Profiles in Patronage from The Center for Public Integrity

Obama rainmakers enjoy White House invites, appointments and contracts

2012-04-27T10:37:36-04:00

As President Barack Obama ramps up his campaign for a second term, many of his top fundraisers are showing how money helps win influence and access to power in Washington.

Dozens of Obama’s elite donors — many of them wealthy business figures — have been appointed to advisory panels and commissions that can play a role in setting government policy. Others have been invited to a range of exclusive White House briefings, holiday parties and splashy social events.

And some have snagged lucrative government contracts that benefit their business interests or investment portfolios, a Center for Public Integrity investigation has found.

These fundraisers are known as “bundlers” because they solicit $2,500 contributions from multiple friends, colleagues and family members and provide “bundles” of checks to the campaign. The sum of contributions per bundler ranges from $50,000 to more than $500,000.

The Center’s analysis of Obama campaign records and White House and other government documents shows:

At least 68 of 350 Obama bundlers for the 2012 election or their spouses have served in the administration, ranging from seats on advisory boards that tackle critical national issues such as economic growth, to ceremonial posts such as serving on the board of the John F. Kennedy Center for the Performing Arts.
At least 250 of the bundlers have been cleared to attend a White House event since January 2009. Most have come twice while others are frequent visitors. The events range from policy briefings to coveted invitations to state dinners and music and entertainment nights featuring top-draw performers at the executive mansion.
At least 30 of the 2012 bundlers have ties to companies that conduct business with federal agencies or hope to do so. They range from Wall Street investors to green energy, technology and defense firms with multimillion-dollar government contracts.

“Money has always spoken loudly in politics and what this shows is that money still has vocal cords. It has not been silenced,” said Jeffrey Berry, a political science professor at Tufts University.

Skirting limits?

Bundling draws the ire of many public interest groups because it skirts individual contribution limits of $2,500 for federal elections. By pooling these donations, bundlers enhance their stature as financiers and they may seek political favors in return for their largesse, these groups contend.

“You raise a lot of money for a politician and you get rewarded, and that’s not supposed to be part of our political system,” said Meredith McGehee, policy director with the Campaign Legal Center. “The fact it’s become so commonplace is the scandal.”

White House officials deny big donors receive special favors and insist that all appointments are based on merit.

They say that Obama is the “most transparent” president in history, noting he is the only 2012 presidential candidate who has thus far disclosed the names of bundlers — and point out that the president’s decision to release partial records of persons entering the White House complex makes it possible to track bundlers’ access for the first time.

“The people in these posts have sterling academic credentials, years of public service and private sector experience that make them eminently qualified for the positions to which they were appointed. Being a donor does not get you a job in this administration, nor does it preclude you from getting one,” White House spokesman Eric Schultz said in a statement emailed to the Center.

While Obama deserves credit for transparency, experts say this does not address the underlying problem.

“Running for president costs so much money, candidates need bundlers, and bundlers usually need to be stroked and rewarded so that their giving continues,” wrote Mary Boyle, vice president of communications for Common Cause in an email. “Until we fix the way we pay for our political campaigns, so candidates, including presidential, don’t need to rely on private money, this will be an issue.”

Same old story?

When Obama kicked off his first presidential campaign in February 2007, he vowed to diminish the power of special interests in Washington. Yet he began awarding spoils to super donors once he took office — just like past presidents, records show.

A 2011 Center investigation found that nearly 200 of his 2008 campaign bundlers, or their spouses, won White House appointments. Nearly 80 percent of those who raised $500,000 or more joined the administration in some role, often as ambassadors. Obama’s record of welcoming bundlers into his administration is about the same as former President George W. Bush’s, the investigation found.

Some of the bundlers from the 2008 election cycle who took government jobs and still hold them are prohibited by law from engaging in partisan political activities and fundraising. But that ban doesn’t apply to many members of hundreds of commissions and boards that advise government officials on a part-time basis.

Of the 350 bundlers for the 2012 campaign, about 100 also made the list in 2008.

The 2012 bundlers have attended a broad range of White House events — just like those in the 2008 campaign in which Obama raised more money than any presidential candidate in history. At least 49 of the 68 bundlers in the 2012 cycle who have served in the administration were appointed after January 2010, records show.

Frank F. Islam, a successful Washington area entrepreneur, shows the varied roles these major donors can play.

