Saturday, October 8, 2011

Treasury Dept warned Solyndra loan restructuring might be illegal

Energy Department Aide Pushed for Action on Solyndra 10/8/11


The Treasury Department warned this year that the restructuring of a government loan to solar-panel maker Solyndra LLC might be illegal, newly released email excerpts show.

Those excerpts and other emails released Friday offer a new picture of how the Obama administration may have brushed aside warnings and, in one instance, a possible conflict of interest as officials pushed to support the solar-panel maker.

Solyndra received a $535 million Department of Energy loan guarantee in September 2009, and the loan itself came from a part of the Treasury Department. Early this year, with the company's finances growing shakier, private investors agreed to pump an additional $75 million into Solyndra. As part of that restructuring, the government agreed to take a back seat to those investors in getting repaid if Solyndra had to be liquidated. The company filed for bankruptcy last month.

Republican lawmakers have questioned the legality of the restructuring deal, and released email excerpts Friday to back their case. In an Aug. 17, 2011, email, a Treasury Department official said the department's "legal counsel believes that the statute and the DOE regulations both require that the guaranteed loan should not be subordinate to any loan or other debt obligation."

The email said Treasury believed the Department of Justice's approval should have been sought for the restructuring. It didn't say when the legal counsel warned of the possible violation.

Energy Department spokesman Damien LaVera said staffers at Energy and Treasury discussed the concerns in February, and Energy concluded the restructuring was legal, "based on a careful analysis of the statute." Energy Department officials have said they believed the restructuring was the best way to protect the funds taxpayers had already invested in Solyndra.

The Treasury Department declined to comment.

Other emails released by a government official on Friday show that an Energy Department adviser pushed colleagues in August 2009 to work faster on the Solyndra loan guarantee, despite an apparent conflict: His wife worked for a law firm representing the company.

The adviser, Steve Spinner, was a venture capitalist and fund-raiser for Mr. Obama in 2008 who took a job the next year as an adviser in the Energy Department.

Mr. Spinner's wife is a partner at Wilson Sonsini Goodrich & Rosati, a law firm based in California that represented Solyndra as part of the loan-guarantee deal.

In August 2009, the White House wanted to show progress on clean energy and its economic-stimulus program, which provided funding for the loan guarantees. Mr. Spinner wrote to an employee in the Energy Department's loan program on Aug. 28, 2009, complaining that the White House was "breathing down my neck on this…they are itchy to get involved if needed."

In an email that month, a White House staffer suggested either President Barack Obama or the president's then-chief of staff, Rahm Emanuel, was eager to highlight Solyndra.

When the employee replied that she hadn't received answers from a colleague, Mr. Spinner wrote, "How --- hard is this? What is he waiting for?"

A September 2009 email indicates Mr. Spinner recused himself from due diligence and negotiations over loan guarantees, but it wasn't clear whether he had done so when he sent the August emails. Mr. Spinner left the administration last year.

An Obama administration official said Friday that the emails showed Mr. Spinner was "facilitating the exchange of information" but didn't act to influence the final decision on Solyndra.

The Energy Department said the financial terms of the Solyndra loan deal were negotiated before Mr. Spinner came on as an adviser, and his wife agreed not to participate in or receive compensation for her firm's work on the deal.

Mr. Spinner was authorized to perform certain tasks such as ensuring deadlines were met but "was not allowed to make decisions on the terms or conditions of any particular loan guarantee," said Mr. LaVera, the Energy Department spokesman.

Mr. Spinner didn't respond to emails requesting comment. A spokeswoman for Wilson Sonsini said Mr. Spinner's wife, Allison Berry Spinner, "did not work on the deal and has never worked with Solyndra in any capacity."

The spokeswoman said the firm built "an ethical wall around Allison" involving Department of Energy loan programs.

Republican Reps. Fred Upton of Michigan and Cliff Stearns of Florida, who have led the congressional Solyndra probe, said: "The paper trail released by the White House portrays a disturbingly close relationship between President Obama's West Wing inner circle, campaign donors, and wealthy investors that spawned the Solyndra mess."

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