Investigations into the Solyndra scandal continue to unearth disturbing evidence about the Obama administration’s role in the decision to award a $535 million loan guarantee to the failed solar company, as well as in the subsequent restructuring of that loan agreement once it became clear the company was in trouble.
The House Energy and Commerce Subcommittee on Oversight and Investigations, which has been leading the investigative effort, hopes to shed more light on the case this Friday, when members will hear testimony from top Treasury Department officials. The subcommittee recently learned that Treasury, in addition to the Office of Management and Budget, had expressed concern over the Solyndra loan restructuring, and even raised questions about its legality.
In a letter to Treasury Secretary Tim Geithner requesting information ahead of the hearing, top Republicans on the committee cite evidence that “raises questions as to whether the Department of Energy satisfied the requirement to consult with the Department of the Treasury” regarding the initial loan guarantee in September 2009, as well as the restructuring agreement in February 2011.
According to e-mails obtained by the committee, Treasury officials complained as recently as August 2011 about the DOE’s failure to share information with respect to Solyndra’s financial condition and the details of the loan-restructuring agreement. The company filed for bankruptcy on September 7.
In an e-mail dated August 17, Mary Miller, assistant secretary for financial markets at Treasury, complained that despite repeated requests for information on Solyndra, Treasury had yet to receive a response from DOE. “Since July of 2010, Treasury has asked DOE for briefings on Solyndra’s financial condition and any restructuring of terms,” Miller wrote in an e-mail to Jeffrey Zients, deputy director of OMB. “The only information we have received about this has been through OMB, as DOE has not responded to any requests.”
Miller also echoed concerns, previously raised by staff at OMB, about the legality of the loan-restructuring agreement. The agreement, negotiated by DOE, gave priority status to private investors regarding the first $75 million recovered in the event of Solyndra’s liquidation. In other words, the American taxpayer took a back seat to private firms such as Argonaut Ventures, the investment arm of the Kaiser Family Foundation, run by Oklahoma billionaire and Democratic fundraiser George Kaiser.
At a committee hearing last month, Republicans argued that DOE’s decision violated the Energy Policy Act of 2005, which created the loans program. The law states that taxpayer-backed loan guarantees “shall be subject to the condition that the obligation is not subordinate to other financing.”
Republicans argued that the only way the DOE’s decision did not violate the statute is if “is not subordinate to other financing” actually means “is not subordinate to other financing at the time of first approval” — and therefore any subsequent restructuring would not be “subject to the condition.” Committee member Brian Bilbray (R., Calif.), among others, was outraged that taxpayers could be cheated out of $75 million based on such a reading of the law.
In her e-mail to Zients, Assistant Secretary Miller appeared to agree with this assessment. “Our legal counsel believes that the statute and the DOE regulations both require that the guaranteed loan should not be subordinate to any loan or other debt obligation,” she wrote. Furthermore, DOE’s own regulations stated that the department “shall consult with OMB and Treasury before any ‘deviation’ is granted from the financial terms of the Loan Guarantee Agreement.”
But DOE never did that, Miller pointed out: “In February , we requested in writing that DOE seek the Department of Justice’s approval of any proposed restructuring. To our knowledge, that has never happened.”
Meanwhile, despite these and other damning revelations, President Obama has continued to defend the ill-fated Solyndra loan guarantee. “Hindsight is always 20/20,” he told George Stephanopoulos in a recent interview. “It went through the regular review process and people felt that it was a good bet.”