The Obama administration urged the now-bankrupt solar-energy firm Solyndra and its top investor to hold off announcing planned layoffs in 2010 until after the Nov. 2 elections, according to e-mails released by House Republicans on Tuesday.
Solyndra received a loan guarantee from the federal stimulus program in September 2009, but it went bankrupt this September—leaving taxpayers on the hook for most of the $535 million initial loan. Struggling financially, the company announced layoffs and plans to consolidate some of its businesses on Nov. 3, 2010, according to press reports at the time.
“They did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3—oddly, they didn’t give us a reason for that date,” states an October 2010 e-mail exchange between advisers for Argonaut Private Equity, the top investor in Solyndra that was founded by George Kaiser, an Oklahoma oil billionaire who bundled campaign donations for presidential candidate Barack Obama in 2008.
The memo released by Republicans on the House Energy and Commerce Committee states that “several e-mails produced by Argonaut to the Committee reference the fact that the layoff announcement was postponed because of the November 2 elections.” The memo does not include the name of the adviser who wrote the e-mail.
The Energy Department responded that the e-mails released by House members add little to the debate about the Solyndra loan. “The Republican report cites internal e-mail from Argonaut about the timing of a press release,” department spokesman Damien LaVera said regarding the Election Day 2010 references. “But as the 180,000 pages of documents that the Department of Energy turned over to the committee indicate, the department’s decisions about this loan were made on the merits, based on extensive review by the experts in the loan program—and nothing in this Republican committee memo changes that.”
Republicans on the House Energy and Commerce Committee released the 14-page memo ahead of Thursday’s highly anticipated hearing, where Energy Secretary Steven Chu will testify on the failed loan. The memo includes many already publicized e-mails and also previously unpublished ones, including the e-mails referencing Election Day 2010. The document seeks to create a chronology of administration actions from September 2009, when the Energy Department awarded the loan guarantee to Solyndra, until Aug. 31 of this year, when the company announced it was filing for Chapter 11 bankruptcy.
The memo includes new details about the administration’s decision to restructure Solyndra’s loan guarantee, a process that was in the works starting in late 2010 and was made final in February of this year. Republicans claim that the administration violated the Energy Policy Act of 2005 when it restructured the loan because it made the government’s debt obligation secondary—or "subordinate"—to that of private investors, including Kaiser’s firm. The law states that the government’s debt cannot be made secondary to private investors’ debt.
The memo includes an e-mail, reinforced by an interview with committee staff, that indicates the Energy Department was aware of—and concerned about—that part of the law.
“Although DOE had apparently previously told Solyndra’s investors that DOE was not allowed to subordinate its interests, by December 7, 2010, as the negotiations floundered and Solyndra considered filing for bankruptcy, it appears that the DOE suddenly offered to subordinate its interest in the first $75 million recovered,” the memo states.
It goes on to cite an e-mail from the chief counsel of the Energy Department's loan-programs office requesting a meeting with the department’s general counsel on Dec. 8, 2010, to talk about the restructuring and the subordination clause in the law: “[W]e have a serious problem with Solyndra and need to brief [the General Counsel] as soon as possible.”
Chu met with White House Office of Management and Budget Director Jacob Lew in late January to talk about the loan program in general and Solyndra specifically, the memo says. An OMB staffer said in an e-mail beforehand that the meeting would provide a good opportunity for Lew to stress to Chu that while “the company may avoid default with a restructuring, there is also a good chance it will not.”
DOE apparently concluded that it was legal to restructure the loan in such a way. Susan Richardson, chief counsel for DOE’s loan office, drafted a memo dated Feb. 15 that lays out the administration’s legal rationale for subordinating the government’s interest. Richardson writes that the Energy Department restructured the loan, putting new private investments ahead of taxpayers’ money in case of default—presumably to ensure continued private investments—because that was the best way to ensure Solyndra's recovery.
Chu made the restructuring final on Feb. 22 and said in a media interview a couple of weeks later that he was “confident” Solyndra could “repay the loan.” Solyndra filed for Chapter 11 bankruptcy in early September.
The memo concludes by offering three broad questions Republicans plan to ask Chu at Thursday’s hearing: 1) Did Chu’s directive to speed up the loan guarantee review process affect Solyndra’s loan guarantee? 2) Could DOE have anticipated Solyndra’s financial woes better? 3) Did DOE break the law when it restructured the loan?
Democrats on the House Energy and Commerce Committee do not have any plans as of now to release their own memo before the hearing, a spokeswoman said on Tuesday.