Democrats Cite White House Solyndra Concerns to Rebut Critics

Democratic lawmakers sought to refute Republican criticism of the Obama administration for backing Solyndra LLC, disclosing e-mails showing the White House budget office disagreed with the Energy Department’s positive assessment of the failed solar-panel maker.

The Office of Management and Budget expressed frustration last year with the Energy Department’s oversight of Solyndra, particularly after an auditor said the company’s financial woes cast doubt on its future, according to a memo yesterday from Democratic staff on the House Energy and Commerce Committee, citing administration documents.

An Energy Department official dismissed the auditor’s warning at the time, saying such a finding was typical for companies planning to sell shares, as Solyndra was, according to the Democrats’ report. E-mails and other documents show a “vigorous internal debate” about the loan guarantee, according to the report.

“The assumption being made here is there was no untoward White House influence,” Salo Zelermyer, an attorney with Bracewell & Giuliani LLP who worked in the Energy Department loan office under President George W. Bush, said in an interview. “This does seem to be an effort by Democrats to insulate officials within the White House from having had any involvement or decision-making responsibility for the loan guarantee.”

Republicans Report

The Democrats’ report includes excerpts from e-mails President Barack Obama’s administration sent the committee on Sept 30. The Republican-led panel has been investigating the loan since February, and in a Sept. 14 report said political pressure may have led to a fast decision on the loan guarantee.

Solyndra fired 1,100 workers, and FBI agents raided its offices two days after it filed for bankruptcy protection on Sept. 6. The company is under investigation for possible accounting fraud, an FBI official who declined to be named said on Sept. 29.

The company’s failure raised the level of congressional scrutiny of the loan-guarantee program and why Solyndra won its award.

“Political pressure to approve the Solyndra deal appears to have caused” the Energy Department and budget office “to miss or disregard numerous shortcomings regarding Solyndra’s ‘financial viability,” according to the Republicans’ report. That analysis is based on previously released documents from the administration.

Obama said yesterday he doesn’t regret giving the loan guarantee to Solyndra and that the administration “always understood” some clean-energy companies might not succeed.

20-20 Hindsight

“Hindsight is always 20/20,” Obama said in an interview with ABC News. Solyndra “went through the regular review process, and people felt like this was a good bet.”

Representative Cliff Stearns, a Florida Republican and chairman of the House Energy investigations subcommittee, has raised questions about connections between Solyndra and George Kaiser, an Obama fund-raiser based in Tulsa, Oklahoma, whose family foundation invested in the solar-panel maker.

Decisions on the guarantee “were made solely on the merits of the project,” Damien LaVera, an Energy Department spokesman, said in an e-mail.

The loan-guarantee program was established by Congress to support projects that “by their nature carry a degree of risk,” while the U.S. solar industry faces Chinese competitors that won $30 billion in financing from their government in 2010, he said.

The documents don’t show political favoritism playing a role in the award, according to the Democratic staff report.

Heightened Concerns

Concern within OMB was heightened by the March 2010 warning from Solyndra’s auditor, PricewaterhouseCoopers LLP, saying the company might not survive, according to the Democratic staff memo. The auditor’s filing was prepared in advance of a planned initial public offering the company abandoned in June.

The Energy Department “has one loan to monitor and they seem completely oblivious” to the auditor’s report, a budget- office official who wasn’t identified wrote to another on April 2, 2010, according to the Democrats’ memo.

The Energy Department had authority over the loan guarantee program, funded with $2.4 billion from the Obama stimulus program. Officials at the Office of Management and Budget helped weigh the risks of the loan.

A budget official wrote in a different April 2 e-mail that problems at the Energy Department may be broader than Solyndra: “What’s terrifying is that after looking at some of the ones that came next, this one started to look better … Bad days are coming.”

‘Doesn’t Default’

White House officials were aware that Solyndra was in trouble before Obama’s May 2010 visit, according to the Democratic memo.

Upon hearing the plans, one OMB official wrote, “Hope doesn’t default before then,” according to the Democrats’ report.

Concerns about Obama’s visit were raised by Steve Westly, managing parter of the Westly Group, who contacted Valerie Jarrett, a senior adviser to Obama, two days before the May 26 trip to the factory, according to the Democrats’ report. Westly urged Jarrett to check with the Energy Department to “make sure they’re comfortable” with Solyndra.

“The president should be careful about unrealistic/optimistic forecasts that could haunt him in the next 18 months if Solyndra hits the wall, files for bankruptcy, etc.,” Westly wrote, according to the Democrats’ report.

Solyndra Investor, Summers

Matt Rogers, then a senior adviser to Energy Secretary Steven Chu, wrote to Ron Klain, at the time Vice President Joe Biden’s chief of staff, that the auditor’s advisory was “standard for companies pre-IPO,” according to the memo. Klain is now a columnist for Bloomberg View.

“The company should be strong going into the fall with their new facilities on line,” Rogers wrote, according to the report.

The Obama visit went ahead as planned.

Energy Department officials disagreed with OMB’s critical assessment, saying the new manufacturing plant, paid for in part with U.S. money, was on time and budget, according to the Democrats’ memo.

“In hindsight, it is apparent that the predictions of officials at OMB about Solyndra were right and those of the officials at DOE were wrong,” according to the Democratic memo.

Other officials questioned the efficacy of the overall loan program.

Summers’ E-Mail

Lawrence Summers, a top economic adviser to Obama, agreed with a Solyndra investor in December 2009 that the U.S. government made a less than ideal venture capitalist.

Summers, director of the National Economic Council until last year, sent an e-mail in response to comments by Brad Jones of Redpoint Ventures, an investor in the company, who said government isn’t “well-equipped” to make such decisions, according to the Democrats’ memo.

“I relate well to your view that gov is a crappy vc and if u were closer to it you’d feel more strongly,” Summers said in his e-mail to Jones, according to the Democrats’ memo.

In his e-mail to Summers, Jones wrote that allocation of clean-energy spending is haphazard.

“One of our solar companies with revenues of less than $100 million (and not yet profitable) received a government loan of $580 million; while that is good for us, I can’t imagine it’s a good way for the government to use taxpayer money,” Jones wrote, according to the memo.

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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