In testimony before the House Energy and Commerce Subcommittee on Oversight and Investigations on Thursday, Energy Secretary Steven Chu took full responsibility for all decisions regarding the $535 million loan guarantee awarded to failed solar company Solyndra. “As the secretary of energy, the final decisions on Solyndra were mine,” he said, “and I made them with the best interest of the taxpayer in mind.”
But despite taking ownership of the debacle, Chu refused to take any of the blame. He did not admit to any wrongdoing on his behalf or that of the Department of Energy in general. When asked by Energy and Commerce chairman Fred Upton (R., Mich.) if someone should apologize for putting taxpayers on the hook for half a billion dollars, Chu simply said, “It is extremely unfortunate what has happened to Solyndra.”
#ad#To date, evidence uncovered by the committee, mostly in the form of e-mails, strongly indicates that 1) Solyndra’s financial condition was always very dubious, making it an extremely risky bet from the get-go, and 2) political considerations played a substantial role in the decision-making process throughout the DOE’s involvement with the company.
But rather than acknowledge these claims, Chu opted instead to plead incompetence. For example, Chu told the committee that he was unaware of predictions by DOE staffers in 2009, before the Solyndra loan was finalized, that the company was likely to face severe cash-flow problems in the future.
“The issue of working capital remains unresolved,” wrote one DOE staff member on Aug. 19, 2009, just days before the loan was officially announced. “[Solyndra] seems to agree that the model runs out of cash in Sept. 2011.” The company would officially declare bankruptcy on Sept. 6, 2011. Chu said that he only recently became aware of the fact that such concerns were ever raised, and argued that the staffer “wasn’t predicting bankruptcy of the company.”
Chu repeatedly blamed Solyndra’s demise on the “unanticipated” deterioration of the solar-panel market over the past several years, spurred by increasing competition from China, which massively subsidizes its own solar industry. There is no disputing the fact that market conditions were not in the company’s favor to begin with, and became increasingly worse. But Chu’s claim that this was an “unanticipated” development flies in the face of the evidence. Staff at the Office of Management and Budget raised these very concerns in the days before Solyndra’s loan was approved.
“Solyndra claims to have a pricing advantage based on performance and lower cost,” an OMB staffer wrote in an Aug. 31, 2009, e-mail. “Recent developments in the solar market, in particular, pricing pressure from China . . . raise concerns about how strong Solyndra’s position will be in the face of rising competition.” As a result, the staffer suggested that OMB “might want to notch the credit rating down (or viewed conversely, increase our estimate of risk).”
The staffer also requested an independent analysis from the DOE to back up the company’s claims of a “pricing advantage.” This was never produced, and months later, on July 26, 2010, another OMB staffer e-mailed a DOE official to reiterate the request for an independent analysis. In late October 2010, when Solyndra’s financial troubles became more pronounced, one of the company’s top investors complain that Solyndra could only produce “anecdotal evidence” that the company would be able to compete in the current market.
#page#Chu denied that “political considerations” had any influence on the DOE’s decisions regarding Solyndra. But again, evidence obtained by the committee suggest otherwise. In perhaps the most striking example, a series of e-mails reveal that the DOE urged Solyndra executives to delay their announcement of layoffs at the company until after the 2010 midterm elections. “[DOE] did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd,” wrote Solyndra investor Steve Mitchell. “Oddly they didn’t give a reason for that date.”
Astonishingly, Chu told the committee he had “just learned” about this, and insisted that “no pressure” was exerted by the DOE to convince Solyndra to postpone the layoffs. “That was not discussed with me and I would have not approved it,” he said.
#ad#In this case, incompetence would seem to be Chu’s only possible defense. Solyndra CEO Brian Harrison e-mailed DOE staff on Oct. 25, 2010, to inform them of the company’s intention to announce layoffs. That e-mail was forwarded to Chu’s own chief of staff, who then contacted climate-change czar Carol Browner and Biden adviser Ron Klain. One Solyndra investor later wrote in an e-mail that layoffs had been postponed until November 3 (the day after the election) “at DOE’s request.”
Evidence released by the committee appears to present a rather damning rebuttal to Chu’s claim that politics played “no role” in the DOE’s decision making. On Dec. 7, 2010, Steve Mitchell, the managing director of Argonaut Ventures, the investment arm of the George Kaiser Family Foundation, e-mailed Kaiser, an Oklahoma billionaire and prominent Obama fundraiser, to discuss his conversations with DOE officials regarding Solyndra’s application for a second loan. (Because Argonaut held the largest private stake in the company, Mitchell also sat on Solyndra’s board of directors.) Mitchell told Kaiser that the request for a second loan “did not fly” with the DOE, and explained that the decision was purely political. “Politically they have no will or ability to get this done,” he wrote. “The DOE really thinks politically before it thinks economically.”
Chu’s testimony raised as many questions as it answered, perhaps most notably: How is it that he only just became aware of such significant details regarding the Solyndra loan, and what does that say about his leadership at the DOE? At least Chu established his competence on one account: “Certainly, knowing what we know now, I’d say no [to the Solyndra loan].” But for taxpayers, that’s too little, too late.
— Andrew Stiles is the Franklin Center’s 2011 Thomas L. Rhodes Journalism Fellow.