Solyndra: What a Mess

There's plenty of blame to go around in the green-energy debacle of Solyndra, but the blame begins with the executives of the solar-panel company itself.

That's a big takeaway from the Energy Department inspector general's new report on Solyndra, a company once highly touted by the White House that collapsed in 2011 after getting a $535 million federal loan two years earlier.

The IG's report finds that executives with the California company, ahead of winning the loan, repeatedly gave the Energy Department, the credit-rating agency Fitch, and outside analysts bad, overly rosy information about its sales contracts.

"Our investigation confirmed that during the loan guarantee application process and while drawing down loan proceeds, Solyndra provided the Department with statements, assertions, and certifications that were inaccurate and misleading, misrepresented known facts, and, in some instances, omitted information that was highly relevant to key decisions in the process to award and execute the $535 million loan guarantee," the report states.

"In our view, the investigative record suggests that the actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department," it adds.

It's the product of a joint probe with the FBI but reflects the IG's position only. The IG says it was informed early this year that the Justice Department won't seek criminal prosecution of company officials.

The report is a big new piece of the puzzle of what went wrong with Solyndra, a name instantly recognizable to anyone who watched battles over green-energy policy ahead of the 2012 presidential election.

Solyndra was the first company to win money under a loan program for green-energy projects that was authorized in a bipartisan 2005 energy law signed by President Bush, but didn't really get into gear until President Obama took office, and the 2009 stimulus law altered and supported the initiative.

Back in 2011 and 2012, Solyndra became a political weapon for Republicans attacking Obama's green agenda.

Senior Republicans such as Rep. Darrell Issa, then the chairman of the House Oversight and Government Reform Committee, launched probes of Solyndra and the wider loan program. GOP operatives and officials, including 2012 GOP White House hopeful Mitt Romney, accused Obama of "crony capitalism" that benefited green-energy entrepreneurs allied with Democrats.

Wednesday's report doesn't hold the Energy Department blameless, finding instead that people vetting the loan application "missed opportunities to surface and critically analyze problematic information that Solyndra had provided to the Department."

The screw-ups included a June 2009 case in which Solyndra sent an amendment to one of its sales contracts to the department that canceled an obligation to purchase panels in the future. The inspector general found "no evidence the consultant alerted the Department to its significance."

Still, the report's message is clear—blame Solyndra executives first: "While the Department's due diligence effort had shortcomings, it is our view that providing misleading answers to Departmental inquiries and failing to openly disclose critical information violated the spirit and intent of the requirement for Solyndra to report material changes to its loan guarantee application to the Department," it states.

The report describes how company officials, as far back as late 2008, were "less than forthcoming" about their future sales. They claimed that four contracts would bring in over $1.4 billion in sales over the next five years, but didn't tell the Energy Department or outside analysts it hired in 2009 about major price concessions they were offering.

Those weren't the only instances of company officials being allegedly deceptive about its future revenue as they sought the loan ahead of the September 2009 closing.

That's not to say there weren't missed signs. The report finds that in one case, Solyndra provided DOE a spreadsheet that, if read carefully, "may have indicated" that the company's sales contracts weren't being enforced. But the company was still peddling a different line to the Obama administration. Here's more from the report on this point:

"However, our investigation uncovered no evidence that this official or any other company official explicitly informed the Department that at the time this information was provided, or at any time in advance of loan closing, the full truth about the company's relations with its contract customers—namely, that (1) Solyndra internally viewed the sales contracts as broken; (2) all seven contract customers had already purchased or been offered panels at below-contract prices; (3) Solyndra's internal forecasts projected the contract customers to collectively purchase less than half their contracted volumes in years 2009, 2010, and 2011; or (4) Solyndra had changed its sales strategy significantly, shifting from contract sales to selling on the spot market."

Former Solyndra CEO Chris Gronet is pushing back against the report.

"There were no false or misleading statements by anyone at Solyndra, and these so-called 'findings' were never supported by the evidence. These exact same allegations were investigated up, down, and sideways by three of the most experienced and aggressive federal prosecutors offices in the country—and each time they rejected this DOE spin as contrary to the actual facts," said Miles Ehrlich, Gronet's attorney, in a statement.

"Solyndra executives were completely truthful and accurate in their representations during this loan process, and the DOE was never misled about Solyndra's business or prospects," Ehrlich said.

He said Solyndra's collapse was the result of "unexpected dumping of Chinese government-subsidized panels at prices 70 percent below market" that battered Solyndra and other U.S. solar-panel companies.

The loan-guarantee program, which faced strong GOP attacks after the failure of Solyndra and bankruptcies or struggles of some other federally backed green-energy companies, has rumbled back into gear during Obama's second term.

Most recently, the White House announced this week that it's making $1 billion in loan guarantees available for so-called distributed-energy projects—think rooftop solar and other types of small-scale green-power projects at homes and businesses.

It's not the first probe of Solyndra's collapse. The GOP-led House Energy and Commerce Committee, which aggressively pursued the topic, issued a 2012 report that was highly critical of administration decisions to grant the loan and efforts to salvage it before the company completely fell apart.

It showed that White House officials were aware of the optics of the loan as they promoted jobs in the renewable-energy sector, and bashed the administration for its eagerness to complete the deal despite warning signs due to a "desire to use the Solyndra guarantee to highlight its stimulus."

However, the House probe did not substantiate frequent GOP allegations that Solyndra's loan was a political reward for a major investor in the company who bundled campaign donations to Obama.

The inspector general's report only grazes the internal administration politics around the loan guarantee program.

"While not the focus of the investigation, we were mindful of the concerns that had been raised regarding possible political pressure applied in the Solyndra decision-making process. Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications. They suggested the pressure was based on the significant interest in the program from Department leadership, the Administration, Congress, and the applicants," it states.

The Energy Department, which still has authority to grant an additional $40 billion worth of loan guarantees for energy projects, noted Wednesday that it improved its due diligence, monitoring, and other processes after Solyndra's collapse.

"Based on these improvements, a recent GAO report found that [Loan Program Office's] due diligence and underwriting is as rigorous, if not more rigorous, than what is performed by the private sector," a department spokesman said.

The department's loan office handles loan guarantees for green-energy projects, such as major wind farms, and a separate program authorized in 2007 that provides direct loans for manufacturing advanced vehicles. The department emphasized Wednesday that its overall $30 billion loan portfolio is strong, with losses only at 2 percent.

"Further, project companies supported by LPO have already repaid approximately $6 billion, including more than $1.1 billion in interest payments, to the U.S. Treasury, which issued the loans guaranteed by the Department through the Federal Financing Bank. These amounts will continue to increase as the loans are repaid over the coming years," the department said.

This story has been updated.