Chu takes responsibility for a loan deal that put more taxpayer money at risk in Solyndra
By Carol D. Leonnig and and Joe Stephens,
Energy Secretary Steven Chu acknowledged Thursday making the final decision to allow a struggling solar company to continue receiving taxpayer money after it had technically defaulted on a $535 million federal loan guaranteed by his agency.
Chu spokesman Damien LaVera said in a statement that the secretary approved the restructuring agreement for Solyndra because it gave the company “the best possible chance to succeed in a very competitive marketplace and put the company in a better position to repay the loan.”
Also Thursday, a law enforcement official confirmed that the criminal probe of Solyndra is focused on whether the company and its officers misrepresented the firm’s finances to the government in seeking the loan or engaged in accounting fraud. The official spoke on the condition of anonymity because of the sensitivity of the probe.
On the political front, Chu’s admission came as some members of Congress were asking whether Chu went too far in trying to help the company before it went into bankruptcy, leaving taxpayers on the hook for the loan.
Chu, a Nobel laureate and physicist who came to the administration from academia, arrived in Washington with a mandate to push billions of dollars in stimulus funds into clean-energy companies and projects. With keen White House interest, Chu rode herd over an $80 billion showcase initiative that was supposed to spur a new “green” industry and economic growth.
Solyndra was the first company approved for a loan guarantee under the Obama administration; its application originated several years earlier during George W. Bush’s presidency. Early on, there were concerns about Solyndra’s finances, but the company was still endorsed by President Obama and received high-profile support from Chu. Both visited the firm at different press events. Chu flew to California to announce the loan approval at the groundbreaking for a $750 million factory that was built mostly with funds from the loan.
In announcing the Solyndra deal in March 2009, Chu boasted of the “speed at which the department can operate,” according to an agency news release.
“Secretary Chu initially set a target to have the first conditional commitments out by May . . . but today’s announcement significantly outpaces that aggressive timeline,” the release said.
In April 2010, the company’s auditors raised doubts about whether the company could continue as a “going concern” because of cash-flow problems. The following month, Obama visited the company to praise it as an “engine of growth.”
In late autumn of 2010, company executives confided to the Energy Department that they were running out of cash and could not make a required payment to a cash-reserve account. The company was supposed to begin making the first of $5 million payments to create a $30 million cash reserve on Dec. 1.
Solyndra officially defaulted on its loan that day. Chu approved a softening of the loan requirements so that the company could continue receiving loan installments.
“Ultimately, the choice was between imminent liquidation or giving the company and its workers a fighting chance to succeed,” LaVera said in the statement, first reported by Politico.
The agency authorized the Federal Financing Bank to give two additional cash installments to Solyndra — one in December 2010 and another in January 2011. Both payments came before Energy Department officials finalized a deal to restructure the loan and forestall the company’s collapse in late February.
On Capitol Hill, Republicans continued to complain Thursday that the Obama administration and Chu had not protected taxpayers.
“Why was the leadership at DOE so stubborn, ignoring every warning sign that Solyndra was a bad bet, continuing to throw good money after bad right up until Solyndra’s fate was sealed and taxpayers were left holding the bag on DOE’s $535 million bust?” said Rep. Cliff Stearns (R-Fla.), chairman of the House Energy and Commerce oversight and investigations subcommittee.
Chu is tentatively scheduled to appear before the subcommittee next month. The House probe seeks to determine whether the White House sought to help Solyndra for political reasons. The nature of the separate criminal probe was first reported in an online story by Bloomberg News on Thursday evening. The leading private investors in Solyndra were investment funds tied to Oklahoma billionaire George Kaiser, a prominent fundraiser for Barack Obama’s 2008 presidential campaign.
Some Democrats also have questioned Chu’s decision, including Rep. Henry A. Waxman (Calif.), the ranking Democrat on the Energy and Commerce Committee.
Rep. Gene Green (D-Tex.) said Thursday that he wants to know why Chu restructured Solyndra’s loan to put taxpayers behind a group of private investors to be repaid if the company went bankrupt. Two investors, including an equity fund tied to Kaiser, provided an additional $75 million to keep the company afloat.
“I guess I’m surprised that Secretary Chu made the decision earlier this year to give the private sector priority over the federal commitment, because your fiduciary duty is to the taxpayer, and not to an applicant. . . . Your responsibility is to the American people,” Green said.
Staff writer David A. Fahrenthold contributed to this report.