He sits on a government panel that advises the Commerce Department on minority business and other policy matters, and he also collects cash for the Obama campaign. So far, he’s brought in from $50,000 to $100,000, according to the campaign.

“I strongly believe that in order for us to participate in democracy, it is important to see that our voices are heard,” said Islam. He said he has never pushed an agenda or sought favors in return for his donations.

The Indian-American entrepreneur built an information technology company into a powerhouse which he sold in 2007 for more than $250 million. That year he formed FI Investment Group LLC in McLean, Va., which invests in technology and health care concerns. He’s now the company’s chairman and CEO.

’I have the skills’

In January 2010, the administration tapped him for a seat on the Advisory Committee of the Export-Import Bank of the U.S., an agency that helps finance the sale of American products worldwide. At least two other 2012 Obama bundlers also have served on the panel. His term has since expired.

Later, in July 2010, Islam was appointed to a four-year term on the Commerce Department’s Industry Trade Advisory Committee on Small and Minority Business, which allows business leaders to interact with government officials on trade policies and foreign investment.

Islam denied that his government appointments and frequent trips to the White House are in any way related to his fundraising prowess.

“I have the skills and knowledge and past performance to serve on the boards. I don’t get paid,” he said. “I am not receiving any kind of favor because I give money to the campaign. I’m there because … I can help promote trade for the United States.”

Islam said that he supports Obama in 2012 because the election is about “America’s future,” and “we need a leader who can spread economic growth. Those are my views.”

Islam’s been cleared to visit the White House at least eight times since December 2010, including a lunch-hour meeting between Islam and the administration’s chief technology officer, Aneesh Chopra, on April 21, 2011. He said Chopra is a personal friend.

He also attended a Nov. 30, 2011, White House meeting with about three dozen other Maryland businessmen to discuss the economy. In most cases, White House logs don’t list the purpose of a visit. But Islam’s website displays dozens of pictures taken at White House events, some showing him and his wife posing with Obama at social functions.

“I’ve been invited to the White House a lot,” he said.

Six-figure donor

So far this cycle Islam has contributed more than $100,000 to Obama and other Democrats for 2012 campaigns. Among them: $35,800 to the Obama Victory Fund, the joint committee between the Democratic National Committee and the Obama campaign and the primary war chest for the President’s re-election effort; $30,800 to the Democratic Congressional Campaign Committee, which works to elect Democrats to the House, and $9,200 to the Democratic Senatorial Campaign Committee, which does the same for the Senate, records show.

The Center for Public Integrity found bundlers serving on more than two dozen different commissions from the ever-popular Kennedy Center board to advisory panels that have significant clout. The White House press office typically refers to such appointments as “key administration posts.”

Chicago investor Penny Pritzker, an early Obama financial organizer and bundler, serves on the Kennedy Center board as well as the President’s Council on Jobs and Competitiveness. That panel was formed by Obama in January to help advise him on how to get the economy back on track. Two other bundlers serve on the jobs council with her.

In all, Pritzker has bundled between $100,000 and $200,000 for 2012, according to campaign records. During the 2008 campaign, when she served as Obama’s national finance chair, she was credited with raising more than $200,000.

Most appointees to advisory posts receive little scrutiny from the media or the general public despite their designation as “key” positions. The White House appointed six bundlers to advisory boards on Sept. 6, 2011, four from the class of 2012.

Two other groups have several bundlers on board: the United States Holocaust Memorial Council, with five, and the White House Council on Community Solutions with four. Obama created the council by executive order in December 2010 to “provide advice to the president on the best ways to mobilize citizens, nonprofits, businesses and government to work more effectively together to solve specific community needs,” according to the White House.

Hatch Act

While some of Obama’s 2008 bundlers accepted paying jobs in the administration — and thus are prohibited from fundraising for next year’s election — those on advisory posts are usually exempt.

The Hatch Act prohibits federal employees from soliciting political contributions, including hosting a fundraiser at their home. However, for employees who work “on an irregular or occasional basis” the law only applies while they are on duty, according to the Office of Special Counsel, the government branch that enforces the law.

In other words, as long as the appointee is not making fundraising calls during their board meeting, there’s no problem. The Office of Special Counsel doesn’t keep a list of which committees are covered by the law, preferring to enforce the law on a case-by-case basis.

