UPDATED 10 pm ET 9/8/11
Surprising executives and stirring official Washington, federal agents on Thursday converged on the California headquarters of a failed solar company, focusing attention anew on the first corporate beneficiary of President Obama's stimulus program to create new clean energy jobs. The company has been a subject of an ongoing series of stories by the Center for Public Integrity's iWatch News in collaboration with ABC News.
Thursday's early morning search was a joint operation involving the FBI and the Energy Department's inspector general, indicating the focus of the investigation, at least in part, is a $535 million government loan to the solar company, Solyndra, Inc., which counts a fundraiser to Obama's 2008 campaign as its chief private investor.
The Energy Department agreed to allow some of those investors to recoup losses before the government, meaning taxpayers could be on the hook for a significant portion of the loan. The company laid off some 1,100 workers and Republicans in Congress already examining the loan said the raid underscored their view that the government's investment had been "a bad bet" and "put taxpayers at unnecessary risk."
There are signs the Energy Department started keeping closer tabs on the company after restructuring its loan earlier this year. A department spokesman confirmed Thursday that it gained “observer status,” sitting in on meetings of Solyndra’s board. That raises the possibility that the Energy Department was aware of company events during the crucial months before Solyndra's demise, even as the department officials continued to publicly support the company.
Some members of Congress seized on a visit Solyndra's chief executive made to Washington less than two months ago, when he trumpeted the company's successes and praised the loan. Now, the House committee is inviting CEO Brian Harrison to testify as a witness in a hearing next week.
"As our investigation continues, we hope to hear directly from Solyndra's executives next week -- the same executives who visited Capitol Hill as part of a PR campaign in July and misrepresented the company's financial situation," House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-Fla.) said in a statement.
The failed loan has become a case study, critics say, in how not to do government business -- and has now drawn the attention of FBI and Energy Department investigators to a project the Obama administration has long touted as a signature blueprint for aiding the economy, putting people back to work, and developing innovative clean technology.
Karen Sulier, a spokeswoman for inspector general Gregory H. Friedman, confirmed his office's participation in the probe. “We confirm the involvement of the Office of Inspector General’s special agents in today’s activities at Solyndra,” Sulier told iWatch News.
Prosecutors and law enforcement authorities said the search warrants were under seal. “We have no comment,” said Jack Gillund, a spokesman for the U.S. Attorney’s Office’s Northern District in California.
“We are conducting a joint investigation with the Department of Energy Inspector General’s Office,” said Peter Lee, an FBI spokesman in San Francisco. “I can confirm that we are at Solyndra this morning executing search warrants.”
Solyndra executives still working for the company were greeted by FBI agents seizing boxes of records.
“The FBI is here this morning executing a search warrant,” Solyndra spokesman David Miller told iWatch News. Asked what records the agency was seeking, Miller said: “I can’t talk about that. I don’t know.”
He said the search took the company by surprise. “We’ll cooperate with them and given them whatever they are looking for, but certainly it was a surprise,” Miller said. “I came to work this morning and they were here and I’ve been sorting it out.”
About the inspector general's involvement, Miller said, “ I’ve only dealt with the FBI agents who were here on site.”
The company had received a half-billion dollar government loan following a fast-track approval process and involving an interest rate lower than other green projects benefitting from Energy Department help, iWatch News and ABC News disclosed.
The benefit, part of the administration's job-creating stimulus, failed to prevent the company from shuttering its doors and laying off all but a skeletal crew that includes Miller. This week, Solyndra filed for bankruptcy -- and already is fending off lawsuits from ex-workers who say they were illegally forced out without 60 days' notice.
In Washington, the collapse of the politically-connected solar energy firm Solyndra has unleashed a barrage of fresh questions from House and Senate investigators, who want to know why the Obama Administration agreed to invest $535 million in the now-bankrupt company, and what can be done to recover those funds.
The House Energy and Commerce Committee’s investigative panel announced it will hold hearings next Wednesday on the government’s Solyndra loan.
