* U.S. govt, Solyndra spar over tax breaks
* Investor says DOE backed plan that preserved tax breaks
* Closing arguments set for Monday
By Tom Hals
WILMINGTON, Del, Oct 17 Failed solar panel maker
Solyndra pressed a federal judge on Wednesday to approve its
plan to end its politically charged bankruptcy over objections
by the U.S. government, which argued the plan was being used by
investors to dodge taxes.
Critics say government involvement in the company has cost
taxpayers twice: for a $528 million government loan, and for tax
breaks potentially worth $340 million that will go to venture
Delaware bankruptcy judge Mary Walrath heard about five
hours of testimony on Wednesday about the plan, which has the
support of all of Solyndra's creditors aside from the U.S.
She adjourned the hearing until Monday, when both sides will
present closing arguments.
The government might get nothing under the plan, according
to court documents.
An executive of one of the venture capital firms said the
Department of Energy, which guaranteed the loan, threw its
support behind a key restructuring deal in February 2011 which
preserved the tax breaks.
Steve Mitchell, a managing director of Argonaut Private
Equity, told the court that preserving tax breaks "was very,
very important" to the DOE because it gave Solyndra a better
chance of survival.
Net operating losses, or NOLs, can be used to reduce future
income by the amount of past losses. The bankruptcy plan allows
Solyndra's parent company to exit bankruptcy under the control
of Argonaut and Madrone Capital Partners. The parent company
will not have any employees or operations and its main asset
will be the NOLs.
Solyndra ceased operations last year and has sold virtually
every asset to raise money to repay creditors.
The company argued that rejecting the plan could undermine
payouts to creditors and a proposed sale of real estate, the
company's most valuable asset. That sale will close next year.
The U.S. government, through the Internal Revenue Service,
wants Walrath to reject the bankruptcy plan, arguing it was
crafted for the impermissible reason of avoiding taxes.
IRS attorney Stuart Gibson pressed Mitchell about emails and
memos that the government said showed Argonaut founder George
Kaiser was keen on using the tax breaks if Solyndra failed. Some
emails were sent nine months before Solyndra went bankrupt.
Gibson argued that a memo to the board of the George Kaiser
Foundation, which controls Argonaut, showed the value of the tax
breaks on a risk-adjusted basis would exceed their investment in
Solyndra. Mitchell dismissed the memo as "sophomoric" and poorly
The company's federal loan was awarded as part of a
government program to promote clean energy. The subsequent
collapse sparked an 18-month investigation by Republicans who
criticized the President Barack Obama's administration for
failing to cut the government's losses on the investment.
Republicans at the time had accused the White House of making
decisions to favor Kaiser, who was a fundraiser for Obama's 2008
The White House has defended the Solyndra investment, saying
the Republicans investigation confirmed the decision to make the
loan was "merit-based."
Solyndra filed for Chapter 11 protection from creditors on
Sept. 6, 2011, as it and other solar panel companies were hurt
by a flood of cheap imports from China that drove down prices.
The company filed an antitrust lawsuit seeking $1.5 billion
in damages from three Chinese solar panel makers.
Solyndra's attorney told Walrath on Wednesday the lawsuit
could eventually recover enough money to pay all of its
creditors in full.
The case is Solyndra LLC, Delaware Bankruptcy Court, No.