WASHINGTON (Reuters) - The Obama administration ignored internal warnings to cut its losses on Solyndra and instead opted for a restructuring that led to a bigger loss for taxpayers when the solar panel maker went bankrupt, Republican investigators said on Thursday.
In its final report on its 18-month probe into the failed $535 million loan, the Republican-led House Energy and Commerce Committee said the Energy Department rushed into the deal, then helped keep the company going despite a series of red flags.
“Solyndra should stand as a cautionary tale of what happens when an administration ties itself to a project so closely that it becomes the poster child of its signature economic policy,” the 147-page report concluded.
Investigators -- lawyers and staff members on the Republican-controlled committee -- reviewed more than 300,000 pages of documents, including many internal emails that have embarrassed President Barack Obama, who held the company up as an example of how the government could help spur renewable energy jobs.
The failure has become a political weapon for Republicans ahead of the November 6 elections as they seek to highlight their own energy policies, which are more favorable to the fossil fuels industry than to alternatives.
A White House spokesman dismissed the report, saying the documents, briefings, and hearings confirm the Energy Department’s decision was “merit-based” and slammed the Republicans for wasting time and money on the probe.
In a memo, Democratic staff on the committee said the report “contains obvious inaccuracies, frequent misstatements, cherry-picked evidence, and glaring omissions of exculpatory information.”
They accused Republicans of oversimplifying the remarkable plunge in prices for solar panels because of Chinese competition that they said caused Solyndra’s demise.
The FBI has been investigating the failed company for close to a year in tandem with the Energy Department’s Inspector General, an independent watchdog.
In early 2009, Energy Secretary Steven Chu had made it a top priority to get the loans program, funded through economic stimulus initiatives, running quickly, and Solyndra was the first company to get a guarantee.
Solyndra had developed a new kind of solar panel and sought a loan guarantee to build a second factory.
Emails showed Energy Department financial analyst Kelly Colyar raised questions about the proposed loan early in 2009, but officials above her rushed the loan through the initial approval process by March because of a planned publicity event.
Democratic staff on the committee said the emails showed healthy internal debate, and said Colyar confirmed in an interview “that no corners were cut in the review of Solyndra’s application.”
Treasury Department officials also raised alarms on the deal. “Treasury had NOT had time to review and consult with Energy on the term sheet, which is a statutory requirement,” said Paula Farrell, a policy director at Treasury.
After a one-day review, Gary Burner, the chief financial officer of Treasury’s Federal Financing Bank concluded: “I do not like this deal, but it is not the worst I’ve seen.”
Analysts at the White House Office of Management and Budget also wanted an announcement on the finalized loan guarantee to be postponed.
“Recent developments in the solar market, in particular, pricing pressure from China from silicon wafer plants scheduled to come on line ... raise concerns about how strong Solyndra’s position will be in the face of rising competition,” wrote Kevin Carroll, chief of OMB’s energy branch.
The OMB review of the Solyndra deal was completed in nine days, but the average time for review for subsequent loans was 28 days, the report said.
By March 2010, an auditor had warned the company would have trouble remaining a “going concern” in a Securities and Exchange Commission filing.
The company hired two Washington lobby firms to pursue government contracts to get their panels used at military bases. But the company was running out of money. A report by independent consultant Navigant in September said Solyndra’s costs were too high to compete.
Layoffs at the company were delayed until just after the November 2010 election, a decision now being investigated by the Justice Department, the report said.
The Energy Department and the company’s private sector backers worked to restructure the loan. That deal put the government behind private investors in the eventual bankruptcy.
Financial analyst Colyar, who by then had moved to work at the OMB, flagged early in 2011 that the government would recover more if it allowed Solyndra to go bankrupt instead of restructuring.
During the investigation, Republicans accused the administration of making decisions to favor one of the company’s private backers, George Kaiser, a billionaire from Oklahoma, who had contributed to Obama’s campaign.
But Democrats said the findings did not support that. “The report is remarkably silent on the influence of campaign contributions,” Democrats on the energy committee said in a memo, noting that all officials interviewed said contributions played no role in their decisions.
Argonaut Private Equity, the investment arm for Kaiser’s foundation, eventually owned a 39 percent stake in the company, investing about $430 million.
Emails from Kaiser and his financial advisers showed that he was aware of what was happening with the company and the loan but the probe did not establish that he influenced government decisions.
When the top Energy Department loan official, Jonathan Silver, tried to phone Kaiser directly in August 2011, emails showed Kaiser would not take his call, and complained to his advisers that Silver had not used the “correct” channels.
Editing by Vicki Allen, Russ Blinch and Cynthia Osterman