Loans Programs Office, resigned. Silver was not on board when the Solyndra loan was issued, but he was when it was refinanced earlier this year. Before his resignation, Silver staunchly defended the loan refinancing and had predicted Solyndra would succeed.

Solyndra CEO Brian Harrison also resigned last week. In papers filed with a bankruptcy court Wednesday, Solyndra said Harrison left his post on Friday, Oct. 7, "as contemplated even before these cases were commenced."

Solyndra filed the papers in a Delaware court in response to a motion by the Department of Justice to appoint a trustee to oversee the company's bankruptcy case. The Justice Department filed its motion after Harrison and Solyndra's CFO, W.G. Stover, invoked the Fifth Amendment and refused to answer questions from the House Energy and Commerce Committee during a Sept. 23 hearing. The company also refused to answer key questions in the bankruptcy proceeding.

A Solyndra attorney told U.S. officials the reason he would not identify the company's customers or talk about its contracts was because "the topic would likely be the subject of investigation and possibly litigation," according to a court filing.

Solyndra CEO Brian Harrison resigns

2011-10-14T09:37:14-04:00

The CEO of Solyndra, a California-based solar energy company that received a controversial $535 million loan guarantee from the Obama administration, has resigned.

In papers filed with a bankruptcy court Wednesday, Solyndra said that Brian Harrison had left his post on Friday, Oct. 7, "as contemplated even before these cases were commenced." Solyndra shut its doors and declared bankruptcy six weeks ago.

Solyndra filed the papers in a Delaware court in response to a motion by the Department of Justice to appoint a trustee to oversee the company's bankruptcy case. The Justice Department filed its motion after Harrison and Solyndra's CFO, W.G. Stover invoked the Fifth Amendment and refused to answer questions from a Congressional committee probing the Solyndra loan during a Sept. 23 hearing. The company is also under investigation by the Justice Department, the Treasury Department and the Department of Energy's Inspector General.

The Obama administration had selected Solyndra as the first to receive a loan under an Energy Department program designed to provide government support to companies that would create jobs while generating energy from cleaner sources, such as solar, wind and nuclear. President Obama personally visited the Solyndra complex, hailing it as a leader in this emerging field.

In August, though, Solyndra abruptly shut its doors, laying off 1,100 workers. Within days, it had declared bankruptcy. The House Energy and Commerce Committee's investigative subcommittee has held two hearings intending to unwind the deal and understand how signs of Solyndra's financial trouble had been overlooked by the Department of Energy.

Another hearing is planned Firday morning, when the committee will explore concerns that DOE refinanced the loan — putting investors in line before taxpayers — without approval from the U.S. Treasury Department. The committee has called Treasury officials to testify.

A week after Solyndra's bankruptcy filing, Federal agents searched the company's California headquarters, and visited the homes of Harrison, company founder Chris Gronet and a former executive.

Solyndra spokesman David Miller confirmed agents visited Harrison's home on the same day the FBI and Energy Department Inspector General seized boxes of records from the company's headquarters.

"Yeah, they did go to his house and speak to him briefly," Miller said. "I don't know what they may have taken. I believe they took a look at his computer."

Julie Sohn, a spokeswoman with the FBI in San Francisco, declined to discuss details of the government's investigation. "Unfortunately, our affidavits are still sealed so we can't go into any details," Sohn said.

In March, ABC News, in partnership with the Center for Public Integrity's iWatch News, began reporting on simmering questions about the role political influence may have played in Solyndra's selection as the Obama administration's first loan guarantee recipient.

"[P]olitical or optical considerations took a backseat to putting the company and its workers in a better position to succeed and repay the loan," he said.

The House Energy and Commerce Committee has sought information from Solyndra's prime investors — including Oklahoma oil billionaire George Kaiser, a bundler of campaign contributions to the president in 2008.

Fundraiser for Obama urged Solyndra deal from the inside

2012-10-05T12:04:27-04:00

An elite Obama fundraiser hired to help oversee the administration’s energy loan program pushed and prodded career Energy Department officials to move faster in approving a loan guarantee for Solyndra, even as his wife’s law firm was representing the California solar company, according to internal emails made public late Friday.

“How hard is this? What is he waiting for?” Steven J. Spinner, who worked in the Obama administration's energy loan guarantee program, wrote in August 2009. “I have OVP [the Office of the Vice President] and WH [the White House] breathing down my neck on this.” Spinner, a high-tech consultant and energy investor who raised at least $500,000 for Obama's campaign, joined the DOE in April 2009.

The $535 million loan to Solyndra was ultimately approved in 2009 and for months was touted by President Obama as a model of his efforts to create new jobs in the emerging field of clean energy. But in late August, the company abruptly shut its doors and days later declared it was filing for bankruptcy. Now the loan, part of the federal stimulus to jolt economic recovery and create jobs, is the subject of multiple investigations, by Congress and by the Justice Department, and taxpayers may be on the hook.

In one of the new emails shared with iWatch News, ABC News and other news outlets Friday, the White House appears to be bracing for the political fallout – one high ranking energy official in the White House warns shortly before Solyndra’s bankruptcy, on Aug. 26, that what’s coming is a “*#~@ show” and “a mess.”

In the lengthy email discussions that occurred in the days before the Solyndra loan closed in September 2009, Spinner emerges as a key figure in advocating for getting the deal done, apparently in an effort to score the loan as a political victory for President Obama. Many of the emails surround his efforts to coordinate plans for either President Obama or Vice President Biden to announce it as the administration’s first loan approval – one that he repeatedly notes will create clean energy jobs.

It is Spinner, for instance, who pushes for a “big event” with “golden shovels, bulldozers, hardhats, etc.”

He also corresponds with career Energy Department loan officials who are making the final decisions on the Solyndra loan. In one instance, he writes, “Hopefully, this might spur [the Office of Management and Budget] a little faster to help the closing.”

