Thursday, September 8, 2011

Solargate: More on the Solyndra Scandal

The FBI raids a beneficiary of federal loan guarantees 9/9/11

The political scandal over the failure of Solyndra, the politically connected solar-panel maker, just got a lot more interesting. The FBI raided the company's Fremont, California offices yesterday and executed a search warrant.

Congress has been investigating the company, which received a $535 million government loan guarantee in March 2009 and announced August 31 that it is filing for bankruptcy. Yesterday's FBI raid is the first hint of a larger government probe, which is being conducted in cooperation with the Department of Energy's Inspector General. The FBI declined to comment and a Solyndra spokesman didn't return calls.

Solyndra was once a leading light, if you will, of the Obama Administration's signature "green jobs" dreams. The Energy Department signed off on the loan guarantee under a George W. Bush-era law, and the Federal Financing Bank, a unit of the Treasury Department, also provided a loan with a 1.025% quarterly interest rate. A parade of Administration officials praised the investment, including President Obama, who said in a speech last year at the company's Fremont headquarters that "companies like Solyndra are leading the way toward a brighter and more prosperous future."

Solyndra never did turn a profit and laid off employees in November. But in February the company renegotiated its loan guarantee—with a hitch. Under the new agreement, Solyndra's investors would loan the company $75 million but be first in line on repayment in the event of bankruptcy, in front of taxpayers.

One of Solyndra's biggest backers is the George Kaiser Family Foundation, whose namesake is an Oklahoma oilman who bundled campaign contributions from multiple sources for Mr. Obama's 2008 campaign.

In an email yesterday, an Energy Department spokesman said the government "restructured the debt to give Solyndra more time to repay and avoid default—much like commercial lenders do when a homeowner is having trouble making the mortgage payments."

The email added that the new deal ensured that "no additional taxpayer funding was used," that Energy received "substantial additional collateral protection in the form of intellectual property, claims on the parent company and more," and that the deal "permitted the company to complete, equip and begin operating its plant, which increased its value in any future liquidation or sale." Sounds like Energy officials already feared Solyndra might go belly-up.

Meanwhile, the Daily Caller reported yesterday that "Solyndra officials and investors made no fewer than 20 trips" to the White House between March 2009 and April 2011 and that Mr. Kaiser also made a few visits. Mr. Kaiser and the White House deny any impropriety.

House Republicans began pressing the Administration for more disclosure about the loan earlier this year—an effort that the White House budget office did not seem to welcome. In July, the Energy and Commerce Committee issued a subpoena to force the White House to answer its queries, which it finally started to do in August.

Speaking about the bankruptcy earlier this week, White House spokesman Jay Carney said: "There are no guarantees in the business world about success and failure. That is just the way business works, and everyone recognizes that." He added that "you cannot measure the success based on one company or the other."

That is all true enough, but then most businesses don't stick taxpayers with hundreds of millions of dollars in potential losses when they fail. The problem with politically directed investment isn't merely that bureaucrats are betting with someone else's money on industries they may not understand. Such investment also invites political favoritism for the powerful few at the expense of millions of middle-class taxpayers. Americans need to know the full story of who made or influenced the decision to give Solyndra its loan guarantee, and if political pressure was brought to bear.

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