Solyndra autopsy: Did Inspector General go too easy on Department of Energy?

[August 31, 2015]  By Rob Nikolewski / August 31, 2015  

An Inspector General of the Department of Energy report that picked over the bones of the Solyndra green energy fiasco placed most of the blame on Solyndra executives for losing more than $500 million in taxpayer money.

But a close reading shows DOE made plenty of mistakes as well.

The report authored by DOE Inspector General Gregory H. Friedman came just short of calling Solyndra’s highest officials liars, saying their actions during the loan process were “at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department.”

While the 13-page report also criticizes DOE officials for not sufficiently vetting Solyndra and mentions political pressure placed on unnamed DOE employees to get the loan pushed through as part of the Obama administration’s stimulus program, it does not go into many specifics — especially about the political aspect of the case.

Instead, the report placed the lion’s share of fault on the solar company’s officials, saying they “were at the heart of this matter” that soaked U.S. taxpayers of more than half a billion dollars in federal loans after the company went broke.

That conclusion riles William Yeatman, senior fellow specializing in environmental policy and energy markets at the Competitive Enterprise Institute, a policy group that advocates for limited government, who called the IG report “a conspicuous whitewash” that tries to absolve DOE.

“It’s an outrage,” Yeatman told Watchdog.org, adding he has admired Friedman’s work in the past.

“I can’t explain the impossibly inappropriate emphasis on Solyndra’s culpability,” Yeatman said. “The report is rife with this language that is to lay the blame at the foot of Solyndra rather than the DOE.”

Watchdog.org left a voicemail message with the media inquiries phone number at Friedman’s office Friday, but did not receive a response.

Click here to read the 13-page inspector general’s report on what went wrong in the $535 million Solyndra deal

In 2009, DOE began the first of a series of loan guarantees calling for up to $535 million to Solyndra to construct a photovoltaic manufacturing facility in Fremont, California. In 2010, President Obama visited the plant and said, “It’s here that companies like Solyndra are leading the way toward a brighter and more prosperous future.”

But just a year after the Obama visit Solyndra collapsed, filing for Chapter 11 bankruptcy protection, largely due to companies in places like China that were able to produce solar panels at a lower price.

The political fallout was harsh, with Republicans on Capitol Hill pouncing on the White House.

After four years of investigating, the IG report came out last week, citing a litany of allegations against Solyndra executives, accusing them of deception during the loan process.

In one instance, the report said Solyndra claimed it had $1.4 billion in sales contracts lined up over a five-year period but didn’t tell DOE or an independent engineering firm hired by the agency that price concessions had been made to three of the four companies.

That “distorted the view the Department and its consultants had of the market for Solyndra’s product,” the report said.

However, the report went on to say DOE had a spreadsheet in its possession showing the four companies’ sales contracts weren’t quite what they seemed.

But the agency’s loan officers “who received this spreadsheet each told us they did not examine it closely,” the report said. “While Solyndra did nothing to highlight or emphasize the new information, the Department missed an opportunity, prior to loan closing, to evaluate the fact that Solyndra’s contract customers were not buying product at the contracted terms.”
 

“They simply didn’t pay attention to this,” Yeatman said in a telephone interview. “That information was quantitative, hard data that, if (DOE) had paid attention to, made clear that this was a bad deal …What a piss-poor job the government does when it plays banker.”

In addition, a week before the loan closing, an employee noticed the price of rooftop solar systems was projected to be much lower than Solyndra’s estimates and sent three emails to top DOE loan officials alerting them to the issue. “Yet, no action was taken,” the report said. “Instead, it was apparently disregarded.”

Later in the report, the inspector general mentions political stress placed on employees at DOE.

Excerpt from page 2 of the Department of Energy Inspector General's report on its four-year investigation into the Solyndra loan.
Excerpt from page 2 of the Department of Energy Inspector General’s report on its four-year investigation into the Solyndra loan.
“Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications,” the report said. “They suggested the pressure was based on the significant interest in the program from Department leadership, the Administration, Congress, and the applicants.”

But the 13-page report doesn’t dig into any of the specifics of who received pressure and who exactly in DOE leadership, Obama administration or Congress was applying it.

That irritates David Boaz, executive vice president of the Cato Institute, a libertarian think tank based in Washington D.C.

“There was a lot of political pressure put on bureaucrats to approve loans to Solyndra and other companies that fit the ideological predisposition of Obama appointees,” Boaz told Watchdog.org. “The more controversial question is whether the political pressure reflected actual political and financial interests. The report shies away from getting too close from that question.”

Instead, Friedman’s conclusions centered on Solyndra.

Logo from the U.S. Department of Energy website
Logo from the U.S. Department of Energy website
GOING EASY ON THE DEPARTMENT?: A 13-page report from the Inspector General of the U.S. Department of Energy puts most of the blame on the half-million loss to taxpayers on a loan to Solyndra on the company, not the department.
“While the Department’s due diligence effort had shortcomings, it is our view that providing misleading answers to Departmental inquiries and failing to openly disclose critical information violated the spirit and intent of the requirement for Solyndra to report material changes to its loan guarantee application to the Department,” the report said.

So if Solyndra’s behavior was so outrageous, will its executives get prosecuted?

No, because the U.S. Department of Justice decided earlier this year not to pursue legal action.

Why not?

“The Department of Justice reviewed the evidence and elected to not pursue charges based on the Federal Principles of Prosecution, which include whether the person’s conduct constitutes a Federal offense and whether the admissible evidence will be sufficient to obtain and sustain a conviction,” DOJ spokesman Peter Carr said in an emailed statement to the Washington Free Beacon.

As for Solyndra, its former CEO Chris Gronet released a statement through his lawyer vehemently disputing the IG’s conclusions.

“There were no false or misleading statements by anyone at Solyndra, and these so-called ‘findings’ were never supported by the evidence,” attorney Miles Ehrlich said. “These exact same allegations were investigated up, down, and sideways by three of the most experienced and aggressive federal prosecutors offices in the country — and each time they rejected this DOE spin as contrary to the actual facts.”

“Solyndra executives were completely truthful and accurate in their representations during this loan process, and the DOE was never misled about Solyndra’s business or prospects,” Ehrlich said.

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“For me, the bigger issue is that this is what happens when government intervenes in the economy,” Boaz said. “If market forces determine where money is invested in energy, then it will tend to be invested in the places with the most likelihood of a positive return.”

“If this happened during the (George) W. Bush administration, the headlines are, ‘Bush’s Department of Energy Officials Make Super-Incompetent Decision,’ ” Yeatman said. “But every single news outlet runs with, ‘Solyndra Lies, It Was Solyndra’s Fault.’ The evidence in the report clearly demonstrates … a gross dereliction of due diligence and it’s awful convenient regarding the report’s conclusion.”

Last week, Obama announced his administration will give $1 billion in new loan guarantee authority to DOE support innovative solar energy projects.