The Department of Energy was fully aware of the risks in backing Solyndra Inc., a start-up company that pocketed a half-billion dollar DOE loan but never turned a penny in profit before shutting its doors, concludes a former FBI agent hired to examine the company’s books.
The expert’s report, filed this week in Solyndra’s voluminous bankruptcy case in California, could embolden critics who say the government ignored financial red flags in supporting the solar panel maker with President Obama’s maiden green energy loan in 2009.
The $535 million loan, which bankrolled a vast new manufacturing plant in Fremont, Calif., was part of a broad government mission to kick-start the clean energy movement: Solyndra’s unique solar panels would cover commercial rooftops across the country, aiding the environment and boosting the economy.
Yet the company collapsed under a sea of debt and a business plan that, amid dramatic shifts in the global solar market, caused it to sell far fewer panels at far higher costs than envisioned. From 2009-11, it cost Solyndra $3.92 more per watt to make its panels than to sell them, the bankruptcy report shows.
Solyndra filed for bankruptcy Sept.6, 2011. Two days later, it faced a raid by agents from the FBI and the Energy Department inspector general. With those clouds looming, the company’s board hired R. Todd Neilson — the former federal agent and veteran trustee in bankruptcy cases — as chief restructuring officer.
Solyndra’s board wanted a CRO to not only manage its bankruptcy case, but to explore whether the company committed misdeeds on its road to collapse. “In light of the Federal criminal investigation and ongoing Congressional investigation … the Subcommittee agreed that the CRO would act in an independent capacity in determining if any improprieties had occurred with respect to the Debtors’ finances,” Neilson’s report said.
After examining tens of thousands of pages of records, Neilson concluded that Solyndra did not improperly divert funds. “The construction costs were correctly recorded in the accounting records and no material funds were diverted from their original intended use,” he wrote.
All funds drawn from the DOE loan, he found, “were spent in accordance with the relevant loan documents.”
And, Neilson made clear, the DOE was fully informed of Solyndra’s finances when it initially backed the company in 2009 — and restructured its loan in 2011, seven months before the bankruptcy and raid.
“The CRO has reviewed the vast level of communications and the underlying records between the DOE and Solyndra,” he wrote. “It is the opinion of the CRO that the DOE had sufficient information to understand the risks and challenges associated with the guarantee obtained from DOE and make an informed decision as to the ongoing financial condition of Solyndra throughout the loan guarantee time frame.”
In fact, records show, the Energy Department supported the Solyndra financing in the early days of the Obama administration in the face of criticism from officials within several wings of government — the Office of Management and Budget, the U.S. Treasury and DOE. “This deal is NOT ready for prime time,” one OMB employee wrote March 10, 2009, government emails show. Ten days later, energy officials announced Solyndra was in line to be the first company to secure a green energy loan guarantee.
And, the Center for Public Integrity and ABC News reported last year, Energy Secretary Steven Chu announced that conditional commitment to back Solyndra before completed marketing and legal reviews were in hand.
An Energy Department spokesman did not respond Thursday to requests for comment about the new bankruptcy report.
In the past, DOE officials have said they support risky — but potentially game-changing — technologies. Sometimes, they say, innovative projects fail. They have also defended the Solyndra loan, saying all due diligence was in hand when the financing closed and that veteran private investors also heavily backed the company.
The Energy Department, Neilson found, was equipped with all the information it needed to “make an informed decision as to the ongoing financial condition of Solyndra.”
A weekly report filed with the Energy Department last year, for instance, detailed the company’s falling fortunes. “By August 20, 2011, the reported cash balance was just $5.0 million and sales for the same seven week period were only $5.3 million, $13.8 million below the February 2011 forecast for the same seven week period,” Neilson wrote. “By July 2, 2011, a little more than a month prior to the bankruptcy filing, Solyndra had reported losses totaling almost $1.1 billion.”
Neilson’s report was built from a review of records and informal interviews with Solyndra employees. He sought interviews with former company CEOs Dr. Chris Gronet and Brian Harrison. “Both Gronet and Harrison declined, through their legal counsel, to speak directly to the CRO.”
While his report found no wrongdoing by Solyndra, the criminal investigation continues.
Julie Sohn, a spokeswoman with the FBI in San Francisco, said Thursday that “since it’s an ongoing investigation,” she could not comment.