The emails occurred less than two weeks after Spinner received a three-paged ethics agreement in which he pledges he will “not participate in any discussion regarding any application involving [his wife’s law firm] Wilson [Sonsini Goodrich & Rosati].” That opinion, obtained by iWatch News and ABC News under the Freedom of Information Act, was written by Matt Rogers, then senior advisor to the energy secretary for Recovery Act issues.

Recovery Act records show Allison Spinner's law firm, Wilson Sonsini, received $2.4 million in federal funds for legal fees related to the $535 million Energy Department loan guarantee to Solyndra. That ethics agrement said his wife would forgo pay "earned as a result of its representation of applicants in programs within your official duties." Courtney Dorman, a spokeswoman for Allison Spinner's law firm, Wilson Sonsini, said the firm also took strides to avoid conflicts, establishing a wall between her and client matters involving the Energy Department while Spinner was in office.

The law firm worked on the solar company's failed public offering, the records show. And it also provided Solyndra with outside counsel on the DOE loan guarantee transaction. The company’s $2.44 million payment was generated by the Energy Department's stimulus loan guarantee to the solar panel firm.

Allison Spinner "was not involved with that transaction, nor has she ever worked with Solyndra in any capacity," Dorman said.

Spinner frequently corresponded with Rogers about Solyndra even after the ethics letter. On August 30, 12 days after the ethics letter, Rogers wrote to him about the pending Solyndra press event: "Yes, indeed, you have us way ahead of the curve. Regards, mr."

Spinner took steps to further disclose his potential conflicts in an email dated Sept. 23, 2009 – but only after the Solyndra loan had closed, and the formal announcement involving Vice President Biden and others took place. In the email, also made public Friday, Spinner wrote “I will recuse myself from any active participation in any of these applications.” Among those he listed was Solyndra’s. He sent the letter to Rogers and an Energy Department lawyer.

The email's subject line is "Conflicts."

When iWatch News and ABC News reported on Spinner’s role in the loan deal Sept. 29, administration officials attempted to minimize Spinner's role at the Department of Energy, saying he worked generally as a liaison, but not directly on the loans themselves.

After that report, Press Secretary Jay Carney was asked to respond to the report "that people who were involved in fundraising in the President's campaign were also involved in decision-making on some of these loans inside the Energy Department … Three prominent fundraisers – Steve Spinner –"

Carney replied: “It's my understanding, at least with regard to the gentleman you just mentioned [Steve Spinner], that he had no connection to overseeing the loan guarantee program.”

Emails obtained Friday, however, show Spinner corresponded directly with Solyndra’s vice president of marketing and business development. In one, the Solyndra executive sends talking points about the loan and jots a quick note: “Steve, Solyndra’s official position on jobs for your speechwriting.”

Another Solyndra executive wrote, on August 30, 2009, that the company “has been communicating directly with Steve Spinner on the question of jobs creation … ” Two days before that, as he pressed an Energy Department colleague for answers on the eve of the deal closing, Spinner wrote: “Not to be anal or overly simplistic, but can you walk over there and force him to give you the answer? This is beyond silly.”

Spinner expressed concern over how Solyndra was troubled by delays. “Any word from OMB? Even Solyndra’s getting nervous,” he wrote to a colleague Sept. 1, 2009, days before closing and a press event for Solyndra including Vice President Biden.

Spinner also wrote an email two weeks before the Solyndra loan closed to an aide to Vice President Biden, identifying the private investors in the deal. He attached to the email a bio from Forbes Magazine of George Kaiser, an Oklahoma billionaire who raised up to $100,000 for Obama's 2008 campaign.

All the emails were turned over to congressional investigators Friday afternoon. In addition to the Spinner emails, the documents show more episodes where the administration was advised that investing in Solyndra may be a bad bet.

An executive from a company competing against Solyndra for federal loan money asked wryly in February of 2009 if the loan program “is suitable as a ‘bail out’ program for failing private manufacturers” given Solyndra’s “failure to secure new investors.” That warning came one month before Energy Secretary Steven Chu announced DOE’s commitment to back the solar panel firm.

There also appeared to be objections from the Department of Treasury to the Department of Energy’s decision, in early 2011, to restructure the Solyndra loan – a restructuring that gave private investors the first opportunity to recoup some of their losses should the company fail.

In one pointed memo, shortly before the company declared bankruptcy, a top Treasury official wrote to the White House to make clear that the decision to restructure the deal did not have Treasury or Justice Department approval – despite early suggestions that approval from both agencies may be required.

“To our knowledge, that has never happened,” wrote Mary J. Miller, Treasury’s assistant secretary for financial markets. “While I expect that DOE has a view about why loan subordination can occur without DOJ approval or Treasury consultation, I wanted to correct any impression that we have acquiesced in the steps to date.”

The House Energy and Commerce Committee, which has been probing the Solyndra loan, seized Friday on Treasury's questions and the internal emails. The committee has called for another Solyndra hearing Friday, probing a loan issued with fanfare but shrouded by legal controversy, lost hundreds of milions, and escalating investigations.

A few days after the Solyndra loan closed, Spinner appeared at a clean-tech forum in Boston. He spoke of the virtue of the DOE's support for emerging companies, including Solyndra.

"We liked the taste of it," he said of the solar firm, telling the Boston group the company would create thousands of jobs.

Head of embattled energy loan program, Jonathan Silver, steps down

2011-10-06T18:01:23-04:00

The head of the Energy Department's embattled loan program, Jonathan Silver, resigned Thursday after a tumultuous month during which the program's first loan recipient, the solar panel manufacturer Solyndra, declared bankruptcy, leading to a wave of scrutiny for his agency.

Energy Secretary Steven Chu confirmed in a statement emailed to iWatch News and ABC News that Silver had stepped down, but said his departure had long been expected.

