Federal officials downplayed Solyndra's troubled history

WASHINGTON — At a number of points in its troubled history, the solar company Solyndra faced dire financial problems that threatened its survival. Yet at each crisis, Energy Secretary Steven Chu and officials at his agency failed to take steps that critics say could have limited taxpayer losses when the company collapsed last summer.

Instead, Energy Department officials monitoring the solar panel manufacturer and its $535 million federal loan stepped in with financial assistance, or worked to dispel concerns raised by industry analysts and other Obama administration staffers, according to previously confidential documents analyzed by the Washington Post.

The officials raised no public red flags even as Solyndra executives presented a glowing picture last summer to Capitol Hill lawmakers, describing a growing company when internal sales figures suggested one that was in serious trouble.

The newly obtained documents, along with other records obtained in recent weeks, offer the clearest picture yet of Solyndra's deteriorating finances and the Energy Department's extraordinary efforts to prop up the company. Chu, who is scheduled to testify next week before a House investigating subcommittee, is likely to be questioned about his agency's willingness to invest millions more taxpayer dollars in the firm, even after the White House had abandoned hopes of a rescue.

The documents also capture escalating tension as staffers at the White House, its Office of Management and Budget and the Energy Department came to grips with Solyndra's likely demise. Working deep into the night and into the weekend, they fretted at times about political fallout from the collapse, noting that Solyndra had been a centerpiece of President Barack Obama's effort to promote clean technology businesses.

By Aug. 9, with Solyndra weeks away from a bankruptcy filing, OMB career staff mocked supportive comments offered by Jonathan Silver, then the head of the Energy Department's loan program. Silver had been quoted in an article saying that Solyndra was "significantly misunderstood" and experiencing the normal "bumps in the road" for a startup company.

"Wow … I wonder if he was unaware of the true situation at Solyndra, or if he was trying to salvage something by showing DOE confidence," an OMB staffer wrote in one email.

Republican critics have accused the administration of favoring Solyndra because its largest investors were funds linked to Obama fundraiser George Kaiser, who has denied involvement in arranging the loan. Emails released this week show that Kaiser and his associates discussed how to win federal contracts and additional loan assistance, and they believed that Chu was "apparently staying involved" in Solyndra's second loan application. DOE officials say Chu was not involved.

White House spokesman Eric Schultz said concerns about the agency's actions are one reason the administration is independently reviewing its loan portfolio. Former Fannie Mae president Herb Allison will recommend ways to ensure better loan monitoring and implement an early-warning system.

Energy Department spokesman Damien LaVera said the agency tried to help Solyndra recover so workers could keep their jobs and taxpayers would be repaid. He said that Chu and other officials publicly supported Solyndra based on information available at the time.

"At each step in the due diligence for and monitoring of this project, we took actions based on analysis of Loan Program experts that were intended to maximize the ability of the taxpayer to recover resources," LaVera said.

"We relied on data provided by the company under penalty of the law and certified by outside auditors that indicated revenue grew more than 40 percent from 2009 to 2010 and was projected to continue to grow in 2011."

Attempts within the agency to minimize concerns about Solyndra's performance began as early as May 2010. By then, independent auditors had questioned whether the company could continue as "a going concern" — a determination that deeply troubled industry analysts. An outside adviser to the White House alerted senior officials that Obama should avoid aligning himself with the company.

But Chu's senior adviser Matt Rogers played down the concerns in an email, asserting that "going concern" warnings were "standard" for companies facing an initial public offering.

"We will see these with all the pre-IPO companies that we fund and is not a general concern," Rogers wrote.

OMB and Treasury Department analysts remained concerned, however. They asked Energy staffers in July 2010 to respond to questions about Solyndra's finances and revenue claims. The Energy Department's Silver assured OMB leaders in a July 21, 2010, meeting that the Solyndra project was "on time and on budget." Six days later, Solyndra replaced its chief executive officer.

Under new leadership, it took Solyndra only three months to alert the Energy Department that the company needed emergency funding to avoid liquidation.

The warning came as it faced a contractual requirement to place $5 million into a reserve fund as a taxpayer protection. In December, Solyndra failed to make the payment and violated its loan terms.

With this technical default , the Energy Department could have pulled the plug on the Solyndra deal. Instead, officials participated in discussions to rescue the company by attracting more private capital. A deal was struck to raise $75 million from the company's own investors, but they agreed to participate only if the Energy Department placed their new investment ahead of taxpayers for repayment in the event of a bankruptcy.

The new loan deal was approved in February. The following month, Chu told an interviewer that Solyndra's sales were growing and that he was "confident" Solyndra would thrive and repay the public's money.

In April, Silver told critics that Solyndra was "going in the right direction" and rapidly growing. "This is a company that doubled their revenues and essentially doubled them again, year over year," he told a trade publication. Silver resigned his post last month.

Federal officials downplayed Solyndra's troubled history 11/11/11 [Last modified: Friday, November 11, 2011 11:22pm]

Copyright: For copyright information, please check with the distributor of this item, Washington Post.
    

Join the discussion: Click to view comments, add yours

Loading...