Bloomberg News

Solyndra Taints Silver’s Stint as Taxpayers’ Venture Capitalist

September 28, 2011

Sept. 27 (Bloomberg) -- Jonathan Silver’s friends say his reputation as a successful venture capital investor would be unquestioned if only his current job didn’t involve pouring taxpayers’ funds into a solar-panel maker called Solyndra LLC.

As executive director of the U.S. Energy Department’s loan programs office for the past two years, Silver has helped steer $18.5 billion in government financing into green-energy companies and automakers that build more fuel-efficient vehicles.

“He put together a total portfolio you could be proud of,” said George Frampton, a former chairman of the White House Council on Environmental Quality, who says he speaks with Silver several times a week. “Nobody’s going to be terribly interested in looking at that now.”

Instead, congressional committees are investigating the Energy Department loan office that Silver heads and Solyndra, the California company that filed for bankruptcy protection on Sept. 6 after collecting $527 million in federal guarantees that were approved two months before Silver took over the operation.

Silver was in charge as signs of trouble at Solyndra multiplied, culminating in the Energy Department’s agreement in January to let $385 million in taxpayer support for the company take a back seat to funds from new investors in a last-ditch effort to rescue the company.

It’s an uncommon setback for Silver, 54, who has glided between the worlds of finance and politics throughout his career.

“He’s got to be discouraged” that the effort to aid alternative energy sources has become “mired in a smell of politics,” Frampton, an attorney with Covington & Burling LLP in Washington, said in an interview.

‘Robust’ Portfolio

Silver declined to be interviewed through the loan office’s spokesman, Damien LaVera, who cited a push to commit as much as $6.5 billion in guarantees before a program for wind and solar energy projects expires at week’s end.

“He’s working on efforts to close 14 deals between now and Sept. 30 and can’t carve out the time,” LaVera said on Sept. 20. Since then, three projects were denied funding and three were approved, trimming the list of pending loans to eight.

“Under Jonathan Silver’s leadership, the Department of Energy’s Loan Program has supported a robust, diverse portfolio of more than 40 projects,” LaVera said in an e-mail. “Collectively, the projects plan to employ more than 60,000 Americans, create tens of thousands of indirect jobs, provide clean electricity to power three million homes, and save more than 300 million gallons of gasoline a year.”

Solyndra’s Product

Loan guarantees such as the one Solyndra got were authorized by Congress in a 2005 energy law to encourage the development of clean energy sources. Fremont, California-based Solyndra said its cylinder-shaped solar panels were easier to install and lighter, giving the company a way to compete against cheaper flat panels from China.

Solyndra, identified as a promising applicant during President George W. Bush’s administration, received the loan guarantee under Obama in September 2009. Silver took over the loan office in November of that year.

During a Sept. 14 hearing before a House Energy and Commerce Committee panel, Silver drew on his private investing experience to explain why he wasn’t alarmed when Solyndra’s auditor warned in March 2010 that its cash was running out and it might not remain a “going concern.”

“Let me respond first, congressman, as a former venture capitalist, and tell you that frequently companies, particularly high-growth companies like Solyndra,” will “burn cash” as they develop, Silver said.

‘Taxpayers’ Money’

“With all due respect, venture capital is different from a government investment and a taxpayer subsidy,” Republican Representative Michael Burgess of Texas responded. “This is a different universe. Your responsibility as a venture capitalist is likely not consistent with being a good steward of the taxpayers’ money.”

Silver, the son and grandson of prominent rabbis in Cleveland, was “raised with a belief and a desire that it’s his responsibility to give back,” Deborah Ratner Salzberg, who has known him since their youth in that city, said in an interview. Ratner Salzberg is president of Forest City Washington, a unit of a real-estate development company her family founded in Cleveland.

Silver earned a bachelor of arts degree from Harvard University in 1979. He worked for McKinsey & Co., the management- consulting firm, and the hedge fund Tiger Management LLC, which Julian Robertson built into one of the world’s largest funds.

Clinton Adviser

In Silver’s first stint in government, he served as an adviser to the departments of Treasury, Interior and Commerce in President Bill Clinton’s administration.

In 1995, he returned to finance, and in 1999, he co-founded Core Capital Partners in Washington, a $350 million private equity fund that provides capital to early stage ventures and small to mid-sized companies.

Silver and his partners helped more than 100 entrepreneurs such as Pure Wave Networks, a provider of 4G antennas; Univa, a software company for cloud computing; MedVentive, a health-care monitoring company; and Infinite Power Solutions, a maker of thin-film batteries, according to the fund’s website.

Silver told the Washington Business Journal he left Core Capital in late 2008 to invest in bonds and derivatives marked down by investors amid the biggest economic slump since the Great Depression.

Social Scene

Silver and his wife, Democratic Party fund-raiser Melissa Moss, live in a row house in Washington’s Georgetown neighborhood that has an assessed value of $2.7 million, according to city tax records. They are fixtures on the capital’s social scene, and he has sat on the boards of the Federal City Center, a Washington civic organization, and WETA, a local public television station. He also was an adviser to former Washington schools Chancellor Michelle Rhee.

“He’s got a very serious investment background and he also knows his way around the Washington, D.C., policy world,” Dan Reicher, a former assistant secretary of Energy who heads the Steyer-Taylor Center for Energy Policy and Finance at Stanford University in California, said in an interview. “This intersection between policy and finance is really a critical one when it comes to clean-energy technology.”

‘Lots of Negotiation’

After taking over the energy loan office, Silver recruited private equity veterans, increasing the staff to more than 180 people from 35 when he started, he told Congress on Sept. 14.

Silver was a tough and pragmatic negotiator in weighing loan applications, said Bill Capp, chief executive officer of Beacon Power Corp. of Tyngsboro, Massachusetts.

“There was lots of negotiation back-and-forth,” Capp said in an interview. His company, which makes flywheels to store energy, got a $43 million loan guarantee in 2010. “There was nothing fast and furious about the process, I assure you.”

Business leaders including venture-capital executive John Doerr have defended the government guarantee program that Silver oversees.

“If you don’t take risk, you are not going to get reward,” Doerr, a partner at Kleiner Perkins Caufield & Byers in Menlo Park, California, said at a press briefing in Washington on Sept. 13, when asked about Solyndra’s collapse. “It’s an absolutely essential part of the equation.”

--Editors: Larry Liebert, Joe Winski

-0- Sep/28/2011 14:12 GMT

To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net; Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net


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