"Under his leadership, the loan program has demonstrated considerable success, with a broad portfolio of investments that will help American companies compete in the global clean energy market," Chu said. "Because of my absolute confidence in Jonathan and the outstanding work he has done, I would welcome his continued service at the Department, but I completely understand the decision he has made."

Silver's departure came on the same day that President Obama was forced to defend his administration's decision to lend $535 million to Solyndra, a decision that came despite deep misgivings among professional budget analysts inside the government. His administration was facing intense scrutiny over the loan decision, both from Republicans in Congress, but also from inspectors general at two agencies, and from the Justice Department.

Last month, the California solar panel manufacturer filed for bankruptcy. Days later, the FBI raided its headquarters in what sources have said is a probe to determine whether the company misled officials in order to obtain federal support.

The Center for Public Integrity's iWatch News, working in partnership with ABC News, first reported on simmering questions about the loan program in March. Already, government auditors had begun questioning whether the Energy Department was giving favorable treatment to some applicants – including Solyndra. At the time, Silver strongly defended the loan to Solyndra, promising that the company would be delivering thousands of new American jobs.

Energy Department officials and the White House have maintained that politics never entered the equation when loans were being considered. But critics of the administration questioned whether there was political influence, noting that a top investor in Solyndra was also a major fundraiser during Obama's 2008 campaign.

Silver defended the program last month in an appearance before Congress, but deflected questions about the Solyndra loan, telling members he had arrived at the department after the loan had already gained approval.

"Support for innovative technologies comes with inherent risks," Silver testified.

Obama said Thursday that his administration has loaned billions to start-up high tech firms like the now-bankrupt solar firm Solyndra based not on political influence, but "on the merits."

"I have confidence decisions were made based upon what's good for the American people," Obama said in a press conference Thursday in response to questions from ABC News senior White House correspondent Jake Tapper. "There were going to be some companies that did not work out. Solyndra was one of them."

"All I can say is the Department of Energy made these decisions based on their best judgments," Obama said, defending the decision to make Solyndra the country's first loan guarantee recipient.

When Silver joined the Department in late 2009, he was touted for his venture capital experience -- a critical need for a department that had been tasked with handing out billions of dollars to start-up companies in the alternative energy space. Energy Department officials said that during his tenure, the loan programs he oversaw were supporting 38 projects that include the world's largest wind farm and several of the nation's largest photovoltaic solar generation facilities.

Energy officials said Silver is leaving to become a Distinguished Visiting Fellow at Third Way, a Washington think tank.

For months, Silver had portrayed the Solyndra financing as a good bet for the public even as the company was falling apart financially behind the scenes.

In May, as iWatch News and ABC News investigated how the Energy Department took shortcuts in approving the loan in 2009, Silver came to the project’s defense. He downplayed the company’s financial troubles even as the Energy Department refinanced its loan this year to give Solyndra more time to pay off its debt. Silver was not with the department when the loan was issued in 2009, but was when it was refinanced.

“That was an effort on our part to ensure we had the tightest and best structured project,” Silver said in the May 9 interview with iWatch News and ABC News.

Yet that loan restructuring has triggered widespread criticism, as investors who raised $75 million for the company – including companies affiliated with Obama bundler George Kaiser – will stand in line before taxpayers in bankruptcy court.

In the interview, Silver placed little significance in the fact that Energy Secretary Steven Chu announced a conditional commitment for the $535 million financing in March 2009 before all outside due diligence was completed, saying all sign-offs came before it closed that September.

“I have never seen a company go straight up without a bump along the way,” said Silver, a former venture capitalist. “I have no doubt they will continue to hire more people.”

By late 2010, however, the Energy Department knew Solyndra faced a major cash flow crisis. As part of the government’s loan restructuring, DOE earlier this year began sitting in on board meetings of the California solar panel firm – getting an up close view in the crucial months before its collapse, bankruptcy and raid by the FBI and Energy Department Inspector General.

Records show the due diligence shortcuts were one of a cascading series of warning flags the Energy Department ignored or bypassed in rushing to announce Obama’s first green energy loan guarantee.

Energy officials have said they backed Solyndra as a potential game-changer in the effort to spur innovative clean technology projects.

Republicans who are heading the congressional probe – Reps. Fred Upton (Mich.) and Cliff Stearns (Fla.) – released a statement Thursday saying they do not believe Silver’s resignation will keep them from seeking more answers.

“Mr. Silver’s resignation does not solve the problem,” the congressmen said in a joint statement. “American taxpayers are already on the hook for the half billion dollar Solyndra bust – what other shoes does this Administration expect to drop?”

Donor warned Obama that Solyndra 'could haunt him'

California,United States — 2011-10-11T22:42:01-04:00

UPDATED 6:10 pm ET 10/3/2011

New White House emails show a top donor to Barack Obama was in direct contact with one of the president’s closest advisers about the federal energy loan program, the latest disclosure underscoring the closeness between the administration and bundlers with a stake in Energy Department funding.

Steve Westly, a California venture capitalist who raised more than $500,000 for Obama’s campaign, emailed Valerie Jarrett, one of Obama’s closest advisers, to warn her about political fallout that could ensue if the president visited the factory being built by Solyndra.

“Could you perhaps check with [the Energy Department] to make sure they’re comfortable with the company? I just want to help protect the president from anything that could result in negative or unfair press,” Westly wrote on May 24, 2010. “If it’s too late to change/postpone the meeting, the president should be careful about unrealistic/optimistic forecasts that could haunt him in the next 18 months if Solyndra hits the wall, files for bankruptcy.”

President Obama told ABC News Monday that he does not regret touting the solar company Solyndra as a model of his jobs program, or loaning $535 million in taxpayer money to the company before it declared bankruptcy.