Dozens of others in the 2012 class of bundlers have participated in White House meetings and policy briefings that in some cases align with the administration’s efforts to shore up support in the Jewish community, among African Americans, or with gay and lesbian groups, White House visitor logs show.

White House records show that visits to the complex by bundlers tended to spike in the months after Obama first took office, though they tapered off for many of the class of 2008 over time. Yet some 2008 bundlers returned for the re-election drive and many of the newest bundlers have made multiple trips.

For example, 22 bundlers, most with their spouses, attended a state dinner for German Chancellor Angela Merkel in June of last year. All but five were either new 2012 bundlers or repeaters, logs and the official guest list show.

White House visitor logs show at least a dozen events from December 2010 through August of last year attended by a dozen or more bundlers, often as part of larger groups. A “holiday reception” held on Dec. 14, 2010, attracted 46 bundlers.

A March 7, 2011, event which the White House described as “POTUS meeting” (Secret Service shorthand for “President of the United States”) attracted at least 20 bundlers, almost all from the 2012 campaign. The event prompted criticism from Republicans who accused Obama of using the White House as a campaign backdrop.

The bundlers are well represented throughout social events such as “Fiesta Latina Event” and “Classical Music Evening Reception” and more than 30 turned out for a taping of the PBS show In Performance at the White House, with Motown stars such as Stevie Wonder and Smokey Robinson and a separate celebration of the music of the civil rights era.

More than 5,000 visits

All told, bundlers have been cleared for more than 5,000 visits to the White House from January 2009 through August 2011, according to visitor logs.

Less common, though troubling to public interest groups, are cases in which bundlers have financial ties to businesses that receive government contracts or other public money — or might try to secure taxpayer funds.

Federal Election Commission rules narrowly define limits on these contributors. Businesses owned by a single person are prohibited from donating if they hold government contracts. But investors in other firms that do businesses with the federal government are free to donate.

Some of these donors, especially ones in the green energy field, have sparked criticism by Republicans in Congress, led by Rep. Darrell Issa, chairman of the House Committee on Oversight and Government Reform.

Issa’s panel last year launched an investigation into White House ties to campaign donors that received government contracts, loans and other favors, citing the failed energy firm Solyndra, which collapsed after receiving a $535 million Department of Energy loan guarantee.

Solyndra was partly financed by George Kaiser, a 2008 Obama bundler. Kaiser has denied any role in seeking the loan and is not a bundler for 2012.

Other energy projects tied to bundlers: $107 million in stimulus funding awarded in July 2010 for the Lost Creek Wind Farm in DeKalb County, Mo. The company’s founder is Thomas Carnahan, a member of a prominent political family and an Obama bundler.

Carnahan corralled at least $100,000 for the 2008 campaign and has upped his game for the 2012 election, bringing in between $200,000 and $500,000 for Obama.

Carnahan said in a statement that the project was one of thousands that qualified for grant money and has been generating electricity for “over a year and providing tax revenue, new jobs and other ongoing investments to the community.” He added: “Efforts to link my personal support for President Obama to the success of this project … simply have no basis in fact.”

Green for green

Steve Westly, a green entrepreneur, also has bundled between $200,000 and $500,000 for the 2012 campaign. During the 2008 cycle, the campaign credited him with at least $500,000 in contributions.

In March of last year, the Center and ABC News reported that Westly had served on a federal advisory board on energy policy and that since June 2009 four companies in his venture capital firm’s portfolio had received more than a half-billion dollars in loans, grants or stimulus money.

Westly had no comment on the report.

Another green investor and first-time Obama bundler has an energy grant application pending with the Department of Energy.

Simon Ahn is an Atlanta area entrepreneur and has bundled between $100,000 and $200,000 for Obama’s re-election. Ahn is the biggest investor in a Michigan electric car business which is awaiting a decision on a $65 million Department of Energy loan. The company, Alte Powertrain Technologies, hopes to use the proceeds to jumpstart plans to retrofit cars and light trucks with battery-powered powertrains.

He was cleared for three White House visits in December of 2010, records show.

Ahn could not be reached for comment. A spokeswoman for Alte said the company has not yet been notified if it will receive the loan.

Administration officials have argued that contracts are awarded to projects that show the greatest potential to create jobs or achieve other goals for the nation.

