Solyndra loan deal: Warning about legality came from within Obama administration

Energy Department officials were warned that their plan to help a failing solar company by restructuring its $535 million federal loan could violate the law and should be cleared with the Justice Department, according to newly obtained e-mails from within the Obama administration.

The e-mails show that Energy Department officials moved ahead anyway with a new deal that would repay company investors before taxpayers if the company defaulted. The e-mails, which were reviewed by The Washington Post, show for the first time concerns within the administration about the legality of the Energy Department’s extraordinary efforts to help Solyndra, the California solar company that went bankrupt Aug. 31.

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The collapse of California solar panel manufacturer Solyndra raises new questions about President Obama's push for alternative energy--and whether White House pressure played a role in a loan guarantee that has taxpayers on the hook for millions. (Sept. 16)

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The FBI raided Solyndra last month, shortly after it closed its doors.

The records provided Friday by a government source also show that an Energy Department stimulus adviser, Steve Spinner, pushed for Solyndra’s loan despite having recused himself because his wife’s law firm did work for the company. Spinner, who left the agency in September 2010, did not respond to requests for comment Friday.

The documents offer new evidence of wide disagreement between officials at the Energy Department and officials at the Treasury Department and Office of Management and Budget, where questions were raised about the carefulness of the loan vetting process used to select Solyndra and the special help it was given as its finances deteriorated. Energy Department officials continued to make loan payments to the company even after it had defaulted on the terms of its loan.

The Solyndra controversy has escalated with each new release of documents to a Republican-led House energy subcommittee investigating the matter. President Obama defended the Energy Department in a news conference Thursday, saying its decisions were made by career professionals. Also Thursday, the head of the embattled loan program announced that he would step down, although Energy Department officials said he was not doing so because of the Solyndra matter.

As Republican committee leaders moved to get more information about warnings from Treasury and the OMB, an Energy spokesman, Damien LaVera, said agency officials had listened to Treasury’s advice to consult the Justice Department on the loan restructuring but felt it was appropriate to move forward.

“Ultimately, DOE’s determination that the restructuring was legal was made by career lawyers in the loan program based on a careful analysis of the statute,” he said.

The e-mails show that Mary Miller, an assistant Treasury secretary, wrote to Jeffrey D. Zients, deputy OMB director, expressing concern. She said that the deal could violate federal law because it put investors’ interests ahead of taxpayers’ and that she had advised that it should be reviewed by the Justice Department.

“To our knowledge that never happened,” Miller wrote in a Aug. 17, 2011, memo to the OMB.

In February, the restructuring was approved by Energy Secretary Steven Chu.

Company executives said they needed a quick cash infusion to save the company, and private investors agreed to contribute $75 million if loan repayment terms were modified.