“Hindsight is always 20/20,” Obama told ABC Good Morning America anchor George Stephanopoulos in an interview broadcast online Monday afternoon. “It went through the regular review process and people felt that it was a good bet.”

The emails were released by House Democrats Monday to emphasize that no government decisions relating to Solyndra were influenced by considerations relating to campaign donations. However, the emails also show for the first time that a major donor had access to top presidential advisers on matters concerning the loan program.

The emails also show deep reservations from analysts at the Office of Management and Budget about the decision to loan $535 million to Solyndra – well before the company's collapse. Last month, the California solar power company filed for bankruptcy, and their offices were raided by the FBI. The new documents also show there was vigorous debate inside the White House about the wisdom of making risky investments in clean energy with taxpayer dollars.

The most pointed example of that came during an email exchange between top White House economic advisor, Larry Summers, and another Solyndra investor, Brad Jones, of Redpoint Ventures. In December 2009, Summers sought advice from Jones about the administration’s economic policy.

Jones' reply included a harsh assessment of the Energy Department’s loan program.

“The allocation of spending to clean energy is haphazard,” he wrote. “The government is just not well equipped to decide which companies should get the money and how much. … One of our solar companies with revenues of less than $100 million (and not yet profitable) received a government loan of $580 million; while that is good for us, I can’t imagine it’s a good way for the government to use taxpayer money.”

Summers accepted the critique, saying, “I relate well to your view that gov [government] is a crappy vc [venture capitalist]…”

The White House said Monday that such email exchanges between Summers and Jones, and from Westly to Jarrett, are not unusual. Part of Jarrett's job, they noted, was to interact with the business community.

Eric Shultz, a White House spokesman, said the emails “validate what we’ve said all along, which is this was a merit-based decision made by career staffers at the Department of Energy. And as we’ve said from the beginning, supporting fledgling innovating technologies assumes some risk, but that doesn’t mean we should throw up our hands and do nothing, ceding the jobs to the future to China or any other country.”

Energy officials said the emails simply prove that the department engaged in healthy debate about the loan decision before freeing up taxpayer money for Solyndra’s use.

“This program was established by Congress to support innovative, cutting edge projects that by their nature carry a degree of risk,” said Damien LaVera, an Energy Department spokesman. “These emails show that the Administration was aware of those risks, and that decisions were based on more than two years of rigorous analysis and due diligence by career officials spanning two administrations. As we have consistently said, there was a thoughtful and appropriate debate within the Administration and decisions were made solely on the merits of the project.”

In releasing the emails, House Democrats said they saw a healthy internal debate about the wisdom of investing in the clean energy sector. Obama had embraced the idea, dedicating hundreds of millions of dollars in an effort to help jump start the fledgling “green energy” industry, create jobs, and improve the environment.

A statement from Rep. Henry Waxman (D-Calif.) said the emails show there was “internal disagreement within the Administration about Solyndra’s viability and the effectiveness of the loan guarantee program throughout the process.”

At the Office of Management and Budget – where analysts were tasked with assessing the financial risks – internal emails show deep reservations about lending money to Solyndra.

“Bad days are coming,” one email warned in April 2010. OMB officials also seemed concerned with the Department of Energy’s apparent failure to monitor the progress at companies that were heavily backed by government loans.

One OMB official wrote: “DOE’s ‘system’ for monitoring loans is quite problematic (barely any review of materials submitted, no synthesis for program management, inherent conflicts in origination team members monitoring the deals they structured, etc) and does not seem to be a program priority.”

The emails surrounding the Obama’s plans to visit the Solyndra plant offer a rare look behind the scenes at how every move by the president is carefully measured in advance for political benefits and risks. And they show top donors, such as Westly, have the connections and the ability to weigh in on such decisions.

In March, the Center for Public Integrity’s iWatch News and ABC News documented how Westly straddled the worlds of big time bundler, venture capitalist for green energy firms – and White House insider.

In August 2010, Westly was appointed to a high-powered advisory board to Energy Secretary Steven Chu. Before that appointment, four companies in the Westly Group portfolio secured more than a half billion dollars in DOE support, iWatch News and ABC News reported. Last month – while Westly continues to raise money for Obama and advise Chu – a fifth firm secured DOE backing. Energy Department officials said the loans and grants were awarded on merit.

In the emails, Westly’s warnings about the political risks of visiting Solyndra -- whose own auditor had raised concerns about its financial health only two months earlier -- are countered by other considerations.

One White House staffer writes: “POTUS [the President] could meet with workers/make remarks at the new building site, which is very construction/new jobs heavy. 400+ union labor workers in hard hats using heavy machinery both indoors and outdoors.”

At the same time, a July 21 e-mail from Solyndra’s lobbyists at the Glover Park Group to staff at the White House Office of Communications pushes a positive message about the company, under the heading “Solyndra Messages,” touting the company’s “strong future,” “growth market,” and emphasizing the benefits of solar panels being “Made in the USA."

Ultimately, the White House decided to go ahead with the factory visit. Ron Klain, then the chief of staff to Vice President Biden, wrote in an email that everyone involved understood the risks inherent in backing fledgling companies such as Solyndra. “Sounds like there are some risk factors here – but that’s true of any innovative company that POTUS would visit. It looks like it is OK to me, but if you feel otherwise, let me know.”

An unnamed Energy Department official throws in support for the visit, telling the White House, “the company should be strong going into the fall with their new facilities on line.”Another Department of Energy official wrote: “Bottom line is that we believe the company is okay in the medium term, but will need some help of one kind or another down the road.”

But OMB analysts remained skeptical. One official wrote darkly of the president’s plans to appear before Solyndra workers on the factory floor in California: “Hope doesn’t default before then."

