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House panel asks: Was it legal to repay investors first after the company defaulted on its $500M loan?

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E-mails Warned Solyndra Deal Could Stiff Taxpayers

House panel asks: Was it legal to repay investors first after the company defaulted on its $500M loan?

Treasury Department e-mails warned that taxpayers would get a raw deal under a loan restructuring for the now-bankrupt Solyndra, but key officials testifying before a House panel on Friday would not say whether the arrangement was legal.  However, Gary Burner, chief financial officer at the Federal Financing Bank, did tell lawmakers, “I have never heard of it” in his 28 years as a Treasury Department official.
 
Republicans on the House Energy and Commerce subcommittee on oversight and investigations want to know whether the law was broken when the government allowed private investors to get in line before taxpayers for repayment if the solar panel company went bankrupt and defaulted on its $500 million guaranteed loan from the government.
 
Documents show that officials in the Treasury Department were concerned enough that they told the Energy Department to clear the matter with the Justice Department before proceeding.
 
“Previous communications produced to the committee revealed that there were numerous concerns within the administration regarding the financial and political impact of the restructuring,” said Rep. Cliff Stearns (R.-Fla.), subcommittee chairman.
 
“What the latest round of e-mails shows is that senior officials within the Obama administration had significant concerns about its legal basis, and that those concerns were simply ignored,” Stearns said.
 
“Judging from these e-mails, it is clear that senior officials at the Department of Treasury were not sufficiently consulted about the restructuring, and when they offered their opinions and warning signs, they were ignored like so many of the others along the way,” Stearns said.
 
Solyndra secured an additional $70 million in loans from the private sector in February after the government agreed to a condition that if the company went under, those private investors could recoup their money before taxpayers would see any of the $500 million repaid.
 
The Energy Department says their decision was critical to ensuring Solyndra’s success.  However, the company went bankrupt, laid off more than 1,000 workers, and was raided by the FBI in late summer.
 
“We told [Energy] that they needed to consult [Justice] about changing the terms of the loan.  Apparently they did not consult [Justice],” Mary Miller, Treasury’s assistant secretary for financial markets, said in one e-mail.
 
Democrats suggested no laws were broken if the Energy Department declined to consult with the nation’s top lawyers about the arrangement, or in the arrangement itself.
 
“I’ve never seen such a big fuss over a small matter in our committee,” said Rep. John Dingell (D.-Mich.).  “There was no criminal or serious misbehavior here.  There was some dumbness.”
 
Democrats also objected to the Treasury Department witnesses being called to the hearing, and said Energy Department officials, who approved and are responsible for the loan, should have been called to give their side of the story.
 
“This is a rigged process,” said Rep. Henry Waxman (D.-Calif.).  “The Energy Department disagreed with Treasury, but they are not being allowed to testify.  We are only getting one side of the story, and that is no way to run an investigation.”
 
“I don’t see any wrongdoing, just a bad business decision,” Waxman said.
 
Republicans reminded Democrats that Energy officials were called before the panel last month to explain the decision, but declined.
 
Jonathan Silver, an Energy Department official, assured the panel he would find out who was responsible for the restructuring decisions and report back to the committee, but Silver has since resigned from his position.
 
Democrats may get their wish, as Stearns suggested that Energy Secretary Steven Chu is next on the list to be called before his panel.

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Written By

Audrey Hudson is an award-winning investigative journalist whose enterprise reporting has sparked numerous congressional investigations that led to laws signed by Presidents George W. Bush and Bill Clinton. She won the prestigious Sigma Delta Chi award for Public Service in 2009 for her report on dangerous drug experiments by the federal government on war veterans, which prompted internal investigations and needed reforms within the Veterans Affairs Department. The report also captured first place for investigative reporting by the Washington, D.C. chapter of the Society of Professional Journalists and was a finalist of the International Academy of Digital Arts and Sciences Webby Awards for news and politics. Her breaking stories have been picked up and followed by major news publications and periodicals, including Readers Digest, Washington Monthly, and The Weekly Standard, as well as The New York Times, Wall Street Journal, USA Today, and Washington Post. With nearly 20 years of experience in Washington as a newspaper reporter and as a Capitol Hill staffer for Western lawmakers, she will now lead Human Events‚?? coverage of energy and environmental issues. A native of Kentucky, Mrs. Hudson has worked inside the Beltway for nearly two decades -- on Capitol Hill as a Senate and House spokeswoman, and most recently at The Washington Times covering Congress, Homeland Security, and the Supreme Court. Audrey‚??s email is AHudson@EaglePub.Co

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