The House Energy and Commerce Committee today released an extensive report detailing the findings of its investigation into the Department of Energy's management of its loan guarantee program. The 147-page report chronicles the committee's 18-month investigation into DOE's failed $535 million loan guarantee to Solyndra, which included the review of over 300,000 pages of documents, interviews with numerous individuals, and five committee oversight hearings. The report was released following the committee's approval yesterday of the "No More Solyndras Act," legislation authored by full Committee Chairman Fred Upton (R-MI) and Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL) to ensure taxpayers will never again be left on the hook for risky bets like Solyndra or other stimulus failures.
The report states, "Now, after a thorough review of the record, the Committee is able to present a complete picture of the facts and circumstances surrounding the DOE's decision to award a loan guarantee to Solyndra, and the roles various Executive Branch agencies, including the White House, played in these events."
The report details the evidence gathered during the course of the investigation and the committee's conclusions. The evidence demonstrates administration officials knew Solyndra was a bad bet from the beginning, but the White House was determined to make Solyndra a stimulus success story at any cost. Despite repeated warnings that Solyndra was doomed to fail, the Obama administration went ahead in backing the solar company, cutting corners in the process, and rushed the loan guarantee out the door. The investigation also found DOE knowingly violated the law when it restructured the terms of the loan guarantee and subordinated taxpayers' interest to the interests of private investors.
Documents obtained by the committee exposed a startling relationship between Solyndra and another stimulus-backed project. The report details Solyndra's role as a supplier for Prologis' Project Amp, a solar panel installation project and the recipient of a partial loan guarantee for $1.4 billion. The White House was well aware of Solyndra's deteriorating financial condition when it allowed DOE to move forward with Project Amp. DOE would later use the relationship between Project Amp and Solyndra as a key bargaining tool to push for a second restructuring while directly engaging in last minute negotiations between Solyndra and the Project Amp sponsor.
The report also gives an in-depth look into the role played by one of President Obama's prominent backers in the administration's decision to issue the loan guarantee and the loan's restructuring that put taxpayers behind two private investors. Key decision makers at DOE, including head of the loans program office Jonathan Silver, knew of billionaire George Kaiser's influence and attempted to leverage it. According to the report, "Individuals connected to the George Kaiser Family Foundation (GKFF) -- whose primary investment arm, Argonaut, was Solyndra's largest shareholder -- played important roles in a series of critical discussions and negotiations with DOE. George Kaiser, whose fortune funds the GKFF, was closely involved in financial decisions related to Solyndra, often authorizing key disbursements and restructuring proposals, as well as in Solyndra's lobbying, public relations, and government procurement strategies in Washington."
"Solyndra will be remembered in the history books as a sad hallmark of a newly installed administration that felt it was above the rules, lusting for positive headlines rather than focused on delivering results. We now know the first domino of the Solyndra mess was DOE cutting the Treasury Department out of the approval process in the rush to send what will go down as the most expensive press release known to man. Now, Solyndra is a painful reminder of why the federal government should not be in the venture capital business. Our investigation revealed a shocking episode where politics were put before taxpayers and integrity was sacrificed for the sake of corporate favoritism," said Upton. "We discovered the problem, and now we reported legislation to correct the situation in The No More Solyndras Act to ensure that taxpayers will never again be the victims of the administration's blind political ambition and gross negligence."
"What was once the poster child for the administration's green energy spending plan, Solyndra is now a symbol of President Obama's failed stimulus economy," said Stearns. "Our investigation uncovered a political saga starring key White House officials and big Obama donors. The story reaches a turning point when DOE subordinates taxpayers to outside funding and then Solyndra files for bankruptcy, laying off employees and leaving taxpayers on the hook for millions of dollars. While this may make for a great Hollywood drama, it is a disturbing truth for taxpayers. We must ensure that the Solyndra story is never repeated."
Below is a summary of the committee's findings included in the report:
The timing of the Solyndra Conditional Commitment was coordinated with the White House, and scheduled before DOE had reached an agreement with the company on key terms.
DOE failed to consult with the Department of the Treasury during the course of its review of Solyndra's application, as required by the Energy Policy Act of 2005. Instead, DOE asked Treasury to review the terms only after it had made the decision to issue the conditional commitment to Solyndra. Even then, Treasury was only given one day to review the terms.
The Department of Energy should have better anticipated the market challenges that contributed to Solyndra's financial condition.
The Department of Energy ignored critical red flags about Solyndra's financial condition prior to closing the loan guarantee in September 2009.
The White House and the Department of Energy scheduled a public announcement event to commemorate the closing of the Solyndra loan guarantee before OMB had reviewed the transaction, impacting the length and quality of OMB's review.
DOE closed the Solyndra loan guarantee and moved forward with Solyndra's second loan guarantee application before DOE had the capability to monitor the first loan guarantee.
Solyndra's financial strategy was dependent on additional government support in the form of sales contracts and a second loan guarantee.
DOE agreed to subordinate its interest to Solyndra's investors in the restructuring before determining whether the Energy Policy Act permitted subordination.
DOE's financial analysis of the restructuring was flawed.
OMB's oversight and review of restructuring failed -- the agency identified risks but still allowed the restructuring to move forward.
DOE approved the conditional commitment for Project Amp while knowing Solyndra--the sole supplier for the project's first phase--was in desperate financial shape. The relationship between Solyndra and Project Amp was understood by the White House and became a critical bargaining piece of the second restructuring negotiations with Solyndra and its investors.
George Kaiser was closely involved in important decisions related to Solyndra throughout the life of the loan guarantee.
Despite the administration's furious efforts to save Solyndra, Ron Klain's unvarnished assessment of the loan guarantee program in an email to a reporter on November 10, 2010 sums up the pitfalls of the program. At the time, Klain was Vice President Biden's Chief of Staff.
In a November 10, 2010, email, Mr. Klain discussed with a reporter some of the challenges facing the DOE Loan Guarantee Program. Mr. Klain explained "loan guarantees present harder problems than just giving people cash . . . [b]ecause with a loan guarantee, we are presumably expecting to get paid back." The challenge, according to Mr. Klain, was determining which companies should receive loans. Mr. Klain noted, "If you loan money to people doing super risky things, like Solyndra (a plant to build a new kind of solar collector never used before) there's some chance (a decent chance) you won't get paid back. If you loan money to people doing proven (but larger) things like [REDACTED], folks argue, "hey, that's just an old technology, those guys could get bank funding if they really tried to.' So on loan guarantees, you are searching for Goldilocks projects -- too risky for the banks, but safe enough to have a high likelihood of repayment. That's a pretty narrow fit."
-Excerpt pulled from page 71, The Solyndra Failure