IMPACT: White House budget office turning over records on loan to politically connected firm

Documents on loan guarantee released in response to congressional subpoena

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Two months after Solyndra's accountant noted the solar firm's recurring losses and negative cash flows had helped raise doubts about "its ability to continue as a going concern," President Obama visited its Fremont, Calif., plant, heralding the project as "a symbol of promise." With Obama is the company's vice president, Ben Bierman (left) and CEO Chris Gronet.

Paul Chinn / Associated Press

 

The White House budget office has agreed to turn over reams of records to a House committee investigating the first energy loan guarantee awarded by the Obama administration, a significant turn in an inquiry that had been bogged down by a no-show witness and subpoena for records.

That breakthrough means the House Committee on Energy and Commerce’s investigation can now explore some fundamental questions: Whether political connections factored into the $535 million loan guarantee, and whether the government fully vetted the deal before issuing the prized financial backing.

The guarantee benefited a California solar panel maker, Solyndra Inc., whose prime financial backers include a bundler for the president, Oklahoma oil billionaire George Kaiser. Yet not long after securing the $535 million loan guarantee from Obama’s Department of Energy in 2009, Solyndra hit financial hurdles, laying off workers and canceling a planned public offering.

When the House Committee on Energy and Commerce launched its investigation this year, it turned to the Office of Management and Budget for answers. OMB had vetted the loan guarantee’s financial risk shortly before DOE closed the deal in September 2009. Such vetting is required before the government puts taxpayer dollars on the line.

But for months, OMB resisted turning over all the records sought, saying it did not want to reveal internal analyses normally exempt from public scrutiny. The budget office said it made many records available for review, but the Committee said it failed to turn over key records – such as internal deliberations as it assessed the risk of the Solyndra loan guarantee. The Committee then called a hearing for OMB to testify, but the official, citing a scheduling conflict, didn’t show.

Members of the Republican-led committee were outraged. Last month, they issued a subpoena demanding OMB open for inspection all its records revealing how it assessed the deal, along with its correspondence with the Energy Department and White House.

OMB, which failed to meet a deadline to turn over those files, is now providing the records sought, officials of both the budget office and congressional committee confirmed.

“OMB has agreed to produce all documents necessary to the Committee's investigation, with appropriate safeguards relating to proprietary information,” a House committee spokesman told.

Kenneth Baer, a spokesman for the budget office, echoed that statement in an interview. “We are complying with the subpoena and are giving the committee the materials they need to conduct their investigation,” Baer said.

The Committee expects to receive some 1,700 to 1,800 pages of records involving the budget office’s review and communication with the Energy Department and White House. In some cases, the budget office is showing select documents to investigators “in camera” before making copies, but the Committee expects to receive the key records sought.

Its records review could wrap up this month, allowing investigators to scrutinize the circumstances involving a once-celebrated loan guarantee that has evolved into a case study in how well the Energy Department has bankrolled green energy projects that have at times benefitted significant supporters of the president.

The Department of Energy, which issued the guarantee, said it fully vetted the transaction and that the company’s unique solar panels will enhance the green energy movement and put more people to work. Solyndra said it won the guarantee on merit and that its finances have improved as its business expands.

Yet questions exist over whether the Energy Department pushed too quickly in announcing its maiden loan guarantee.

In May, iWatch News and ABC News revealed that DOE announced its commitment to provide the financial backing in March 2009 before receiving full marketing and legal reviews. That shortcut drew criticism from a GAO report that chided the Energy Department for treating loan guarantee applicants disparately.

“DOE’s implementation of the LGP has treated applicants inconsistently, favoring some and disadvantaging others,” the GAO concluded. “For example, DOE conditionally committed to issuing loan guarantees for some projects prior to completion of external reviews required under DOE procedures.”

Solyndra’s guarantee was among those case studies, iWatch and ABC found; the Energy Department said it received completed marketing and legal reviews before closing the loan guarantee in September 2009 and that it is confident in the approval process.

This month, iWatch News disclosed that OMB also raised questions, viewing the transaction as riskier to taxpayers than the Energy Department had. Because the budget office assigned a higher risk rating to the loan guarantee, the government had to set aside more money in case of a default.

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