April 4 (Bloomberg) -- The U.S. Treasury Department was given one day to review Solyndra LLC’s $535 million U.S. loan guarantee after learning the Energy Department was ready to announce the award, 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 were addressed by the Energy Department, the Treasury’s Inspector General’s Office said yesterday in the report.
Officials in the White House’s Office of Management and Budget told the Treasury Department that the announcement of a conditional commitment to Solyndra was imminent. The department had one day to review the terms of the guarantee to accommodate an Energy Department press release.
“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 an Energy Department program in September 2009 that was funded by the Treasury’s Federal Financing Bank, a government corporation created by Congress in 1973.
The audit “makes clear that Treasury Department officials believed they had enough time to evaluate the terms,” Damien LaVera, an Energy Department spokesman, said in an e-mail. “The simple fact is that the review was exhaustive -- involving technical, legal and financial experts from three federal agencies for more than 1,000 days spanning two administrations.”
Energy officials didn’t consult the Treasury on the terms and conditions of the loan transaction before or during their review, according to the audit.
The 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.
More Time Requested
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,” according to the report.
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.
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.
‘Heightened Media Attention’
The Treasury conducted the audit because of “heightened media attention” and congressional inquiries into the loan, the report said.
“Solyndra was a bad bet from the beginning that was rushed out the door while every red flag was ignored,” Republican Representatives Fred Upton of Michigan, chairman of the House Energy and Commerce Committee, and Cliff Stearns of Florida, who leads the committee’s investigations panel, said today in a statement. “Treasury was clearly an afterthought in Solyndra’s loan guarantee as well as its restructuring that put company investors ahead of taxpayers.”
Energy Department officials have said renegotiating the loan’s terms was a last-ditch effort to save Solyndra from bankruptcy. 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.
Before the bankruptcy, Solyndra got about $528 million of the $535 million in guaranteed loan funds, the report said.
The Energy Department is responsible for all credit losses under its loan guarantee program, which “are ultimately borne by the American taxpayers,” the report said.
To contact the editor responsible for this story: Jon Morgan at email@example.com