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On August 31st, Solyndra, a solar manufacturing company president Obama touted as a “testament to American ingenuity and dynamism” when he visited its Freemont, CA facility in 2010, filed for bankruptcy. Eleven hundred workers were laid off immediately. Most of the $535 million in federal loan guarantees made by the Department of Energy is likely lost, along with $1.1 billion in venture capital (VC). That loss represents the largest for venture capitalists in history. In the process, Solyndra has become the focus of competing political philosophies, along with a criminal probe that may extend far up the Obama administration’s food chain.
First political philosophy. Solyndra’s loan, first approved under the Bush administration, and expanded under the Obama administration’s $862 billion stimulus program, was supposed to be one of the shining examples of the president’s determination to create millions of “green jobs.” Much of the president’s determination to realize his vision is assailed by many critics as an ill-advised attempt by his administration to pick “winners and losers,” which they characterize as the essence of crony, as opposed to free-market, capitalism.
This sentiment is buttressed by the fact that the Obama administration reportedly restructured Solyndra’s loan last January, raising the likelihood that a couple of private investors will be paid back before the American taxpayer. $75 million will be given to entities that came up with cash to prevent Solyndra from going bankrupt back then. One of those entities is associated with George Kaiser. Mr. Kaiser is an oil magnate, and an Obama campaign bundler who raised between $50,000 and $100,000 for the president’s 2008 campaign. In addition, he, along with Solyndra executives and board members, also contributed an another $87,050 to the president.
Thus, one is left to ponder the difference between financial acumen, and political expediency. Financially, the Department of Energy’s contention that refinancing Solyndra “represents the best possible course of action to achieve the highest return on its invested capital,” was due to the fact that by January, the government was already in for $460 million and Solyndra’s liquidation value in December, when it had only a month’s cash left, would have been between $91 and $99 million. That would have represented a 22-cents-on-the-dollar return. The government simply thought it would get a better return on its investment by preventing bankruptcy in exchange for subordinating $385 million of government loans to the $75 million ponied up by private investors to save the company.
Yet politically, it is impossible to ignore this particular company was an integral part the president’s green jobs strategy, and that its failure would be considered a serious blow to that strategy. When the Mr. Obama visited the Freemont plant in May of 2010, he spoke before an audience of employees, even as the leaking BP well was still pouring oil into the Gulf. It was a perfect backdrop to explain that his administration had “placed a big emphasis on clean energy,” further noting that “through the Recovery Act, this company received a loan to expand its operations,” and that “as you fill orders for solar panels to ship around the world, you’re demonstrating that the promise of clean energy isn’t just an article of faith–not anymore.”
Perhaps green energy per se is no longer an article of faith. But early indications made it look like continued investment in Solyndra certainly was. One month after the president’s presentation, Solyndra withdrew a planned IPO, which company founder Chris Gronet attributed to “uncertainty in the public capital markets.” At that time the company had already received a “going concern” letter from auditors noting that the company “would not be able to survive beyond 12 months if it didn’t receive the $300 million is was seeking when it filed an IPO.”
Thirteen months later, and less than three weeks before the company declared bankruptcy, the Energy and Commerce Committee’s oversight and investigations subcommittee voted to subpoena White House documents relating to the $535 million loan. They did so after requests for the documents, in a familiar refrain emanating from the “most transparent administration in history,” were rebuffed by the White House’s Office of Management and Budget. The canceled IPO and the closing of an old factory were cited as the reasons for the subpoenas. “We simply cannot allow executive-branch agencies to pick and choose what they will produce, or whether they produce it at all,” said panel chairman Rep. Cliff Stearns (R-FL). At the time, Democrats, led by Henry Waxman (D-CA), characterized those subpoenas as “premature.”
Perhaps they were. But on September 2nd, House investigators announced they had uncovered evidence that White House officials had become “personally involved” in the Energy Department’s review of financing for the company. “How did this company, without maybe the best economic plan, all of a sudden get to the head of the line?” Rep. Fred Upton (R-MI) speculated to ABC News. “We want to know who made this decision … and we’re not going to stop until we get those answers.” The White House countered that the loan to Solyndra came after a thorough vetting by the DOE and that no one exerted undue pressure. However, it was revealed by the Center for Public Integrity’s iWatch News and ABC News that Energy Department officials announced their support for the company prior to legal and marketing reviews regarding its viability.
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