Even some of the administration’s most strident critics acknowledge that many wealthy fundraisers have a wide variety of financial holdings and there’s seldom direct evidence that they made contributions expecting a government contract in return. Public policy groups agree to an extent, but argue that there’s little doubt that money talks.

Boyle of Common Cause said that wealthy bundlers can amass political clout and use it to “further enrich themselves, and their circle of friends and business acquaintances.”

“Money buys access and influence and that’s the big problem,” she said. “Those who don’t have it are left out in the cold. That’s not how our democracy is supposed to work, and it must change.”

That’s not likely, according to Tufts political science professor Berry.

Asked if a Republican presidential challenger would end the practice should he win the office next year, Berry said: “It would be shocking if they decided not to try to reward their most loyal fundraisers. It would make no sense.”

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.

Energy Department auto loan program sputters

2013-03-18T11:57:39-04:00

A Department of Energy loan program, infused with $25 billion to spur a wave of fuel-efficient vehicles, has not closed a loan in two years and is likely to leave two-thirds of the money unspent amid fallout over the Solyndra debacle and other factors.

Those findings, revealed Friday in a U.S. Government Accountability Office report, rekindle questions over how effectively the Energy Department picks winners and losers for its lucrative green energy portfolio.

The audit focuses on DOE loan programs, including one known as ATVM — the Advanced Technology Vehicles Manufacturing program.

That program was pitched as part of a broader government campaign to spur innovative, clean technologies that would both rev up the economy and clean the environment. Under ATVM, the government would help bankroll electric cars and other fuel-saving initiatives; this seed money would, in turn, trigger a domino effect for industry and consumers.

Yet the last loan closed in March 2011, and just $8.4 billion has been spent so far in five projects.

The money, records show, helped stalwarts Ford Motor Co. and Nissan North America transform factories to build fuel-efficient vehicles, and cutting-edge upstarts Tesla Motors and Fisker Automotive develop electric cars and plug-in hybrids. A smaller loan went to a Miami company to develop wheelchair-accessible vehicles to run on compressed natural gas.

Yet not all the projects have found success.

An investigation by The Center for Public Integrity and ABC News, published in October 2011, revealed that DOE made a $1 billion bet on two politically connected California car companies — Tesla and Fisker — despite questions from analysts and others about how well their electric cars would fare in the market.

Both companies said the government investment ultimately would pay off. Yet Fisker’s CEO stepped down this week, as the company seeks new investors to jump-start its production.

The ATVM program was infused with another $7.5 billion to cover credit subsidy costs, yet $4.2 billion remains in that pool of money, the GAO report said.

The Energy Department does not expect to issue any more loans under a program once pitched with promise.

As of January 29, 2013, “DOE was not actively considering any applications for using the remaining $16.6 billion in loan authority or $4.2 billion in credit subsidy appropriations available under the ATVM loan program,” the GAO’s Frank Rusco wrote.

The Energy Department told auditors it had seven ATVM applications on file, totaling $1.48 billion. But those applications were “inactive,” DOE said, “for reasons including insufficient equity or technology that is not ready.”

“DOE is not likely to use the remaining ATVM loan program authority given the current eligibility requirements,” the GAO said.

Some potential applicants said they were hesitant to seek Energy Department funding. One factor: The ghost of DOE’s Solyndra debacle continues to hover over the program.

Solyndra, the first green energy loan guarantee unveiled by the Obama administration, was announced with fanfare in early 2009. Yet the Center and ABC reported in May 2011 that DOE initially green-lighted the $535 million loan without all due diligence in hand, putting taxpayers at risk. Later in 2011, Solyndra shuttered its California headquarters and filed for bankruptcy.

The FBI and the Energy Department’s Inspector General have been conducting a joint investigation of the Solyndra project since 2011. No charges have been filed. “It’s still an ongoing, joint investigation,” an FBI spokeswoman told the Center January 31.

“Most applicants and manufacturers noted that public problems with the Solyndra default and other DOE programs have also tarnished the ATVM loan program, contributing to the challenges,” the GAO wrote. “They believed the negative publicity makes DOE more risk-averse or makes companies wary of being associated with government support.”

Applicants and manufacturers said the loan program is needed to help advance technology. Yet several told auditors the cost of participating “outweigh the benefits.” Some cited a “lengthy and burdensome application and review processes.”

