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Obama Solyndra Scandal Roundup – Background Information and Unanswered Questions (Videos)

September 16th, 2011 | Filed under Politics & Government . Follow comments through RSS 2.0 feed. Click here to comment, or trackback.

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Here’s a roundup of coverage on Obama’s scandalous $535 million taxpayer funded “investment” into one of his top campaign contributors’ failed solar power company.

That Custom-Tailored Obama Scandal You Ordered Is Finally Here

Solyndra’s failure doesn’t discredit the entire idea of a green energy economy, but some might take it as a sign of the Obama administration’s incompetence.

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Obama Faces Controversy Over $535 Million Backing of Failed Solar Power Firm Solyndra

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Here’s important background information in a June report from iWatchNews:

Solar panel manufacturer linked to Obama bundler gets more U.S.-backed aid
By Jeremy Borden, iWatchNews

A politically-connected California producer of solar panels is again benefitting from a fast-tracked U.S. government-backed loan guarantee despite an ongoing congressional investigation and concerns about the company’s finances, iWatch News has learned.

Solyndra, based in Fremont, Calif., and backed by Obama bundler George Kaiser, is a company heralded as a prime example of the Obama administration’s efforts to create so-called “green” energy and manufacturing jobs. The solar panel manufacturer received a $535 million loan guarantee in 2009 from the Energy Department—and then, a year later, closed a plant, laid off workers and had to renegotiate terms of the loan, calling into question whether the government did due diligence before backing such a sizeable loan.

iWatch News and ABC reported in May that the Department of Energy bypassed important steps meant to protect taxpayers in awarding that loan guarantee to Solyndra.

On Friday, a House Energy and Commerce subcommittee will hold a hearing on Solyndra’s loan guarantee and the Office of Management and Budget’s role in approving it. In a document, the committee says OMB has not released internal emails they have asked for.

The company’s new loan guarantee, approved after just 41 days, comes by way of the U.S. Export-Import Bank under a new program called “Renewable Express,” meant to spur exports in that industry through a streamlined process.

In this case, the Export-Import Bank guaranteed a €7.7 million ($10.3 million) loan over 18 years that was obtained by a third-party company, Zellik II, from KBC Bank NV. That money financed a project that put Solyndra solar panels on the roof of the Delhaize supermarket chain’s distribution center, outside of Brussels.

Solyndra backer Kaiser is an Obama bundler who raised at least $50,000 for the president’s 2008 campaign. And the chairman and president of the Export-Import Bank, Fred P. Hochberg, bundled at least $100,000 for Obama.

David Miller, a Solyndra spokesman, said politics played no part in the Export-Import Bank loan guarantee. “It’s a standard financial transaction which was initiated by a European bank,” he said. “There’s no politics involved.”

Miller said Solyndra is “contemplating” additional Ex-Im deals but would not go into detail.

Phil Cogan, a spokesman for the Export-Import Bank, said in an email that the bank knew about the DOE’s large loan guarantee and the subsequent plant closing. He said that the bank’s staff “were not aware of the congressional investigation” at the time of the approval, and that Kaiser “was not involved in the loan guarantee in any way.”

Shyam Mehta, a solar industry analyst with GTM Research, said Solyndra is using new solar panel technology that hasn’t been tested over many years like more established companies’ technology.

“If you’re thinking about it from the U.S. government’s perspective, you want to be looking at other companies,” Mehta said. “Solyndra, in terms of the help it’s gotten, it’s more than enough.” He said the Ex-Im bank loan, however, is less controversial since the government is more than likely to get its money back. “From a risk-reward position, it makes sense,” he said.

Miller said it was the first time one of Solyndra’s solar panel buyers had used the export bank’s financing options for a project. It’s something the company is continuing to market to buyers to increase financing options and make Solyndra more competitive.

“All of our foreign competitors have the same ability to tap their banks for low rates,” Miller said. “This allows us to compete on a level playing field in the financing area.”

The loan guarantee was approved on Feb. 17, in just 41 days, according to the Export-Import Bank. The deal doesn’t require the level of review or time spent on site for a relatively small loan guarantee and can be fast-tracked, said Cogan, the bank’s spokesperson.

