Report: DOE Failed to Catch Solyndra’s Misrepresentations
A years-long investigation into the Department of Energy’s support for the bankrupt solar company Solyndra faults DOE officials, contractors, and the company itself for the department’s eventual loss of hundreds of millions of taxpayer dollars steered to the firm.
The DOE’s inspector general on Wednesday released the results of the investigation. It was undertaken in conjunction with the Department of Justice, which, the report reveals, decided early this year not to pursue any criminal charges in the matter.
Solyndra received a $535 million stimulus-backed DOE loan guarantee as part of the Obama administration’s early push for renewable energy subsidies. The company filed for bankruptcy in 2011 and laid off 1,100 employees, eventually costing taxpayers more than $500 million.
The company became a symbol of opposition to the administration’s green energy subsidy programs. Critics said its investors’ political connections had helped it to obtain taxpayer money despite obvious problems with its business.
Wednesday’s report, from DOE’s inspector general, notes these concerns, but says that the political factors supporting Solyndra’s government assistance were not examined during the investigation.
“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,” the report noted.
“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.”
The report faults some unnamed DOE officials for failing to account for problems with the company’s business model shortly before it guaranteed financing for its solar panel production.
A week before the closing of Solyndra’s loan, an employee in the DOE’s Loan Programs Office (LPO) noticed a report from another branch of the department, the office of Energy Efficiency and Renewable Energy, that projected a per-watt cost of rooftop solar systems well below what Solyndra charged for its products.
According to the report, the LPO employee sent three emails to superiors noting the troubling data, yet no action was taken and DOE moved ahead with its Solyndra loan guarantee.
“This information should have raised serious questions concerning the viability of Solyndra’s financial model and Solyndra’s corresponding ability to service its debt payments. Instead, it was apparently disregarded,” the report found.
By that point, according to the report, Solyndra was already lying to the department about the company’s financial health: it inflated sales figures and misrepresented the costs of its solar panels to both DOE and engineering and financial contractors hired to assess its loan guarantee application.
The report primarily blames Solyndra for those misrepresentations, but it also faults LPO officials for failing to recognize apparent discrepancies in the information the company was providing.
In the run-up to the closing of its DOE-guaranteed loan, Solyndra assured the White House Office of Management and Budget and the credit rating agency Fitch, hired to assess the company’s financial prospects, that its panels were selling well and fetching a competitive price.
However, just weeks before, the company had provided DOE with a spreadsheet that “if read carefully” would have demonstrated to LPO officials that the company was inflating promises of future contracts and hiding the true costs of its products and that it “internally viewed the sales contracts as broken.”
“It is clear that there were shortcomings in the Department’s due diligence process,” the IG found, but it placed the bulk of the blame on the company itself for providing misleading and at times inaccurate information to department auditors and loan officials.
William Yeatman, a senior fellow and energy policy expert with the Competitive Enterprise Institute, said he was suspicious of IG findings that seemed to absolve the department of responsibility for ensuring the accuracy of information used to support the loan guarantee.
“The report raises more questions than answers,” Yeatman said in an email. “Outwardly, it passes the buck to Solyndra. But if you pay attention to the details, it demonstrates a woeful lack of due diligence by the Energy Department.”
“However, the IG refused to investigate a likely cause of this ineptitude—political pressure, which the report acknowledges was a factor—for whatever reason,” he added.
Since Solyndra’s bankruptcy, two other companies backed by the same loan guarantee program, Fisker Automotive and Abound Solar, have also filed for bankruptcy protection.
A third, Vehicle Production Group, ceased operations and laid off its entire staff in 2013. Another company, AM General, bought up VPG’s remaining assets, and its DOE-backed $50 million loan, for which it paid just $3 million.
Meanwhile:
EPA withholds mine spill documents from Congress
by Tori Richards: A congressional committee blasted the Environmental Protection Agency today for blocking release of documents related to the Gold King mine disaster, which poured deadly chemicals into the largest source of drinking water in the West.
“It is disappointing, but not surprising, that the EPA failed to meet the House Science Committee’s reasonable deadline in turning over documents pertaining to the Gold King Mine spill,” said Rep. Lamar Smith (R-TX). “These documents are essential to the Committee’s ongoing investigation and our upcoming hearing on Sept. 9. But more importantly, this information matters to the many Americans directly affected in western states, who are still waiting for answers from the EPA.”
Smith – who frequently spars with the EPA – is chairman of the House Science, Space, and Technology Committee. EPA director Gina McCarthy has been asked to appear and answer questions about the agency’s role in creating a 3-million-gallon toxic spill into Colorado’s Animas River on Aug. 5. Critics say McCarthy and the EPA have been unresponsive, secretive and unsympathetic toward millions of people who live in three states bordering the river.
For several days, the EPA didn’t notify the states of Utah, New Mexico or the Navajo Nation that the spill was coming their way. McCarthy waited a week before visiting Colorado and even then she refused to tour Silverton, the town nearest the Gold King mine where EPA contractors unleashed the toxic plume into waterways that feed the Colorado River. The agency withheld the name of the contractor working on the project and other details that are generally considered public information. Lastly, the Navajo Nation, which relies on the river for drinking water and farming, received an emergency supply from the EPA in oil-contaminated containers.
Smith also blasted McCarthy for traveling to Japan while controversy over the spill continues to swirl. He criticized President Barack Obama, as well.
“EPA Administrator Gina McCarthy is currently crusading on climate-change action in Japan while President Obama, who has yet to visit the areas affected by the spill, is touring the U.S. to tout EPA’s latest regulation that will do little to impact climate change and will only further burden Americans with higher electric bills,” Smith said.
And it’s not just the public and the media that have been frustrated by the EPA’s inaction.
“Time and again, the EPA has failed to be cooperative, forthright, or reasonable in its dealings with my Committee and with Congress in general,” Smith told Watchdog. “The agency embodies all the dysfunction, misguided priorities, and government overreach that angers so many Americans. The EPA seems to have a clear disregard for the very people it is intended to serve.”
The hearing is scheduled to last just a day and could include testimony from the firm that was contracted to stem the flow of toxic water from several mines above Silverton. Smith said in a statement last week that people affected by the spill continue to deal with limited information and uncertainty.
“As the agency entrusted by the American people to protect the environment and ensure the nation’s waters are clean, the EPA should be held to the highest standard,” Smith said. “The Science Committee needs to hear from the EPA about steps it is taking to repair the damage and to prevent this from ever occurring again.”
One official familiar with the committee but not authorized to speak said House members have been dismayed by an increased number of reports showing either incompetence or flat-out disregard in a variety of situations not limited just to the Animas River spill.
And at least one state senator has started an investigation into allegations that the EPA purposely caused the spill to create a Superfund site – a designation that the tiny town of Silverton has repeatedly rebuffed.
“EPA gets a failing grade from me for pursuing an extreme agenda at the expense of our nation’s economy, American interests, and, in this case, environmental protection,” Smith told Watchdog. “The more I review reports from the spill, the more questions I have about EPA’s faulty processes and failure to communicate with local residents and officials.”