Did Obama Administration Play Favorites With Energy Loans?

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When the White House announced the federal government would loan $465 million to Tesla, a California start-up company with plans to develop an all-electric sedan, President Obama called it an "historic opportunity to ensure that the next generation of fuel-efficient cars and trucks are made in America."

The loan also represented a lucrative opportunity for Steve Westly, a major investor in the car company who had raised more than $500,000 for the president's campaign.

In 2009, the U.S. Department of Energy directed more than half a billion dollars in loans and grants to companies backed by Westly's California venture capital firm. In 2010, the White House tapped Westly for a seat on a special energy advisory panel that gives him regular access to Energy Secretary Steven Chu. Westly boasts on his website that his firm is "uniquely positioned" to take advantage of the Obama administration's interest in green energy.

Congress has given the Energy Department authority to distribute billions of dollars in public funds to help stimulate the economy and seed a new generation of clean energy firms. A joint investigation by ABC News and the Center for Public Integrity that will air on World News with Diane Sawyer tonight has found that Westly is just one of several political allies of the president who have ties to companies receiving chunks of that money through loans, grants, or loan guarantees.

CLICK HERE to read the Center for Public Integrity's story on Steve Westly.

The department lent $528 million to Fisker Automotive, whose electric car is being financed by a venture capital firm run by billionaire Obama supporter John Doerr -- a firm that touts former Vice President Al Gore as a board member. And, a $535 million federal loan guarantee was used to help a California solar cell company whose major investors include George Kaiser, an Oklahoma billionaire who raised between $50,000 and $100,000 for Obama during the 2008 election.

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CLICK HERE to watch an ABC News reporter attempt to question Steve Westly.

"I think what happens is they give some of this money out to people who are either contributors or strong supporters," said Rep. Cliff Stearns, a Florida Republican who chairs a House Energy subcommittee that is looking into the loan program. "I think in the long term we have to worry about the United States government guaranteeing loans for businesses based perhaps upon favoritism."

White House Denies Favoritism

Both the White House and the Energy Department have adamantly denied that political supporters of the president have had any edge as they competed with hundreds of applicants for loans and loan guarantees.

"Grants and loans are competitively awarded on the basis of merit," said Reid Cherlin, a White House spokesman.

"Attending two meetings of a non-binding, public advisory panel hardly gave companies supported by Steve Westly a leg up -- especially considering the board has no decisionmaking role, isn't involved in making grants or loans, and never even discussed those companies," said Stephanie Mueller, an Energy Department spokeswoman, in an email to ABC News. "The funds were awarded long before he joined the board, and Tesla's competitors were awarded billions of dollars more than Tesla. Our goal isn't to help any particular investor; it's to ensure that America leads the world in manufacturing the next generation of high technology vehicles."

Top Energy officials told ABC News the loan program took time to get rolling, but is now overseen by 175 professionals who rigorously scrutinize applicants, and attempt to get behind companies with the best hope of creating sustainable jobs.

But efforts to analyze the criteria the Energy Department has used to select the companies that have received federal loans or loan guarantees have proved challenging, even for government auditors. Last summer, the Government Accountability Office issued an unusually blunt assessment of the Energy Department's loan program. The report concluded that the department had "treated applicants inconsistently, favoring some and disadvantaging others."

The author of the GAO report, Franklin Rusco, told ABC News that Energy Department officials used an opaque process to select loan recipients. He said the agency could not, or would not, explain why some companies were given a quick green light for approval, while others waited years for a response.

"I think it's problematic for [the Department of Energy]," Rusco said. "I think they need to have a systematic, transparent and equitable process. And I think if they're not seen to have that, it's going to create issues, it's going to create perception problems. And there may be real problems underlying this as well that we haven't uncovered yet."

A principal complaint about the loan program has been its failure to distribute the bulk of the money Congress gave to the Energy Department to help stimulate the economy. The $25 billion program to jumpstart the development of electric cars, which was first funded in 2008, has so far loaned about $8 billion to five companies, with applications from more than 100 other companies still pending.

Frustrations have simmered in many quarters, but have been particularly heated among the entrepreneurs who are vying to create the first commercially viable electric car. James Taylor, CEO of Ohio's Amp Electric Vehicles, summed up those feelings in a recent interview with Edmunds.com. "These are companies trying to get off the ground and are just like us, starving for cash, looking for investors. It just seems a shame. All that money is there to be had," Taylor said. "For some reason, [the government money] is not falling through the funnel and getting out to us."

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But one of the major investors in the new technology who is finding success getting the money through the funnel is Steve Westly.

Westly declined repeated requests from ABC News for an interview, on or off camera. When approached to be interviewed while waiting to enter an Obama event in Washington, Westly ignored questions until a Democratic National Committee staff member was able to jump him to the front of the line and shuttle him past a U.S. Secret Service checkpoint.

Steve Westly Becomes An Obama Bundler

The former California state controller has a long history in politics. Westly began campaigning and raising money for Obama in 2007, just as he was starting to build The Westly Group, a venture capital firm specializing in start-up companies with fresh ideas for clean technology. By Election Day, Westly had joined the elite circle of "bundlers," the candidate's top group of fundraisers who used their connections to gather more than $500,000 for Obama's campaign. After the election, he visited the White House to "discuss potential opportunities for service within the Administration related to green energy policy" and to receive a briefing from a top Obama aide on technology initiatives the administration was undertaking, according to Cherlin.

Westly took a seat on the Secretary of Energy's advisory panel in 2010 and used his website to alert future clients to his newfound connections.

"We believe that with the Obama administration, and other governments … committing hundreds of billions of dollars to clean tech, there has never been a better time to launch clean tech companies," his company website says. "The Westly Group is uniquely positioned to take advantage of this surge of interest and growth."

Companies backed by Westly's venture capital firm first started seeing the fruits of that unique position with the $465 million loan that helped Tesla Motors launch development of an electric sedan that is expected to list for $54,700. Four months later came a $700,000 federal grant, crucial to expanding a recycling program in Philadelphia. In December 2009, the Department of Energy awarded stimulus grants of $20.4 million for a bio-refinery and $25 million to develop a diesel substitute through the fermentation of sweet sorghum.

Then, in February, the Obama administration announced plans to stimulate sales of electric cars by offering consumers a $7,500 federal rebate at the dealer level. Stock in Tesla Motors, which went public last year, rose 6 percent with the news. Westly sat on Tesla's board for more than two years, and though his firm recently sold its nearly 2.5 million shares, he personally remains a shareholder. "I think Tesla's best days are ahead of it," he told Bloomberg West TV March 11.

Eric Wesoff, a senior analyst who specializes in renewable energy and financing for Greentech Media, which covers news and analysis about the green tech market, told the Center for Public Integrity that pulling strings with the administration "might actually be part of [Westly's] business plan."

"One of the things the firm pledges that differentiates The Westly Group from other venture capitalists is they help companies navigate the political landscape," Wesoff said.

CLICK HERE to follow the ABC News Investigative Team and Brian Ross on Facebook and join in on the discussion.

The Center for Public Integrity is a nonprofit, investigative reporting outlet in Washington, D.C.

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