This is not the first time auditors have questioned the ATVM program. An earlier GAO audit, released in 2011, warned that the $25 billion may never fully be spent in a program lacking clear benchmarks to ensure taxpayer dollars were properly spent.

An Energy Department spokesman did not respond to an interview request Friday.

The agency, in a written response to auditors, acknowledged it “is not likely to use the remaining Advanced Technical Vehicles Manufacturing loan program authority under the current eligibility requirements.”

The loan office “would be pleased to share our lessons learned in implementing the program and discuss options for program modifications to improve implementation of the original legislation,” wrote David G. Frantz, the Loan Programs Office’s acting executive director.

Center, ABC win Emmy Award for Solyndra investigation

2012-10-02T11:27:50-04:00

NEW YORK — The Center for Public Integrity and ABC News were awarded an Emmy Award Monday for their yearlong investigation exposing flaws in a U.S. government green energy program meant to boost new and innovative technologies.

Center senior investigative reporter Ronnie Greene and a team from ABC were honored for Green Energy: Contracts, Connections and the Collapse of Solyndra, a series of reports exploring how the Department of Energy awarded lucrative green energy contracts. The coverage detailed breakdowns in the award to solar panel maker Solyndra Inc., which later filed for bankruptcy, and examined connections between Obama campaign bundlers and the DOE.

The prestigious News & Documentary Emmy Awards, presented Monday at Lincoln Center's Rose Hall, honored the Center and ABC for Outstanding Business and Economic Reporting. The ABC team included producer Matthew Mosk and chief investigative reporter Brian Ross.

Click here to read ABC’s story. Watch the segment by ABC World News with Diane Sawyer here.

Solyndra loan guarantee 'a bad bet from the beginning,' GOP report says

2012-08-06T14:33:05-04:00

The Department of Energy knew its $535 million loan guarantee to solar-panel maker Solyndra Inc. was “a bad bet from the beginning” but was “determined to make Solyndra a stimulus success story at any cost,” the Republican-led House Energy and Commerce Committee concluded in a report released Thursday.

Solyndra failed last year. The committee’s 154-page report follows its approval Wednesday of the No More Solyndras Act, which would disband the DOE loan guarantee program. The bill would also bar any guarantees for applications received after 2011 and require additional reviews by the Treasury Department and Congress for pending and existing loans.

Solyndra, a California-based renewable energy firm and favorite of the Obama White House, received the administration's first loan guarantee in 2009 and was held out as an example of the “promise of clean energy” by the president. Within two years, the company had filed for bankruptcy, firing 1,100 employees in the process.

The Center for Public Integrity and ABC News first reported on the Solyndra loan guarantee in May 2011, revealing that the DOE had rushed to back the firm without fully vetting its economic prospects. The investigation also noted that billionaire George Kaiser, one of Obama’s principal backers in the 2008 elections, was a major Solyndra shareholder.

The Energy and Commerce Committee report reflects an 18-month investigation into the DOE-Solyndra affair, presenting what it calls “a complete picture of the facts and circumstances” surrounding the White House, DOE, Solyndra, and investors like Kaiser.

“Solyndra will be remembered in the history books as a sad hallmark of a newly installed administration that felt it was above the rules, lusting for positive headlines rather than focused on delivering results,” committee chairman Rep. Fred Upton, R-Mich., said in a press release. “Now, Solyndra is a painful reminder of why the federal government should not be in the venture capital business. Our investigation revealed a shocking episode where politics were put before taxpayers and integrity was sacrificed for the sake of corporate favoritism.”

In a statement, White House spokesman Eric Schultz replied, “This is month eighteen of this Congressional investigation and everything disclosed in the 215,000 pages of documents, 14 committee staff briefings, 5 Congressional hearings, 72,000 pages from Solyndra investors, and Committee interview with George Kaiser, affirms what we said on day one: this was a merit based decision made by the Department of Energy. As Republicans won’t answer how much investigation has cost taxpayers, we believe they should instead be focused on legislation to creating jobs and grow the economy."

Democrats on the Energy and Commerce Committee released a memorandum stating, "The Republican report contains obvious inaccuracies, frequent misstatements, cherry picked evidence, and glaring omissions of exculpatory information received by the Committee."

Treasury Department review of Solyndra loan was rushed, report says

2012-04-04T18:08:51-04:00

The Energy Department kept Treasury Department officials in the dark until late in the government's review of the $535 million loan to now-bankrupt solar panel maker Solyndra, triggering a rushed consultation that may have left concerns unresolved, a new audit released Wednesday found.

