Bloomberg News

Treasury Didn’t Review Solyndra Rescue Effort, Memo Shows

October 12, 2011

(Updates with comment from lawmakers in seventh paragraph.)

Oct. 12 (Bloomberg) -- Treasury Department officials told U.S. congressional investigators they weren’t “directly involved” in the Obama administration’s failed effort to rescue Solyndra LLC this year.

A Republican investigation of the solar panel maker’s $535 million loan guarantee has shifted to the restructuring of its original loan agreement in February, putting taxpayers behind $75 million in private investment in case of liquidation.

The deal, which Energy Department officials have said was a last-ditch effort to save Solyndra, will be the subject of an Oct. 14 House Energy and Commerce Committee hearing, the third since the company’s Sept. 6 bankruptcy filing two years after winning the loan guarantee.

A memo from the Republican staff to the committee’s investigations panel, released today after a meeting with Treasury officials, suggests the Energy Department may not have satisfied conditions of a Dec. 4, 2009, rule before renegotiating the agreement.

Department officials should consult with both the Treasury and the Office of Management and Budget before approving a “deviation that would constitute a substantial change in the financial terms of the loan guarantee agreement,” according to the rule cited in the memo.

Republicans asked Gary Grippo, the Treasury’s deputy assistant secretary for fiscal operations and policy, and Gary Burner, chief financial officer of the Federal Financing Bank, to testify at the hearing. The bank provided Solyndra with cash that was guaranteed by the Energy Department.

Waxman, DeGette Request

Democratic Representatives Henry Waxman of California and Diana DeGette of Colorado wrote Representative Cliff Stearns, a Florida Republican and chairman of the investigations subcommittee, asking that the Energy Department also be represented at the hearing.

Department “lawyers looked closely at the legal authority issues,” Waxman and DeGette said in a letter today. The panel should have Energy Department representatives “at the witness table” to understand the communications with the Treasury and the department’s analysis on subordinating the loan, the said.

Stearns should consider postponing the hearing if an Energy Department official isn’t available by Oct. 14, the lawmakers said.

Restructuring Scrutinized

Administration e-mails turned over in response to requests from congressional investigators have drawn scrutiny to the restructured financing agreement.

Republicans have said the new agreement violated the 2005 loan guarantee law by subordinating taxpayer debt. Energy officials have said the law gives the secretary broad discretion to revamp the terms of the guarantee.

The memo cites a Feb. 10 e-mail from Burner to Susan Richardson, general counsel of the Energy loan programs office, and Frances Nwachuku, director of portfolio management in the office, saying the Justice Department may need to be consulted on the legality of the restructuring.

Nwachuku replied that there may be a “gross misunderstanding of the outcome of the restructuring.” The e- mails show the issue was further discussed in a phone call, without indicating how it was resolved.

Mary Miller, assistant secretary for financial markets, wrote in an August 2011 e-mail that she expects “DoE has a view about why loan subordination can occur without DOJ approval or Treasury consultation, I wanted to correct any impression that we have acquiesced to date.”

By then, Solyndra was seeking a second restructuring. The Energy Department denied the request on Aug. 30. Solyndra announced it was closing the next day. It fired 1,100 workers, filed for bankruptcy protection, and is the subject of an FBI fraud investigation.

--Editors: Steve Geimann, Larry Liebert

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

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


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