Solyndra executives refusing to answer bankruptcy questions

2011-10-03T15:38:25-04:00

Top executives at Solyndra have refused to tell U.S. officials whether they received executive bonuses after the company began to fail, and they have frustrated bankruptcy proceedings by refusing to provide any insight into the company’s sudden and dramatic shut-down, according to papers filed by Justice Department lawyers late Friday.

A Solyndra attorney told U.S. officials the reason he would not identify the company’s customers or talk about its contracts was because “the topic would likely be the subject of investigation and possibly litigation,” according to the court filing.

Among the questions executives declined to answer, according to the new bankruptcy filing: ”Whether Solyndra has a plan to repay the loan obtained from the U.S. Government.”

Word of Solyndra’s refusal to cooperate in bankruptcy proceedings comes just days after two top Solyndra executives declined to answer questions from Congress, invoking their Fifth Amendment rights against self-incrimination. Details about their refusal to answer questions were revealed in papers filed by the attorneys representing the U.S. government during bankruptcy proceedings in Delaware. The solar company was awarded a $535 million federal loan as part of President Obama’s program to help spur growth in emerging forms of alternative energy. Now, federal lawyers are seeking to recover at least some of that money.

In their filing, government attorneys called on the bankruptcy court judge to put the company in the hands of an independent trustee, so its books could be pried open.

“Management’s invocation of the Fifth Amendment does not excuse them from performing their fundamental disclosure and reporting duties under the Bankruptcy Code,” the filing says.

One topic of concern to federal attorneys is the accuracy of Solyndra’s financial statements. According to a report Thursday by Bloomberg, a focus of a federal investigation into the firm’s behavior is whether it lied to Energy Department officials in order to secure additional financing after the company started to fail.

Friday’s filings note that Solyndra executives refused to say “whether financial information submitted or represented to investors, creditors, and others was accurate.”

The executives have also refused to say when they determined the company was in financial trouble, and “whether the company paid management bonuses after management realized the company’s poor financial condition.”

“Such topics lie at the core of the information that [Solyndra] must disclose,” the court filing said.

A spokesman for Solyndra has not replied to an email or phone calls seeking comment. In a separate filing earlier this month, Solyndra wrote: “The company is not aware of any wrongdoing by Solyndra officers, directors or employees in conjunction with the DOE loan guarantee or otherwise … ”

With Friday’s bankruptcy court filing, key questions emerge. Among them: What impact will the executives’ refusal to answer questions have on creditors’ attempts to recover money as the bankruptcy case moves forward? The U.S. loaned more than a half billion dollars to the startup company, but will stand behind investors in seeking to recover.

“Typically we don’t comment beyond our filing itself,” said Jane Limprecht, a spokeswoman for the Executive Office for U.S. Trustees.

In March, ABC News, in partnership with the Center for Public Integrity's iWatch News, began reporting on simmering questions about the process that led the Obama administration to make Solyndra the first company to receive a loan under a program designed to provide government support to companies that would create jobs while generating energy from cleaner sources, such as solar, wind and nuclear. President Obama personally visited the Solyndra complex, hailing it as a leader in this emerging field. Solyndra's prime investor, George Kaiser, bundled donations for Obama in 2008.

In August, though, Solyndra abruptly shut its doors, laying off 1,100 workers. And within days it declared bankruptcy. The FBI raided the plant days later, part of an investigation that involves inspector generals for the Energy Department and the Treasury Department. In addition, Republicans in the House Energy and Commerce Committee have been working to dissect the deal and understand how signs of Solyndra's financial trouble had been overlooked by the Department of Energy.

Bundlers on the inside

2013-05-08T11:53:30-04:00

Several of Barack Obama’s top campaign supporters went from soliciting political contributions to working from within the Energy Department as it showered billions in taxpayer-backed stimulus money on alternative energy firms, iWatch News and ABC News have learned.

One of them was Steven J. Spinner, a high-tech consultant and investor in energy companies who raised at least $500,000 for Obama. He became one of Energy Secretary Steven Chu’s key loan programs advisors while his wife’s law firm represented a number of the companies that had applied for loans.

Recovery Act records show Allison Spinner’s law firm, Wilson Sonsini Goodrich & Rosati, received $2.4 million in federal funds for legal fees related to the $535 million Energy Department loan guarantee to Solyndra, a solar company whose financial meltdown has prompted multiple investigations. She pledged to take no portion of the money and did not work on the loan applications.

As House Republicans step up their probe of the Obama administration’s green energy loan program in the wake of Solyndra’s bankruptcy, a key focus – and open question – is whether the president’s political supporters had any hand in influencing which companies received the taxpayer support.

"There is great concern over political influence contaminating the DOE loan guarantee program,” said Rep. Cliff Stearns (R-Fla), who chairs the House Energy and Commerce’s Oversight and Investigations Subcommittee. “The prevalence of fundraisers and bundlers scattered throughout DOE is cause for alarm and is a subject our investigation does not take lightly – we are looking into this and will see where it leads us.”

The administration has repeatedly said that politics has played no role in deciding which companies received federal loans.

Spinner declined requests to be interviewed. Representatives for Spinner, his wife, and for the Energy Department all told iWatch News and ABC News that Spinner and his wife took elaborate steps to avoid conflicts between his government work and her legal work. Spinner obtained a waiver that promised he would not work on cases involving clients of his wife’s firm. And she pledged not to take proceeds from her firm’s work with companies that had applied for loans.

Damien LaVera, an Energy Department spokesman, described Spinner as someone who had “no role” in evaluating loan applications or selecting recipients.

Spinner described his job differently. His online bio for the Center for American Progress, the left-leaning think tank he joined after leaving the administration, states that he “helped oversee the more than $100 billion of loan guarantee and direct lending authority” for the department’s green-energy loan program.

And in a speech at a “Green Tech” conference in June 2010, Spinner described how he “worked very, very closely with all the various organizations, the various offices, in trying to streamline operations and … move the funding opportunity announcements out, get the solicitations out on the street.”

