Jonathan Ernst/ReutersRepublicans in Congress are questioning what the Obama administration knew about the failure of a Fremont solar power company.
Washington D.C. – While touting its financing of Fremont-based Solyndra as a success story to the public, the Obama administration behind the scenes was worried about the political fallout of the solar panel company's possible bankruptcy as early as January and suggested it was time for the government to cut its losses, e-mails obtained by California Watch show.
A Jan. 31, 2011 e-mail sent between Office of Management and Budget officials reveals that the agency worried that the Department of Energy's controversial restructuring of Solyndra's loan terms, which put private investors ahead of taxpayers in the case of default, would not stave off a Chapter 11 filing. The as-yet-unnamed OMB officials suggested that it was time for the DOE to cut its losses.
“While the company may avoid default with a restructuring, there is a good chance it may not,” according to the letter. “Given the PR and policy attention that Solyndra has received since 2009, the optics of a Solyndra default will be bad whenever it occurs.”
The officials then underlined the following, according to the e-mail. “If Solyndra defaults down the road, the optics will be arguably worse later than they would be today,” the letter said, when the timing “would likely coincide with the 2012 campaign season heating up.”
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The e-mail was part of a series released by Republicans on the House Energy and Commerce Committee as part of their investigation. Despite the changed loan terms which closed in February this year, Solyndra filed for bankruptcy in late August, listing $783 million in debts, including $527 million in taxpayer-funded loans.
President Barack Obama visited the company in May 2010, saying that the solar panel maker was “leading the way toward a brighter and more prosperous future” touting the loans that had paid for the giant new factory called Fab 2.
Yet, earlier e-mails released by the committee showed that DOE loan program officials under the Bush administration on Jan. 9, 2009 had remanded the Solyndra application calling a recommendation for a loan approval “premature.”
However, under the Obama administration, the Solyndra loan application was resurrected, with Obama officials determined to get an approval for a loan for the company within 60 days of the inauguration. Still, another e-mail from March, even under the new administration, claimed “this deal is not ready for prime time.”
Less than two years after getting its initial loan in March 2009, Solyndra attempted to rework its terms in a last ditch effort to stave off bankruptcy.
But in the Jan. 31, 2011 letter, the OMB officials attempted to warn “DOE at the highest level the stakes involved” that a later default would make the Obama administration look worse, by having made a bad investment “not once, but twice,” according to the letter. The officials urged for the OMB Director to convey the message to Energy Secretary Steven Chu during a scheduled Feb. 1 meeting as an opportunity to “limit further taxpayer exposure (by) letting bad projects go.”
According to records from the Federal Financing Bank, Solyndra borrowed more than $80 million between October 2010 when its troubles came to the attention of the government and February 2011, when the restructured loan closed. The company borrowed another $38 million after the revised loan term closed and its bankruptcy filing in August.
Republicans on the House Energy and Commerce Committee yesterday criticized DOE loan director Jonathan Silver for not shutting off Solyndra's credit line during the negotiations when they claimed it was clear the company was foundering as early as last summer, when the company withdrew plans for a initial public offering, and its auditor, PricewaterhouseCoopers, said the company might fail.
House Democrats at the same hearing admitted that Solyndra company officials visited their offices in July, promising that revenues would double in the coming fiscal year and that the solar panel company was on better financial footing.
Solyndra shuttered its doors for good on Sept. 6, laying off more than 1,000 workers without warning. Two days later, FBI agents raided the company offices, as well as the homes of top executives.