WASHINGTON — Top leaders of a troubled solar panel company that cost taxpayers a half-billion dollars repeatedly misled federal officials and omitted information about the firm's financial prospects as they sought to win a major government loan, according to a newly released federal investigative report.
Solyndra's leaders engaged in a "pattern of false and misleading assertions" that drew a rosy picture of their company enjoying robust sales while they lobbied to win the first clean energy loan the new administration awarded in 2009, a lengthy criminal investigation uncovered. The Silicon Valley start-up's dramatic rise and then collapse into bankruptcy two years later became a rallying cry for critics of President Barack Obama's signature program to create jobs by injecting billions of dollars into clean energy firms.
The report, written by the Energy Department's Inspector General, summarizes the findings of the four-year-long criminal investigation conducted by FBI agents and investigators from the Office of the Inspector General.
Solyndra officials told the government in 2009, for example, that they had firm contracts to sell $2.2 billion worth of their unique cylindrical solar panels over the next five years. But behind the scenes, investigators found, Solyndra was struggling with customers who were balking at the high panel prices, arranging secret side deals to pay discounted prices and refusing to buy as many panels as they once promised.
Government officials, however, shared in some of the responsibility for the loss of the $535 million federal loan, investigators concluded in their report. Federal loan officers, feeling pressure from the White House and other senior government leaders to approve the loan, failed to notice warnings in the fine print of documents that could have alerted them to Solyndra's shaky status, the investigative report said.
These new details come now, at the end of a four-year-long probe by the FBI and the Department of Energy's Inspector General. Together the two offices looked at whether Solyndra officials committed a crime by making false statements to the government, primarily the Department of Energy that awarded the loan.
Earlier this year, the Department of Justice decided not to pursue criminal charges against the former Solyndra officials involved.
The report does not identify the Solyndra leaders who gave specific misleading information by name. Lawyers for the former chief executive officer and the former chief financial officer, who presented the loan application to the department, declined to comment.
What investigators learned about Solyndra in its officials' internal emails and financial records — summarized in a "Special Report" from Inspector General Gregory H. Friedman — provides a kind of final chapter to the Solyndra saga.
After Obama's election in November 2008, word spread of his incoming administration's plan to jumpstart the economy with a massive $787 billion stimulus program, and to broadly expand an Energy Department loan program for clean energy firms. That month, Solyndra was already "less than forthcoming" about its financial situation, the report said; two company officials told the department they had four corporate customers locked in to buy $1.4 billion in panels over five years.
But that number was inflated, the report said, because one customer at that point had negotiated a major discount on the price of panels. A second customer told investigators that a Solyndra executive allowed him to buy fewer panels than they had agreed, but wanted to keep up the illusion of having more business. The Solyndra executive "stated he wanted the contract to reflect larger volumes" but the customer "was assured" he wouldn't have to buy the full amount, the report said.
In January 2009, with Obama in office, the Energy Department hired an engineering firm R. W. Beck that would judge Solyndra's business model. A Solyndra executive insisted all its sales contracts remained unchanged.
By May 2009, when Beck made its final report concluding the company was in god shape, investigators found, all four of Solyndra's customers had been quietly offered price discounts.
Solyndra was then required to hire an outside rating agency to assess its credit, and contracted with Fitch Ratings. Solyndra told Fitch it then had seven sales contracts worth $1.9 billion. When Fitch asked the company officials if they had given any customers price discounts, company officials said no.
"We found that, at that time, all seven of Solyndra's contract customers had already received price concessions," the report said. "Additionally, Solyndra's largest contract customer had informed Solyndra it would not buy more panels in 2009 because Solyndra's price was too high."
Despite its insistence of solid sales projections, the company did submit some documents that showed otherwise. The firm submitted a spreadsheet showing accurate sale figures for the first half of 2009. "If read carefully," investigators said, the spreadsheet revealed Solyndra's customers were buying less product at lower prices than the company claimed.
"The department loan officers who received this spreadsheet each told us they did not examine it closely," the report said.
In June 2009, the company provided a copy of a contract amendment eliminating the customer's obligation to buy $300 million worth in panels. The department's loan officer appeared not to notice, though, later counting the original amount in projected sales.
The department missed a warning sign that "the market acceptance of Solyndra's product was not nearly as robust as that portrayed by Solyndra's executives," the report said.
In one case, Solyndra officials made up a fake excuse to avoid giving a department consultant the name of a contact at one of their customers. "Solyndra officials internally discussed that at least one contract customer risked informing the consultant that Solyndra's price was too high," the report said.
Finally, in September 2009, the department awarded its first loan to Solyndra, with Vice President Joe Biden helping make the announcement. The funds were supposed to create more than 1,000 jobs and help build American's clean energy industry, but the company began to struggle financially almost immediately.
In late 2010, Friedman's office opened its investigation after noticing that numbers Solyndra provided in its loan application conflicted with information the firm provided in a securities filing.
In August 2011, Solyndra announced it would file for bankruptcy and shuttered its glass-walled factory with a snazzy corporate boardroom. The dramatic fall left Solyndra's 1,179 employees without jobs, shuttered a gleaming new factory built with federal funds, and spurred a firestorm of congressional hearings and other investigations.
The FBI quickly joined the investigation. On Sept. 8, agents from the FBI and the Inspector General's office raided Solyndra's offices, carting off boxes of documents and computer drives.
Last year, the investigators and a lead prosecutor in San Francisco felt they had enough evidence to pursue criminal prosecution of the former Solyndra officials, the Washington Post reported, citing two government officials familiar with the discussion.
The U.S. Attorney in the Northern District of California did not pursue the case, though, and FBI Director Jim Comey proposed that the U.S. Attorney in the Southern District of New York review the case for a second opinion.
The Department of Justice declined to comment on its decision not to proceed. Solyndra officials' defense lawyers pointed to a key weakness in the case in a letter to top Justice officials in Washington: it would be hard to show the government was a victim of false statements when agency officials were rushing to approve the loan in time for a political press event and failing to notice key financial information.
Solyndra has been studied extensively — by venture capitalists looking to avoid bat bets, by solar industry leaders analyzing panel prices, even by students of bankruptcy law.
"Solyndra started out as green tech's poster child, showing how government and green entrepreneurs could team up to create clean energy, blue collared jobs, and a healthy new industry," reads a 2012 bankrtupcy case study of the company written by law school students at the University of Tennessee. "Instead, Solyndra will likely be remembered as a cautionary tale of how taxpayer dollars were wasted when the government made financial investments based on political considerations."
Investigators didn't try to determine if political favoritism fueled the decision to award Solyndra a loan, but heard some concerns about political pressure, the report said.
"Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications," the report said. "They suggested the pressure was based on the significant interest in the program from department leadership, the administration, Congress, and the applicants."
The report comes two days after President Obama pledged his committment to supporting clean energy with federal funds, although in a more modest fashion. In Las Vegas on Monday attending a national clean energy summit organized by Sen. Harry Reid, D-Nev., Obama pledged to distribute $1 billion in federal loan guarantees for rooftop solar panels on American homes. He said the federal government has so far invested in 34 commercial-scale solar projects that have created thousands of jobs.
"And now is not the time to pull back on those investments," the president said.