The audit by the Treasury Department’s inspector general found that Treasury officials had raised serious concerns about the terms of the loan, but there was no documentation of whether they were addressed. The report’s findings of hurried reviews and ignored warning signs echo previous iWatch News reporting on Solyndra.

The loan, originally touted as a model of President Obama’s green energy program, has become a political weapon. “The Treasury report echoes what our investigation has shown over and over; Solyndra was a bad bet from the beginning that was rushed out the door while every red flag was ignored,” Republican Reps. Fred Upton and Cliff Stearns said in a statement Wednesday.

Though the Energy Department arranged the loan, it was actually processed by the Federal Financing Bank, a government lending institution under Treasury’s control. The newly released audit found that Treasury was not involved in the process until the loan negotiations were largely complete.

Treasury officials raised concerns about the terms of the loan, including the fact that it included a 100 percent guarantee, rather than a partial guarantee, auditors found. After a conference call with Energy Department officials, one Treasury official wrote, in an email uncovered by auditors, “we pressed on certain issues … but the train really has left the station on this deal.”

Department of Energy knew of Solyndra risks, former FBI agent finds

2012-03-29T15:31:20-04:00

The Department of Energy was fully aware of the risks in backing Solyndra Inc., a start-up company that pocketed a half-billion dollar DOE loan but never turned a penny in profit before shutting its doors, concludes a former FBI agent hired to examine the company’s books.

The expert’s report, filed this week in Solyndra’s voluminous bankruptcy case in California, could embolden critics who say the government ignored financial red flags in supporting the solar panel maker with President Obama’s maiden green energy loan in 2009.

The $535 million loan, which bankrolled a vast new manufacturing plant in Fremont, Calif., was part of a broad government mission to kick-start the clean energy movement: Solyndra’s unique solar panels would cover commercial rooftops across the country, aiding the environment and boosting the economy.

Yet the company collapsed under a sea of debt and a business plan that, amid dramatic shifts in the global solar market, caused it to sell far fewer panels at far higher costs than envisioned. From 2009-11, it cost Solyndra $3.92 more per watt to make its panels than to sell them, the bankruptcy report shows.

Solyndra filed for bankruptcy Sept.6, 2011. Two days later, it faced a raid by agents from the FBI and the Energy Department inspector general. With those clouds looming, the company’s board hired R. Todd Neilson — the former federal agent and veteran trustee in bankruptcy cases — as chief restructuring officer.

Solyndra’s board wanted a CRO to not only manage its bankruptcy case, but to explore whether the company committed misdeeds on its road to collapse. “In light of the Federal criminal investigation and ongoing Congressional investigation … the Subcommittee agreed that the CRO would act in an independent capacity in determining if any improprieties had occurred with respect to the Debtors’ finances,” Neilson’s report said.

After examining tens of thousands of pages of records, Neilson concluded that Solyndra did not improperly divert funds. “The construction costs were correctly recorded in the accounting records and no material funds were diverted from their original intended use,” he wrote.

All funds drawn from the DOE loan, he found, “were spent in accordance with the relevant loan documents.”

And, Neilson made clear, the DOE was fully informed of Solyndra’s finances when it initially backed the company in 2009 — and restructured its loan in 2011, seven months before the bankruptcy and raid.

“The CRO has reviewed the vast level of communications and the underlying records between the DOE and Solyndra,” he wrote. “It is the opinion of the CRO that the DOE had sufficient information to understand the risks and challenges associated with the guarantee obtained from DOE and make an informed decision as to the ongoing financial condition of Solyndra throughout the loan guarantee time frame.”

In fact, records show, the Energy Department supported the Solyndra financing in the early days of the Obama administration in the face of criticism from officials within several wings of government — the Office of Management and Budget, the U.S. Treasury and DOE. “This deal is NOT ready for prime time,” one OMB employee wrote March 10, 2009, government emails show. Ten days later, energy officials announced Solyndra was in line to be the first company to secure a green energy loan guarantee.

And, the Center for Public Integrity and ABC News reported last year, Energy Secretary Steven Chu announced that conditional commitment to back Solyndra before completed marketing and legal reviews were in hand.

