As it scrambled to save the flagship company of the Obama administration's green energy program, the Energy Department ignored repeated warnings from top Treasury Department officials that it was not following guidelines in refinancing Solyndra's half-billion dollar federal loan, a Congressional hearing Friday revealed.
When the DOE refinanced the government's $535 million loan to the California solar panel manufacturer in February, it agreed to let investors, including a major Obama fundraiser, stand in line before the public to recoup the first $75 million of their investment should the company fail. Solyndra declared bankruptcy six weeks ago.
During a House Energy and Commerce hearing on the refinancing of the loan Friday, Rep. Cliff Stearns, R.-Florida, chairman of the Committee's Oversight and Investigations Subcommittee, asked Treasury Department CFO Gary Burner if he had ever seen another case where taxpayer money was subordinated to that of investors.
"No sir, I have not," said Burner, who has been with the department for 28 years, becoming chief financial officer five years ago.
Internal Treasury Department documents released by the committee also show that officials warned DOE and the White House about the refinancing.
The refinancing is one piece in a long string of favorable terms the government granted to Solyndra, a start-up solar panel firm that secured the Energy Department's first loan guarantee in March 2009 in what was touted as a signature project for the green energy movement. DOE pressed ahead with that financing -- and everyone from Energy Secretary Steven Chu to President Obama made personal trips to the California plant -- despite repeated red flags the loan was a risky bet.
Now the company has collapsed and Congress, the FBI and the inspectors general of the Energy and Treasury departments are all investigating the loan. The head of the Energy Department's loan program and Solyndra's CEO have both resigned in recent weeks.
Some Energy and Commerce Committee members, including Stearns, contend the DOE violated the Energy Policy Act of 2005 during the refinancing by putting investors in line before taxpayers to recoup any recovered funds. Those investors -- including a major fundraiser for President Obama, George Kaiser -- provided $75 million to help prop up Solyndra in February at the time of the government's refinancing.
"This seems to me a clear violation of the Energy Policy Act of 2005, which says DOE shall consult with OMB and the Secretary of the Treasury before granting any deviation in the loan," said Fred Upton, R-Michigan, chair of the committee. "Putting the taxpayers at the back of the line behind private investors in the event of liquidation is not only a deviation, it is apparently unprecedented."
An internal Office of Management and Budget email released by the committee shows that OMB officials were also unsure whether the restructuring followed the law. "There are some questions at the staff level about how DOE is going about the restructuring for Solyndra," says the email, in reference to moving private investors to the front of the line for reimbursement. "I think they have stretched this definition beyond its limits."