Separately, the Center for Public Integrity's iWatch News and ABC News learned that investigators in the Democrat-controlled Senate have begun seeking answers from the administration about the Energy Department loan. That development is significant, as senators' interest signals that questions about the deal now extend to both parties in Congress. Earlier this year, the Republican-controlled House committee voted, along party lines, to subpoena the White House Office of Budget and Management for records on the financing.
After Thursday’s raid, members of a House committee investigating Solyndra said they have invited Harrison, Solyndra's CEO, to testify at a hearing next week, along with OMB Deputy Director Jeffrey Zients, Executive Director of DOE’s Loans Programs Office Jonathan Silver and Solyndra chief financial officer W.G. "Bill" Stover.
“The FBI raid further underscores that Solyndra was a bad bet from the beginning and put taxpayers at unnecessary risk,” said congressmen Upton and Stearns. “President Obama’s signature green jobs program went from a darling of the administration, to bankruptcy, to now the subject of an FBI raid in a matter of days."
That hearing, in turn, could spin upon a vital question: Did the Department of Energy misjudge Solyndra from the start, ignoring warning signs from credit agencies, auditors and analysts in rushing to award it DOE’s first green energy loan guarantee?
The company’s failure came after officials in the Energy Department had spent two years touting the company’s promise, and fast-tracked Solyndra through the normally cumbersome process of securing hundreds of millions in federal funds. All that help caught the attention of federal auditors, who questioned why the Energy Department granted it conditional loan approval even before completing the legal and marketing reviews that were typically required.
On Wednesday, iWatch News and ABC News reported that the federal loan to Solyndra came through the Treasury Department's Federal Financing Bank, and was approved with a quarterly interest rate lower than that of any other federally-backed green energy project —a rate of 1.025 percent. (iWatch News and ABC News first reported on the Solyndra loan and the company’s political connections in March.)
Energy Department officials said the rates for all of its green energy loans were set by the bank using a formula, and Solyndra's favorable terms were not the result of special treatment. "All borrowers under the [government loan guarantee] program receive the same treatment," Energy Department spokesman Damien LaVera wrote in response to questions.
Congressional investigators, though, have said they are still unclear why Solyndra was the first loan approved, why it received the most favorable lending terms, and why the administration gave the company so much attention – even sending President Obama to the company’s California headquarters to tour the plant and tout its potential.
Energy Department officials said they could not comment on law enforcement matters. Spokesman LaVera on Thursday defended the loan, saying the department “conducted exhaustive reviews of Solyndra’s technology and business model prior to approving their loan guarantee application.”
“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,” said LaVera. “In the end, the company completed the project they said they would complete, were producing the products they said they would produce and were selling those products around the world.”
While Energy Department officials steadfastly vouched for Solyndra—even after an earlier round of layoffs raised eyebrows—others questioned the viability of the company. Energy officials said Solyndra won the coveted award on merit.
One of the private investors in Solyndra was George B. Kaiser, an Oklahoma oil billionaire. Kaiser was a bundler of campaign donations for Obama's 2008 race, and is a frequent visitor to the White House. Since 2009, he has made 16 visits to presidential aides, according to White House visitor logs.
Kaiser's Argonaut Ventures and its affiliates have been the single largest shareholder of Solyndra, according to SEC filings and other records. The company holds 39 percent of Solyndra's parent company, bankruptcy records filed Tuesday show.
Under terms of the bankruptcy filing, investors including Argonaut -- which led a $75 million round of financing for Solyndra earlier this year -- will stand in line before the federal government and other creditors to recoup its losses. Energy officials confirmed this arrangement, saying that after private investors including Kaiser recover $75 million, the U.S. government would have a chance to seek $150 million of its investment.
Kaiser has declined interview requests for months from iWatch News and ABC News. Calls went unreturned again on Thursday. HisTulsa-based George Kaiser Family Foundation, which in 2009 cited a $342 million investment value in Solyndra, issued a statement after Solyndra's collapse, citing "serious challenges in the marketplace, especially the drastic decline in solar panel prices during the past two years caused in part by subsidies provided by the government of China to Chinese solar panel manufacturers."