“What the secretary really cared about was he wanted us to get the money out fast, he wanted us to pick and select fantastic projects,” Spinner said.

Spinner was not the only Obama political supporter to play a role at the Energy Department. California venture capitalist Steve Westly, who raised more than $500,000 for Obama, has Secretary Chu’s ear on green energy issues as a member of a high-level volunteer advisory panel. Mackey Dykes, who was a finance manager for the Obama campaign, was hired to be the liaison between the Energy Department and White House. Each declined interview requests.

Obama’s political supporters were also investors in companies that had applied for loans. Westly has had a stake in at least five companies that have won DOE support; four won funding before he joined Chu’s board. While it is common for presidents to reward top donors with ambassadorships or other political posts, the Sunlight Foundation’s Bill Allison said it is unusual to see a major donor such as Spinner given a position inside a relatively obscure government loan program.

“For an administration that won’t hire lobbyists to be hiring fundraisers for that role, that seems to be a bit of contradiction,” said Allison. “Obviously you want to keep all people who are involved in political influence out of positions of responsibility.”

The Energy Department said Spinner brought experience working with startup companies – the type of firms lining up for green energy funding intended to aid the environment and economy.

“Spinner is a Harvard MBA and an experienced business executive with more than 15 years advising innovative start-up companies in the technology, media and retail industries. He advised over 50 start-up companies over the last 10 years,” the Energy Department’s LaVera said.

Both Spinner and Westly were among a California contingent of green energy executives who put their money, and energy, behind Obama.

When President Obama won the White House in 2008, Spinner was one of several Silicon Valley executives to help vault him to victory. Spinner was one of just 52 fundraisers to raise more than half a million dollars for the president. He served the Obama-Biden Presidential Transition Team focused on technology innovation and government reform.

In February 2009, San Francisco Magazine quoted several local Obama backers reflecting on the campaign.

“In May, about 120 of us had an Entrepreneurs for Obama video teleconference with Barack. Afterward, Steve Westly and some other senior Silicon Valley executives stayed and put forth their ideas on tech issues and initiatives and the campaign,” Spinner was quoted as saying. “I really loved that I could help differentiate this campaign’s technology from any others in history. I knew most of the venture capitalists and entrepreneurs, and if there was something good, I could bubble it up to the campaign.”

In April 2009, Spinner joined an Energy Department poised to unleash billions of dollars, becoming a “small business loan guarantee advisor,” a title that later shifted to “loan program advisor,” focused on financing start-up green energy firms and cutting edge car makers. He held the job for 17 months.

The move turned a hearty presidential supporter and frequent energy investor into a DOE insider.

Spinner’s financial disclosure forms showed that was an active investor in energy-related companies. On his final disclosure report signed Oct. 15, 2010, Spinner listed at least 15 purchases and 14 stock sales of energy related stock earlier that year.

An initial review of financial disclosure records by iWatch News and ABC News showed one investment in an energy firm whose subsidiary received funds from the Energy Department while he was working there, and investments in three others that landed Energy Department support after he sold his stakes. Energy officials said they considered his portfolio small enough to fall “within the Executive Branch-wide de minimis exception for interests in securities.”

Spinner reported making $12,155 from a 2008 investment in Atheros Communications. In June 2010, Atheros announced it would receive up to $4.5 million in DOE grant funding. DOE said Spinner sold his Atheros stock before joining the department. On another form, Spinner reported selling off his $1,001-$15,000 investment in Air Products & Chemicals Inc. in February of 2010, four months before Air Products announced it landed $253 million in stimulus funding. “To the best of our knowledge, he had no involvement” with the award, a company official said. Spinner invested $1,001-$15,000 in Exelon. A subsidiary of Exelon was awarded a $200 million DOE grant in late 2009. A spokeswoman said the company never dealt with Spinner as their grant was being considered.

His wife’s role in a law firm representing corporate clients seeking energy funds prompted Energy Department ethics officials to take a closer look, according to documents obtained under the Freedom of Information Act. The law firm has represented several companies that had applied for Energy Department loans and loan guarantees.

On August 18, 2009, four months into his tenure at the Energy Department, Spinner received an ethics opinion involving that connection. Matt Rogers, then a senior advisor to the energy secretary, wrote that Spinner could continue in his duties, but “not participate in any discussion regarding any application involving Wilson [Sonsini].” The opinion said his wife would forgo pay “earned as a result of its representation of applicants in programs within your official duties.”

Rogers said Spinner’s conflict was minimized because his role at the Energy Department was supervisory – “to embrace strategic objectives, inquire on overall progress of applications to the program staff, anticipate and help senior management clear any institutional roadblocks to accomplishment of the program’s objectives.”

Courtney Dorman, a spokeswoman for Allison Spinner’s law firm, Wilson Sonsini, said the firm also took strides to avoid conflicts, establishing a wall between her and client matters involving the Energy Department while Spinner was in office.

One of those law firm clients, SEC records show, was Solyndra – the California solar panel firm whose collapse put half a billion dollars of taxpayer money at risk and prompted an investigation by the FBI and other agencies.

The law firm worked on the solar company’s failed public offering, the records show. And it also provided Solyndra with outside counsel on the DOE loan guarantee transaction. The company was paid $2.44 million for its Solyndra work, records show – money generated by the Energy Department’s stimulus loan guarantee to the solar panel firm.

Allison Spinner “was not involved with that transaction, nor has she ever worked with Solyndra in any capacity,” Dorman said.

The law firm’s website cites Allison Spinner’s work with other clean tech firms – including Amyris Inc. and HCL CleanTech. Both companies had engaged in the time consuming process of applying for green energy grants. Amyris Biotechnologies won $25 million from DOE in late 2009 to develop a diesel substitute and went public the next year – with Spinner’s wife helping handle the IPO. After Spinner left the department, HCL CleanTech landed a $9 million Energy Department grant to convert biomass feedstocks into fuel and chemical products.

