The restructuring went forward, but within months Solyndra failed anyway, leaving federal taxpayers on the hook for much of the half-billion-dollar federal loan. Now, a year after the company’s collapse, debate continues over whether the refinancing plan was legal or a wise investment. Last week, Solyndra’s final liquidation plan estimated that the government will recover just $24 million of the $527 million that taxpayers lent to the company.
Details about the debate emerge in internal government documents. They show that Energy Department officials argued that Solyndra might be able to pull out of its downward spiral if given an emergency infusion of cash.
They also show that career OMB staff members circulated a series of e-mails emphasizing the risks of restructuring the loan. In congressional testimony last year, the agency’s deputy director suggested that career staff members made the final determination about what to do and “used their best expertise.”
The House energy committee is expected to release the results of its 18-month investigation into Solyndra this week. Its report, parts of which were obtained by The Washington Post, suggests that then-OMB Director Jack Lew let the refinancing move forward without intervening, even though some OMB analysts thought a refinancing plan that favored private investors might violate the law. Lew is now White House chief of staff.
Solyndra abruptly shut its doors in August 2011 and defaulted on its loan. A short time later, the FBI raided its offices in Silicon Valley as part of a criminal investigation into whether the company misled the government about its finances.
The congressional report, which revisits a number of events previously reported in The Post, may provide additional ammunition for Republican presidential candidate Mitt Romney, who visited Solyndra’s shuttered plant earlier this year and cited it as a symbol of wasted stimulus money. Republicans have accused the administration of favoring Solyndra because its largest investors were funds linked to Oklahoma billionaire George Kaiser, a fundraiser for the president.
Energy Department spokesman Damien LaVera said Wednesday that the department stands by its earlier conclusion that restructuring Solyndra’s loan provided the best hope for the company’s success and for protecting taxpayers.
“The record clearly shows that decisions related to this loan were made solely on the merits after careful review by experts in our loan program,” LaVera said in a statement. “That includes the shared determination by our career lawyers and outside legal experts that the decision to permit the restructuring of the loan agreement was legal.”
The White House declined to comment Wednesday but has repeatedly said there is no evidence that the administration made loan decisions to help a connected political donor.
OMB spokeswoman Moira Mack said the agency’s career staff members, who were responsible for calculating the cost of the proposed restructuring, ultimately determined that the Energy Department’s approach was reasonable, considering the information available at the time.
On Wednesday, the House energy committee passed the No More Solyndras Act, which would wind down the Energy Department’s loan guarantee program for clean-energy initiatives, require greater transparency and prohibit the department from restructuring loan guarantees without consulting Treasury Department officials.
Documents show that in January 2011, when Solyndra was in technical default on its loan, OMB analyst Kelly Colyar concluded that if the company were immediately liquidated, taxpayers would lose $141 million. If the loan were restructured and more money were released to Solyndra, she estimated, a subsequent default would cost taxpayers $385 million. The loss was attributable in part to allowing private investors to recover some of their money first.
Colyar said in e-mails that the Energy Department appeared to be giving away its “upper hand” in financing negotiations with private investors, creating additional risk. At the time, Solyndra had failed to meet the terms of its loan and was on the edge of bankruptcy because disbursements from the loan had been frozen.
Colyar said in one e-mail that she was “vastly confused by DOE’s decision to negotiate away their senior position in this transaction.” She also questioned whether the Energy Department underestimated how much taxpayers could recoup if the company were shut immediately and its California factory sold. The proceeds of an immediate sale would be “significantly HIGHER than DOE’s estimate,” she wrote in a January 2011 e-mail, meaning that the government “is better off liquidating the assets today than restructuring under DOE’s proposal.”
Colyar could not be reached for comment Wednesday.
A colleague at the OMB agreed, saying the analysis “confirms our earlier concern that DOE’s restructuring could effectively result in higher costs than liquidation.” He added that, given the project’s high visibility, “DOE is likely to be very sensitive about optics if it should default.”
OMB analysts also questioned whether the bailout would be enough to save Solyndra, considering that cheap solar panels from overseas had begun flooding the market. “With increasing competition from China, and other low-cost competitors, it wasn’t clear how Solyndra would be able to achieve the scale-up and margins needed” to survive, one e-mail said.