The Ex-Im Bank is pursuing goals of doubling exports by 2015 and pursuing a mantra of “government at the speed of business,” the bank’s theme at its annual meeting this year. The bank also has a Congressional mandate to steer at least 10 percent of its financing toward “environmentally beneficial” exports.

The bank is an independent federal agency that finances the sale of U.S. exports through a variety of financial options.

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Here’ a new report from ProPublica:

What’s Happening With That Solar Company Scandal? Here’s Our Guide on Solyndra
By Marian Wang, ProPublica

Once hailed by the Obama administration as a key example of its commitment to green technology driving growth and creating jobs, solar company Solyndra has lost a good deal of its shine. It’s bankrupt and the target of a federal criminal investigation.

Scrutiny — particularly from House Republicans — quickly shifted to the Obama administration, which has been accused of rushing to approve a $535-million loan to the company in 2009 for political reasons and without carefully weighing the risks.

So what’s the situation, who’s the focus of the investigations, and how big a deal is this Solyndra storyline? We sort through what it does — and doesn’t — mean.

What was the investment to begin with?

The government first began considering Solyndra for a loan as part of a loan-guarantee program that began under the Bush administration. The Obama administration expanded the loan guarantee program by way of the stimulus and approved the half-billion-dollar loan to the California-based solar company.

As The Washington Post’s Wonkblog notes, Solyndra makes up just 1.3 percent of the $38 billion in loans extended as part of the loan-guarantee program, and it’s the only loan to go bad so far.

Now that Solyndra has filed for bankruptcy protection, how much taxpayers will actually recoup depends on how things shake out in bankruptcy court and whether any money is left. Bloomberg and Time recently reported that at least some private investors are in line to be repaid before U.S. taxpayers.

What’s the government’s investigation about?

It depends on which investigation you’re wondering about. According to The Wall Street Journal, the FBI’s criminal investigation focuses on “whether Solyndra executives knowingly misled the government to secure more than $500 million in loan guarantees.” (A Solyndra spokesman said the company is “fully cooperating” with the investigation.)

Meanwhile, Republicans on the House Energy and Commerce Committee released findings yesterday from a seven-month investigation into the government’s role in approving the loan. The memo, titled “The Solyndra Story ” [PDF], blames the Department of Energy and the White House Office of Management and Budget for ignoring red flags “in their rush to spend stimulus dollars.”

Did the Obama administration do anything wrong?

Well, government shouldn’t approve the use of taxpayer money without doing its due diligence first. A 2010 report [PDF] by the Government Accountability Office found that the Department of Energy “treated applicants inconsistently, favoring some and disadvantaging others.”

Solyndra wasn’t the only one that got fast-tracked. The GAO also found that in at least four other cases, the government agreed to back companies before obtaining final reports assessing their risk of failure.

But so far, there’s no evidence that the Obama administration approved the loan in order to curry favor with supporters, as some have speculated.

Ultimately, Solyndra was a failed investment decision on the part of the government, which, unfortunately for taxpayers, isn’t unusual. Consider the billions in bailout dollars that were lent to banks that, like Solyndra, ended up bankrupt .

Was the urgency for the loan politically motivated?

That’s what Republicans have speculated and some reports have suggested. Noting that one of Solyndra’s major investors was a venture-capital fund linked to George Kaiser, a bundler for Obama’s 2008 campaign , the House Committee on Energy and Commerce wrote a letter requesting any communications that the White House had with Solyndra or Solyndra investors about the loan guarantee.

Democrats, meanwhile, have pointed out that Solyndra’s second-biggest private investor was a fund tied to the Walton family, which has typically funded Republicans. The San Jose Mercury News also reported that Solyndra’s CEO is registered as a Republican in California.

White House spokesman Jay Carney said the email messages showed “there was urgency to make a decision about a scheduling matter,” referring to a press event. But he pushed back against implications that there had been any wrongdoing or special favors.

“It had nothing to do with — and there is no evidence to the contrary — nothing to do with anything besides the need to get an answer to make a scheduling decision,” Carney said.

Was lending to Solyndra a bad idea?

It was certainly a risky decision, and one that ended badly.