Dorman, the firm spokeswoman, said in an email that Wilson Sonsini “established an ethical wall around Allison with respect to WSGR representation of clients in matters involving DOE loan programs.” Dorman also said that Allison Spinner’s clients had DOE loans or grants “that fell outside of Steve’s jurisdiction.”

Steven Spinner was not with the department when Solyndra won a conditional commitment for the loan guarantee in March 2009. But he was on board when the loan closed that September. A few days later, at a clean tech forum in Boston in September 2009, Spinner spoke of the virtue of the DOE’s support.

“We liked the taste of it,” he said, telling the Boston group the company would bring thousands of jobs.

After leaving the department last September, Spinner has continued to cheerlead for its mission. This July, he co-authored an article for the Center for American Progress titled “Don’t Let Clean Energy Funding Die on the Vine.” The House committee’s investigation of the Solyndra financing was just heating up.

“This ‘embattled’ program has by all business metrics proven an outright success,” he wrote. “Even the most controversial loan guarantee recipient—Solyndra, a solar manufacturer—is seeing an operational turnaround…”

Little more than a month later, Solyndra fired 1,100 workers and filed for bankruptcy.

Solyndra excutives stonewall Congress

2011-09-26T11:04:40-04:00

The two top executives of the bankrupt solar power company Solyndra sat stone-faced before a Congressional committee today and invoked their Fifth Amendment rights, rather than explain how they blew through $535 million in taxpayer money.

"Let me just warn you and the other folks involved in this taxpayer rip-off," Energy and Commerce Chairman Fred Upton (R-Mich.) told the Solyndra executives. "We're not done. No we're not."

The decision of Solyndra CEO Brian Harrison and Chief Financial Officer W. G. Stover to repeatedly refuse to answer questions about Solyndra's Energy Department loan guarantee was the latest twist in an unfolding investigation into the failure of the California solar panel manufacturer, which just one year earlier had been touted as a model of President Obama's green jobs program.

The Obama administration had selected Solyndra as the first to receive a loan under a program designed to provide government support to companies that would create jobs while generating energy from cleaner sources, such as solar, wind and nuclear. President Obama personally visited the Solyndra complex, hailing it as a leader in this emerging field.

In August, though, Solyndra abruptly shut its doors, laying off 1,100 workers. And within days it declared bankruptcy. Friday's hearing was the second in two weeks by the House Energy and Commerce Committee's investigative subcommittee, intending to unwind the deal and understand how signs of Solyndra's financial trouble had been overlooked by the Department of Energy.

"I want to ask Mr. Harrison if he thinks the American people who invested over a half a billion dollars deserve to know what happened to that money?" Rep. Joe Barton (R-Texas) asked the two executives. Both declined to answer, invoking their Fifth Amendment rights.

"I don't understand what's self-incriminating about a yes or no answer to whether the American people deserve to know what happened to over a half a billion dollars of their money," Barton said. For just over an hour, the two men continued to remain mum.

Rep. Tim Murphy (R-Pa.) appeared annoyed, asking the men to explain their "plan to pay back the taxpayers $535 million you owe them." "And when will you pay them back? Mr. Harrison?" he pressed.

No reply.

Democrats said they, too, were puzzled by the silence of executives who just months earlier had sent a memo to Congress describing the company as "ramping" up its production, "competitive" with foreign rivals, and "on track" to hit its financial targets for the year.

The document obtained by ABC News, entitled "Exceeding Expectations: Solyndra Today," appears to have grossly distorted the company's actual financial standing. Since Solyndra sent the document to Congress on June 23, followed by a mid-July letter and personal visit making more claims about its financial strength, the company has not only declared bankruptcy, it has been raided by the FBI.

"When Mr. Harrison was in my office in July he said that Solyndra's future was bright, with sales and production booming," said Rep. Henry Waxman (D-Calif.). "I'd like to know why he told me that in July and then filed for bankruptcy one month later. Unfortunately I will not get an answer today."

Earlier this week, a Solyndra spokesperson said in a statement that both Harrison and Stover would be "unable to provide substantive answers to the Subcommittee's questions," and said that "present circumstances require both gentlemen to exercise their Fifth Amendment rights."

The statement added that Solyndra is unaware of any wrongdoing by company officials related to the loan guarantee "or otherwise," and is cooperating with federal investigators. "The company believes that the record will establish that Solyndra carefully followed the rules of the competitive application process, starting in December 2006 under the Bush administration and continuing under the Obama administration."

The subcommittee's investigation into the massive federal loan to Solyndra had already been underway for months. In March, the Center for Public Integrity's iWatch News, in partnership with ABC News, began reporting on simmering questions about the role political influence may have played in Solyndra's selection as the Obama administration's first loan guarantee recipient.

Damien LaVera, an Energy Department spokesman, has told ABC News that politics never entered the decision to grant the loan, or restructure it earlier this year. LaVera said the department decided it was worth trying to redo the terms to try and salvage the government's initial investment. "[P]olitical or optical considerations took a backseat to putting the company and its workers in a better position to succeed and repay the loan," he said.

On Wednesday, the House Energy and Commerce Committee escalated its inquiry into the deal by seeking information from Solyndra's prime investors — including Oklahoma oil billionaire George Kaiser, a bundler of campaign contributions to the president in 2008.

That quest for information could shift the spotlight from DOE to the big money players behind Solyndra: Kaiser's Argonaut Private Equity, and another group, Madrone Capital Partners. Madrone is affiliated with the Walton family, founders and WalMart and major Republican donors. Kaiser and other investors get to recoup the $75 million they invested earlier this year before the U.S. government recoups taxpayer money in Solyndra's bankruptcy proceedings.

