September 20, 2011 > White House worried about Solyndra default
White House worried about Solyndra default
By Matthew Daly, Associated Press
WASHINGTON (AP), Sep 15 - White House officials discussed the political ramifications of a possible default by a troubled solar energy company that received more than $500 million in federal loans, newly released emails show.
Emails released Thursday night show that Obama administration privately worried about the effect of a default by Solyndra Inc. on the president's re-election campaign.
``The optics of a Solyndra default will be bad,'' an official from the Office of Management and Budget wrote in a Jan. 31 email to a senior OMB official. ``The timing will likely coincide with the 2012 campaign season heating up.''
The email, released by the House Energy and Commerce Committee as part of its investigation into the Solyndra loan, showed that Obama administration officials were concerned about Solyndra's financial health even as they publicly declared the solar panel maker in good shape.
Solyndra, which received $528 million in federal loans under the stimulus law, declared bankruptcy late last month and laid off 1,100 workers.
The Silicon Valley company was the first renewable-energy company to receive a loan guarantee under the 2009 stimulus law, and the Obama administration frequently touted Solyndra as a model for its clean energy program. President Barack Obama visited the company's Fremont, Calif., headquarters last year.
Even as Obama praised the company's plans to hire more than 1,000 workers, warning signs were being sent from within the government and from outside analysts who questioned Solyndra's viability as a ``going concern.''
At least three reports by federal watchdogs over the past two years warned that the Energy Department had not fully developed the controls needed to manage the multibillion-dollar loan program that provided more the loan to Solyndra Inc., a now-bankrupt solar panel manufacturer.
Emails obtained by The Associated Press show that a White House official dismissed reports about Solyndra's gloomy future. An email from Greg Nelson, a White House official who had been involved in the planning of Obama's May 2010 trip to Solyndra's headquarters, to a Solyndra executive downplayed a July 2010 news story in a trade publication that criticized the company's financial health.
``Seems B.S.,'' Nelson wrote.
A 2009 report by the Energy Department's inspector general warned that the DOE lacked the necessary quality control for the loan guarantee program, which was created in 2005 to support clean-energy projects that could not obtain conventional bank loans due to high risks.
In July 2010, the Government Accountability Office said the Energy Department had bypassed required steps for funding awards to five of 10 applicants that received conditional loan guarantees.
The report did not publicly identify the companies that were not properly vetted, but congressional investigators say one of them was Solyndra. The company was the first to receive a loan guarantee after the program was expanded under the 2009 stimulus law.
In March, DOE Inspector General Gregory Friedman again faulted the loan program for poor record keeping. A report by Friedman said the program ``could not always readily demonstrate, through systematically organized records... how it resolved or mitigated relevant risks prior to granting loan guarantees.'' According to the report, the department kept limited or no electronic data on 15 of 18 loan guarantees examined.
Documentation for the remaining three projects was more robust, the report said, ``but did not include all of the information necessary... to evaluate the applicant's credit worthiness and/or the risks associated with the projects.''
Damien LaVera, a spokesman for the Energy Department, said all reviews were completed before any taxpayer money was obligated.
Even so, warnings about the company persisted. A report last year by auditor PricewaterhouseCoopers said Solyndra had suffered recurring losses from operations and negative cash flows, raising ``substantial doubt about its ability to continue as a going concern.''
But last May, a Solyndra email informed the White House that ``things are going well'' at the company and that it had ``good market momentum, the factory is ramping up and our plan puts at cash positive later this year. Hopefully, we'll have a great story to tell toward the end of the year.''
Nelson, the White House official, replied: ``Fantastic to hear that business is doing well - keep up the good work! We're cheering for you.''
White House spokesman Jay Carney said the White House did not influence the Solyndra loan, which he said was made on ``a merit-based process'' by DOE.
``There's no evidence that the White House was involved in the loan,'' Carney said Thursday. Emails that show White House officials pressuring the administration's budget office about the loan were about scheduling, he said.
``The White House was involved in trying to find out when a decision would be made, so... staff here could make a decision about the vice president's having an event'' at Solyndra headquarters in September 2009, Carney said.
The FBI recently raided Solyndra's headquarters, shortly after Solyndra filed for bankruptcy and laid off 1,100 workers.
A U.S. official, who spoke on condition of anonymity because the case under seal, said the search was related to a fraud investigation into whether Solyndra filed inaccurate documents with the government.
Meanwhile, the Treasury Department's inspector general said Thursday it has opened an investigation into the Solyndra loan.
Spokesman Richard Delmar said the inspector general is reviewing the role and actions of the Federal Financing Bank, a government corporation supervised by the Treasury Department. The bank provided the low-interest loan to Solyndra. The loan is one at least 15 loans totaling more than $6 billion made by the financing bank as part of the stimulus program
The FBI has executed search warrants at Solyndra's headquarters and talked to top executives. The Energy Department's inspector general and the House Energy and Commerce Committee also are investigating Solyndra and the DOE's loan guarantee program, which has provided billions in loan guarantees to renewable energy companies.
The loan guarantees essentially make it easier for the companies to get financing, because the government guarantees repayment in the event of default. In Solyndra's case, the loan came from the government itself, but private banks often provide the financing.
The Obama administration is moving to finalize as many as 15 loan guarantees for renewable-energy companies before the stimulus program ends on Sept. 30. Republicans question whether that could lead to more loans to companies that fail like Solyndra.
LaVera said the department won't take any shortcuts during the approval process.
``We will only close the deals that are ready to close on Sept. 30,'' he said.
Associated Press writers Jack Gillum, Jim Kuhnhenn and Larry Margasak contributed to this report.