As iWatch News notes, the credit rating agency Fitch had assigned Solyndra a B+ credit rating back in 2008, which is below investment grade. iWatch also noted that the Obama administration approved the loan despite early warnings:

“If you guys think this is a bad idea, I need to unwind the WW [West Wing] QUICKLY,” wrote Ronald A. Klain, then chief of staff to Vice President Joe Biden, in an email sent March 7, 2009.

Three days later, an analyst at the Office of Management and Budget cautioned against moving too quickly. “This deal is NOT ready for prime time,” the analyst wrote in a March 10, 2009, email.

Only 10 days later, the Department of Energy formally announced its commitment to guarantee the loan, which the administration had fast-tracked as the first green-energy project backed by stimulus dollars.

On the other hand, a lot of private investors saw potential in Solyndra, and there was plenty of media buzz about the company.

In 2010, a story in The Wall Street Journal’s small-business section listed Solyndra as the “top clean-tech company,” citing the $535-million government loan in addition to $286 million in venture capital. The Journal also ranked Solyndra fifth on its “Next Big Thing” list for top venture-backed companies.

Still, when red flags continued to crop up, the Obama administration didn’t abandon its signature project. After a March 2010 audit noted Solyndra’s “recurring losses from operations, negative cash flows since inception” and “a net stockholders’ deficit,” President Obama still toured the plant and touted its success at job creation and innovation.

“The true engine of economic growth will always be companies like Solyndra, will always be America’s businesses,” he said. (You can read about his tour on the White House blog.) And after the company later laid off nearly 180 employees, the Energy Department cast Solyndra’s financial woes as a “cash flow crisis that is very common for innovative start-up companies that are growing quickly,” iWatch noted.

Where is the latest news on Solyndra coming from?

The latest revelations stirring the pot on Solyndra have been from Republican investigators for the House Energy committee, which also held a public hearing yesterday.

Separate from the hearing, both ABC News/iWatch and The Washington Post published stories yesterday claiming exclusives on emails shared by Republican investigators. (It’s unclear whether the outlets were given the same email messages.) Here’s The Post:

The August 2009 e-mails … show White House officials repeatedly asking OMB reviewers when they would be able to decide on the federal loan and noting a looming press event at which they planned to announce the deal. In response, OMB officials expressed concern that they were being rushed to approve the company’s project without adequate time to assess the risk to taxpayers, according to information provided by Republican congressional investigators.

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Some interesting questions…

Unanswered Questions In The Solyndra Case
By Bruce Krasting

I have, on numerous occasions in the past, written an article that took the form of a question to readers. I present some demonstrable facts. Then I pose the question(s), “What do you think?”What do you know?” I’m “smarter” as a result of the responses I have gotten. I think others are as well.

I’m going to take this to a different level. The following questions are directed to my usual readers. They are also directed to the actors in the Solyndra story. The DOE, OMB, company execs (past and current), the equity owners, the lawyers and the MSM could chime in with an explanation. This blogger/taxpayer is seeking some clarity on the following.

There are questions of who did what to whom and when. There is an aspect to this that has not yet (to my knowledge) been discussed in the media. (Note-I tried to make this easy to follow. It isn’t. Sorry)

On July 29, 2011 (just five-weeks before going bankrupt) Solyndra (“SOL”) entered into a transaction whereby it sold both the Accounts Receivables (IOUs from panels sold) and the Inventory (panels) of the company (“the A/R Transaction”). Solyndra Financial (“SOLF”) (a subsidiary of SOL) was the seller. The purchaser was a newly formed company called Solyndra Solar II LLC (“SSII”). The following is the only information that I could find about SSII. Note that the company was organized in the Sate of Delaware one-day before the sale of significant assets of SOL.

It is clear from the limited information from the bankruptcy court that the A/R transaction took place. From the SOL, INTERIM ORDER (I) court filing: (Emphasis mine)

Inventory Accounts Receivable Trust Funds. Prior to the Petition Date, Debtor Solyndra LLC (as servicer), one of its subsidiaries, Solyndra Financing LLC (as seller), Argonaut Solar LLC (as agent), and Solyndra Solar LLC (as buyer), entered into that certain Amended and Restated Purchase and Sale Agreement dated as of July 29, 2011 (the “A/R Sale Agreement”). Pursuant to the A/R Sale Agreement, Solyndra Solar LLC purchased certain of the accounts receivable resulting from the sale of the Debtors’ inventory and owns and has the right to receive the proceeds of collection of such accounts receivable. In addition, Solyndra LLC (as servicer), one of its subsidiaries, Solyndra Financing LLC (as seller), Argonaut Solar LLC (as agent), and Solyndra Solar II LLC (as buyer), entered into that certain Inventory Purchase and Sale Agreement dated as of July 29, 2011.

I have found no explanation/details for this transaction. It is clear that a purchase/sale took place. The question of how much was sold and at what price is not clear. It is also not clear what Argonaut Solar is doing in this deal. Argonaut is a name that George Kaiser uses. His family investment vehicle channeled money to SOL through a company called Argonaut Ventures. Why would a company controlled by GK have a role as Agent between the buyer and seller of SOL’s assets? A question to ask is whether GK has (directly or indirectly) an interest (equity or debt) in SSII.

Again, both receivables and inventory were sold. A question is, “Was this a material transaction?” The court docs suggest there is real money involved.

As of September 2, 2011, there was approximately $3,866,342.83 in Inventory Accounts Receivable Trust Funds being held in the Inventory AIR Purchaser Trust Accounts.

There was nearly $4mm of cash in the account! There are, no doubt, other receivables to come in the future. Clearly the sale of receivables was material.

I have no information from public documents regarding the scope of the sale of inventory. I have information from a former Solyndra employee (Yes, this person will remain anonymous). I believe that the following is factual. A third party confirmation of this is required. (Love to hear from you). With that said:

It seemed like the company had been hoarding panels in the last month. We were producing a great deal of material, but holding off on shipments.

We were stacking up panels everywhere. Our old building was packed with them, but we had some huge orders in the works. Usually we shipped most of the material in the last week of the quarter, so this was not completely unusual.

We had close to three months worth of panels and we were on track to sell about two hundred million this year. That works out to about fifty million in inventory.

Make what you will of this. What is the value of inventory that is not yet sold? Answer: A fraction of the sale value referred to above. But even a small fraction is still a material number.

Argonaut (GK) has separately offered to provide a post bankruptcy loan of $4mm (“DIP”). There are many terms required by Argonaut. One requirement relates to the A/R sales. From the docs:

It is a condition to funding under the DIP Facility that the Inventory Accounts Receivable Trust Funds being held in the Inventory A/R Purchaser Trust Accounts are released to Argonaut Solar, LLC, as agent for the Inventory A/R Purchasers.

Argonaut’s (very good) lawyers make their position very clear as to who owns the assets in the A/R accounts.

The Purchased Inventory (including any proceeds thereof) and the Inventory Accounts Receivable Trust Funds (including any proceeds thereof) are property of the Inventory AIR Purchasers and not property of the Debtors’ estates.

In other words, Argonaut is willing to make a new $4mm  loan, PROVIDED that the Judge releases (at least $3.86m) back to an entity that Argonaut is connected to (SSII). In addition, the Judge would be functionally sanctioning the A/R sale. The inventory (whatever it is worth) and the receivables (whatever they are worth) will be excluded from the Debtors Estate. That means that there is even less of a chance that Uncle Sam sees a penny of the money that he (we) are owed.

One additional point from the unnamed ex-employee:

It seems liked Solyndra was racing to spend all the federal money right up till the end.

There are many possible explanations for the July 29 A/R sale. This could have been an arms-length transaction that was a last ditch effort to save SOL. This could also be something a bit more malodorous. I don’t know.

This is a unique bankruptcy. A significant amount of public money has been lost in a startup company. While the details of the A/R deal may be kept confidential, the question marks that this transaction raises will not go away.

Don’t read this and conclude that I’m suggesting wrongdoing on anyone’s part. That’s not the case. What I’m looking for is some clarity and opaqueness. I think the country deserves that.


- This roundup was compiled by AmpedStatus editor David DeGraw. His long-awaited book, The Road Through 2012, will finally be released on September 28th. He can be emailed at David[@]AmpedStatus.com.


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