The White House from The Center for Public Integrity

Opening of Bush library a reminder of administration's 'Broken Government'

2013-04-25T14:51:13-04:00

Today’s dedication of the George W. Bush Presidential Library and Museum will bring together all of America’s living ex-presidents for what will likely be a warm and celebratory event. Protocol for the unveiling of presidential portraits and presidential libraries general calls for an abundance of courtesy and good feelings, with politics to be left at the front door.

Like all presidential libraries, this one — built on the campus of Southern Methodist University in Dallas — largely reflects the president’s own view of his time in office. The library and museum also reflects the 43rd president’s unique demeanor — “straightforward, confident, unapologetic and willing to let history be the ultimate decider of his time in office,” according to the Washington Post.

But there are other views, of course. George W. Bush’s presidency — like most — was also marked by controversy, tragedy, bitter political rancor and failings large and small. As the Bush administration ended in Dec. 2008, the Center for Public Integrity took stock of what went wrong during those years in its Broken Government project. In a comprehensive assessment of systematic failures over the previous eight years, the Center found more than 125 examples of government breakdown.

Read the project: Broken Government

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.

VIDEO: Who can vote?

2012-08-13T06:00:01-04:00

Voters Overview from News21 on Vimeo.

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.”

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.