The House committee said it sent letters to Argonaut and Madrone seeking documents on the $535 million loan guarantee, the investors' $75 million financing this year -- and any communications with the Obama administration, including telephone calls between the White House and companies. Kaiser has not responded to interview requests from iWatch News and ABC News since March.
The June memo and July letter both appeared to be efforts to counter claims that the company was in financial trouble, saying they were providing "the most accurate and up-to-date information."

The letter, signed by Solyndra CEO Brian Harrison, said, among other things, that the company had just completed a "record quarter for shipments," and that it was using "American innovation and ingenuity to compete on the global solar market." Later, Solyndra would blame competition from China for its downfall. Solyndra declared bankruptcy on August 31.

Congressional investigators have also released a copy of a Sept. 10, 2011 email from an attorney for Solyndra to staff of the House Energy and Commerce Committee stating that the company's CEO "will appear voluntarily and answer the Committee's questions on any day the Committee chooses."

Just days later, an attorney for Harrison, the Solyndra CEO, wrote back to say his client would not answer any questions from the committee, and planned to invoke his Fifth Amendment rights when he appears before the committee Friday.

Solyndra told Congress it was 'on track' for success

2011-09-21T20:56:29-04:00

Less than three months before declaring bankruptcy, the federally-backed solar power company Solyndra sent a memo to Congress describing the company as "ramping" up its production, "competitive" with foreign rivals, and "on track" to hit its financial targets for the year.

The document obtained by ABC News, entitled "Exceeding Expectations: Solyndra Today," now appears to have grossly distorted the company's actual financial standing at a time when congressional investigators were already asking tough questions about the $535 million in federal backing Solyndra had received.

Since Solyndra sent the document to Congress on June 23, followed by a mid-July letter making more claims about its financial strength, the company has laid off nearly its entire workforce, has declared bankruptcy, and has been raided by the FBI.

The promises to the House Energy and Commerce Committee's investigative subcommittee arrived this summer, after the subcommittee's investigation into the massive federal loan to Solyndra had already been underway for months. In March, iWatch News and ABC News began reporting on simmering questions about the role political influence may have played in Solyndra's selection as the Obama administration's first loan guarantee recipient.

The June memo and July letter both appeared to be efforts to counter claims that the company was in financial trouble, saying they were providing "the most accurate and up-to-date information."

"This is not a decision arrived at lightly, but it is a decision dictated by current circumstances," wrote Walter F. Brown Jr., the lawyer for Solyndra CEO Brian Harrison in a letter to Congress.

Among those circumstances, the lawyer said, is a broadening investigation by the FBI and the U.S. Department of Justice into the Obama administration's decision to loan $535 million to the California solar power company, and the abrupt financial ruin of the firm, which shut its doors late last month.

'Who Exactly Are Solyndra's Executives Trying to Protect?'

Members of the House Energy and Commerce Committee expressed outrage that the executives -- after promising to freely answer questions -- would now insist on remaining silent.

"Who exactly are Solyndra's executives trying to protect and what are they trying to hide?," said a statement released by Energy Committee Chairman Fred Upton, R.-Mich., and Rep. Cliff Stearns, R-Fla., who chairs the oversight and investigations subcommittee.

"We have many questions for Solyndra's executives on their dealings with the Obama administration, their efforts to secure federal support for a project that appeared doomed from the outset, and why they made certain representations to Congress regarding their dire financial situation just two months ago," the statement said.

Friday's hearing was intended to be the second act to hearings held last week, during which a senior Energy Department official and a top White House budget analyst attempted to explain why they decided to grant the loan to Solyndra, and why they agreed to restructure the loan after it became increasingly clear the firm was in dire financial trouble.

The path taken by Solyndra's application for a massive government loan was just one of several questions explored by members of the House investigative subcommittee last week. Members grilled Jonathan Silver, head of the Energy Department's loan program, and Jeffrey Zients, deputy director of the Office of Management and Budget, as to why the initial loan was approved, and why the Solyndra deal was restructured earlier this year. The restructuring came at a time when the company was already showing signs of financial stress, with Chinese competitors offering similar products for less money.

Damien LaVera, an Energy Department spokesman, has told ABC News that the decision to restructure the loan was intended to salvage the government's initial investment. "Since the restructuring went forward, if anything, this email is yet another piece of evidence that political or optical considerations took a backseat to putting the company and its workers in a better position to succeed and repay the loan," he said.

On Wednesday, the House committee investigating the deal escalated its inquiry by seeking information from Solyndra's prime investors -- including Oklahoma oil billionaire George Kaiser, a bundler of campaign contributions to the president in 2008.

That quest for information shifts the spotlight from DOE to the big money players behind Solyndra: Kaiser's Argonaut Private Equity, and another group, Madrone Capital Partners. Kaiser and other investors get to recoup their $75 million investment earlier this year before the U.S. government stands in line in Solyndra's bankruptcy proceedings.

The House committee said it sent letters to Argonaut and Madrone seeking documents on the $535 million loan guarantee, the investors' $75 million financing this year -- and any communications with the Obama administration, including telephone calls between the White House and companies. Kaiser has not responded to interview requests from iWatch News and ABC News since March.

The loan had been shelved by the Bush administration but was fast-tracked just days after President Obama took office, and one of the major investors in the company is an Obama fundraiser -- Oklahoma billionaire George Kaiser -- who has visited the White House 16 times, including four meetings with such senior aides as Valerie Jarrett, Austan Goolsbee and Pete Rouse in the months prior to the loan's approval.

The White House has maintained that those meetings covered other topics -- including Kaiser's charitable work. And both the White House and the Department of Energy have been steadfast in their position that politics played no role in the decision to grant Solyndra the loan.

"The Department of Energy conducted exhaustive reviews of Solyndra's technology and business model prior to approving their loan guarantee application," said LaVera,. "Sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment."