Bloomberg News

Solyndra’s Loan Guarantee ‘Was Rushed,’ Treasury Audit Says

April 03, 2012

The U.S. Treasury Department was given one day to complete its review of the government’s $535 million loan guarantee to Solyndra LLC, the bankrupt solar-panel manufacturer, to accommodate an Energy Department press release, according to a Treasury audit.

While Treasury staff say they had enough time to review the loan, internal e-mails cast doubt on whether staff suggestions to provide a partial instead of a full guarantee were addressed by the Energy Department, the Treasury’s Inspector General’s Office said today in the report.

“Treasury’s consultative role was not sufficiently defined, the consultation that did occur was rushed and no documentation was retained as to how Treasury’s serious concerns with the loan were addressed,” the audit said.

Solyndra, heralded by President Barack Obama as proof that “the promise of clean energy isn’t just an article of faith,” filed for bankruptcy in September, days before the FBI raided its headquarters in Fremont, California. The company received a $535 million loan guarantee under the Energy Department’s Loan Guarantee Program in September 2009 that was funded by the Treasury’s Federal Financing Bank, a government corporation created by Congress in 1973.

An Energy Department spokesperson wasn’t immediately available for comment.

Draft Press Release

The Energy Department didn’t consult the Treasury on the terms and conditions of the loan transaction before or during Energy’s review. The Treasury’s review happened after its staff was told by the Office of Management and Budget that the Energy Department was ready to make a conditional commitment to Solyndra, the report said.

The Energy Department sent a draft press release to the Treasury on March 18, 2009, “announcing Solyndra’s conditional commitment planned for issuance later that afternoon,” the report said. The Treasury requested more time for review and later agreed with the Energy Department’s request to expedite the review by March 19, 2009, “so that the press release could be issued on the morning of March 20, 2009,” the report said.

Treasury staff offered feedback in a March 19, 2009, conference call, noting concerns that included the amount of equity in the project, a preference for a partial guarantee and the Energy Department’s claims on Solyndra’s intellectual property in the event of default.

Comments Raised

While “Treasury officials told us that all comments raised were addressed by” the Energy Department, internal Treasury e- mails from that time “leave questions” as to whether concerns were fully addressed, the audit said.

“We pressed on certain issues such as why we aren’t providing only a partial guarantee and covering a smaller percentage of the eligible project costs, but the train really has left the station on this deal,” an internal Treasury e-mail said, according to the report.

The Treasury conducted the audit because of “heightened media attention” and congressional inquiries into the loan, the report said.

Congressional Republicans investigating Solyndra have criticized the Energy Department for not including Treasury officials in a decision to restructure the terms of the loan guarantee that was approved in February 2011.

The last-ditch effort to save Solyndra from bankruptcy put taxpayers behind $75 million in private investment in case of liquidation. Representative Cliff Stearns, a Florida Republican and chairman of the House Energy and Commerce Committee panel investigating Solyndra’s loan, said Treasury was “not sufficiently consulted” on the new terms at a hearing in October.

Treasury officials told auditors that it was “unclear if Solyndra’s restructure was considered a deviation” of the terms, which would have required consultation. The report says the departments should develop a “common understanding” of what qualifies as a deviation of the loan terms.

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Pete Young at pyoung13@bloomberg.net


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