Emails reveal White House kept tabs on Solyndra loan
Deliberations over fed loan rushed
Newly uncovered emails show the White House closely monitored and tried to rush Energy Department deliberations over whether to make a $535 million taxpayer-backed loan to Solyndra, a politically connected solar energy firm that went bankrupt and now is the focus of a criminal investigation.
The company's solar panel factory was heralded as a centerpiece of the president's stimulus-backed green energy plan – billed as a way to jumpstart a promising new industry while creating jobs. The internal emails, excerpts of which were obtained by iWatch News and ABC News, show the Obama administration keenly monitored progress of the loan, even as analysts voiced serious concerns about the risk involved.
With Obama about to take a trip where he might be able to announce the loan in March 2009, top White House officials were pressing for a quick answer.
"If you guys think this is a bad idea, I need to unwind the WW [West Wing] QUICKLY," wrote Ronald A. Klain, then chief of staff to Vice President Joe Biden, in an email sent March 7, 2009.
Three days later, an analyst at the Office of Management and Budget cautioned against moving too quickly. "This deal is NOT ready for prime time," the analyst wrote in a March 10, 2009 email.
Only 10 days later, the Energy Department formally announced its commitment to guarantee the loan, which the administration had fast-tracked as the first green energy project backed by stimulus dollars.
The administration wanted to unveil the announcement while Obama was on a visit to California, according to excerpts of the emails, among information that has been uncovered by the House Energy and Commerce Committee and obtained by iWatch News and ABC News. As previously reported by iWatch News , recurring red flags failed to slow the administration's race to approve the loans. [A complete timeline of key events involving Solyndra is here.]
White House officials said the email excerpts obtained Tuesday do show White House interest in the timing of the Solyndra decision – but only because the president was considering announcing the decision himself while on the trip. One administration official, speaking on condition of anonymity because he was not authorized to speak publicly for the White House, said pressure did not play a part.
"I think that it is clear that folks understood at DOE that they were supposed to make their decision on the merits and do whatever they were supposed to do to kick the tires on the decision," the administration official told ABC News. "Folks were interested in being updated as to whether the decision making process was completed."
Energy Secretary Steven Chu announced the loan guarantee that March, and Obama toured the company's plant a year later, portraying Solyndra as a symbol of how government and industry can come together.
The House Energy and Commerce Committee is to hold hearings on the Solyndra loan Wednesday. The Republican led House has been investigating the Obama administration's green energy loan program for months. That probe took on new urgency two weeks ago, when Solyndra abruptly shut its doors and laid off 1,100 employees. Last week, the FBI raided the factory as part of a joint investigation with the Energy Department's inspector general.
"This is not right. This is not good," said Rep. Fred Upton (R-Mich.), who chairs the House committee that is examining the loan. "It makes you sick to your stomach. This is taxpayer money."
As federal authorities examine whether Solyndra misled the government about its true financial state, the Obama White House is fielding fresh questions over why it pushed so hard for Solyndra. Officials with DOE and the Office of Management and Budget are expected to testify Wednesday.
Late Tuesday came word that executives with Solyndra, invited to appear as witnesses, will not attend Wednesday's hearing. Instead, they'll appear next week.
The White House has argued that any effort to finance startup businesses in a relatively new field like solar energy is bound to include risky ventures that could fail. They reject the notion being pushed by Republicans that Solyndra was chosen for political reasons. One of the largest private investors in the deal, Oklahoma billionaire George Kaiser, was also a prominent fundraiser for Obama's presidential campaign.
In advance of intensifying scrutiny of the loan, the White House has noted that the Bush administration was the first to consider Solyndra's application, and that some executives at the company have a history of donating to Republicans.
Obama's Energy Department has said it backed Solyndra as a potential game changer in the clean tech movement, but as iWatch News has reported, clear warning signs indicated the venture was a high risk from the start.
A report prepared by congressional investigators notes that, in the weeks before President Bush left office, on January 9, a credit committee at the Energy Department, which reviews loans for approval, had voted against offering a loan commitment to Solyndra.
Even after Obama took office on Jan. 20, 2009, analysts in the Energy Department and in the Office of Management and Budget repeatedly questioned the wisdom of the loan. In one exchange in August 2009, a month before the loan closed, an Energy official wrote of "a major outstanding issue" – namely, that Solyndra's numbers showed it would run out of cash in September 2011.
There also was concern about the high risk nature of the project. Internally, the Office of Management and Budget noted that "the risk rating for the project sponsor [Solyndra] … seems high." Outside analysts had warned for months that the company might not be a sound investment.
Peter Lynch, a New York-based solar energy analyst, has said even a cursory glance at Solyndra's prospectus revealed a problem with the company's numbers.
"It's very difficult to perceive a company with a model that says, well I can build something for six dollars and sell it for $3," Lynch said. "Those numbers don't generally work. You don't want to lose three dollars for every unit you make."
In 2008, as Solyndra, then just 3 years old, pushed ahead with its application for government backing to build a new plant to produce its unique solar panels, an outside rating agency, Fitch, gave it a B+ credit rating. Two months earlier, in June 2008, Dun & Bradstreet issued a credit appraisal of the company. Its assessment: "Fair."
Those are not top of the line scores. Fitch Ratings spokeswoman Cindy Stoller said of a B+ rating: "It's a non-investment grade rating." She provided a company ratings definition, showing that B+ falls between a "highly speculative" B and "speculative" BB.
Asked about those ratings, and how significantly the department viewed the risk, energy officials said Monday the department conducted "extensive due diligence" on the application, which included consideration of the Fitch rating.
"We believed the rating, which is used to inform our analysis of potential risks associated with the loan, was appropriate for the size, scale and innovative nature of the project and was consistent with the ratings of other innovative start-up companies," said Damien LaVera, an Energy Department spokesman.
"The Department conducted exhaustive reviews of Solyndra's technology and business model prior to approving their loan guarantee application," LaVera said. "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."
Solyndra President and CEO Brian Harrison and CFO W.G. Stover, Jr., invited to appear as witnesses, will not attend Wednesday's hearing but have told the House committee they will voluntarily appear in the future.
In advance of the hearing, Solyndra issued a statement Tuesday citing "the timing for the hearing, legal complexities arising from last week's activities, and the urgency of the bankruptcy proceedings" as reasons Harrison and Stover could not attend.
"Given that it is in the best interest of all creditors, including the U.S. government, to attempt to gain maximum value for the Solyndra assets, either via sale of the whole company or in parts, including its intellectual property, it is in the best interest of all interested parties for them to remain in California to engage with potential purchasers."
Reprinted by permission of The Center for Public Integrity.