An Energy Department spokesman did not respond Thursday to requests for comment about the new bankruptcy report.

In the past, DOE officials have said they support risky — but potentially game-changing — technologies. Sometimes, they say, innovative projects fail. They have also defended the Solyndra loan, saying all due diligence was in hand when the financing closed and that veteran private investors also heavily backed the company.

The Energy Department, Neilson found, was equipped with all the information it needed to “make an informed decision as to the ongoing financial condition of Solyndra.”

A weekly report filed with the Energy Department last year, for instance, detailed the company’s falling fortunes. “By August 20, 2011, the reported cash balance was just $5.0 million and sales for the same seven week period were only $5.3 million, $13.8 million below the February 2011 forecast for the same seven week period,” Neilson wrote. “By July 2, 2011, a little more than a month prior to the bankruptcy filing, Solyndra had reported losses totaling almost $1.1 billion.”

Neilson’s report was built from a review of records and informal interviews with Solyndra employees. He sought interviews with former company CEOs Dr. Chris Gronet and Brian Harrison. “Both Gronet and Harrison declined, through their legal counsel, to speak directly to the CRO.”

While his report found no wrongdoing by Solyndra, the criminal investigation continues.

Julie Sohn, a spokeswoman with the FBI in San Francisco, said Thursday that “since it’s an ongoing investigation,” she could not comment.

FCC sends wireless broadband firm LightSquared back to square one

SkyTerra Communications, Inc. — 2012-02-15T15:51:25-05:00

Wireless broadband company LightSquared’s fast-tracked approval process came to a screeching halt late Tuesday when the Federal Communications Commission decided to “indefinitely suspend” its conditional waiver to operate.

The decision came in the wake of a second government study confirming the concerns raised by congressional Republicans and global positioning system users about the potential for the company’s planned network to interfere with millions of GPS devices.

The FCC described its decision as a setback for competition in the wireless market. It is also a huge blow for Philip Falcone, a major donor to President Barack Obama, and his hedge fund, Harbinger Capital Partners, which owns most of LightSquared. Falcone has invested more than $3 billion in the venture.

Until recently, the administration had shown strong support for the politically connected company.

As the Center for Public Integrity first reported in July, the president was an early investor in LightSquared’s precursor company and is tight with many of its biggest backers. White House visitor logs and emails obtained by the Center showed that the company executives met with administration officials before the FCC fast-tracked LightSquared’s approval in January 2011.

The company also repeatedly mentioned the campaign contributions it had made to Democrats and the president in communications with White House staffers.

Sen. Charles Grassley (R-Iowa), members of the military, and the Federal Aviation Administration raised concerns about possible signal interference from LightSquared’s planned high-speed, fourth-generation wireless Internet network. The government conducted two studies to examine the risk.

The first multi-agency review, concluded on Jan. 12, found that there were “no practical solutions” to resolve the GPS issues. A second, released shortly before the FCC announced its decision, also said that “there is no practical way to mitigate the potential interference at this time.”

LightSquared ran into problems because GPS devices have not been built to effectively screen out the company’s signal. Falcone purchased the under-used spectrum to run the network in 2010. It had originally been set aside by the government for low-energy satellite transmissions, but the FCC strongly supported his bid to increase competition in wireless Internet market by repurposing the spectrum.

LightSquared accused its opponents of playing politics.

“The GPS industry has leveraged years of insider relationships and massive lobbying dollars to make sure that they don’t have to fix the problem they created,” wrote Executive Vice President Jeff Carlisle in a blog post Monday.

The company has vowed to challenge the suspension, but how long it can stay financially solvent is in question. For example, one of its biggest contracts — a $13 billion, 15-year deal with Sprint, the third largest U.S. wireless carrier — required that LightSquared resolve the FCC concerns about GPS before March. The value of Harbinger, which is heavily invested in LightSquared, fell by half last year.

Falcone and LightSquared have few options left, according to analysts. They can try to sell the spectrum, swap it for better airwaves, or sue the government and reduce costs to stay afloat until a solution is found.

Grassley cheered the FCC’s decision but vowed to keep investigating the agency.

“Now that the interference issue is settled, we need to find out more than ever why the FCC did what it did,” he said in a statement Wednesday. “The agency put this project on a fast track for approval with what appears to have been completely inadequate technical research. After all of this time and expense, still, no one outside of the agency knows why.”

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.”