White House-Backed Solar Energy Company Collapses

Aug. 31, 2011 — -- Solyndra, a renewable energy firm that became the darling of the Obama Administration, shut the doors to its California headquarters today, raising sharp questions from the administration's critics about political favoritism in the federal loan program.

"We smelled a rat from the onset," Republican House Energy and Commerce Committee members Rep. Cliff Stearns and Rep. Fred Upton said in a statement to ABC News of the the $535 million government loan guarantee awarded to Solyndra in 2009.

The manufacturer of rooftop solar panels opened in 2005 and in 2009 became the Obama administration's first recipient of an half-billion dollar energy loan guarantee meant to help minimize the risk to venture capital firms that were backing the solar start-up. Obama made a personal visit to the factory last year to herald its bright future.

ABC News and the Center for Public Integrity's iWatch News first reported on questions about the choice of Solyndra for the loan in May after the Department of Energy disclosed it was being forced to restructure its loan package for the company, which was showing early signs of financial distress. One of Solyndra's major investors was George Kaiser, an Oklahoma billionaire who raised between $50,000 and $100,000 for Obama during the 2008 election.

Following the ABC News and iWatch News reports, the House Energy and Commerce Committee opened an investigation into the loan, which Stearns and Upton said today was "suspect from day one."

"I think what happens is they give some of this money out to people who are either contributors or strong supporters," Stearns said weeks before Solyndra announced its closing. "I think in the long term we have to worry about the United States government guaranteeing loans for businesses based perhaps upon favoritism."

Officials at the Department of Energy told ABC News and iWatch News that it used objective factors in selecting Solyndra, and Wednesday the department released a statement on its website blaming changing economics in the industry -- including a major push by Chinese firms to drive down solar panel prices -- for the company's collapse.

"The changing economics have affected a number of solar manufacturers in recent months, including unfortunately, Solyndra, a once very promising company that has increased its sales revenue by 2,000 percent in three years and sold more than 1,000 installations in 20 countries," the Energy web post states. "As a result, Solyndra now plans to suspend its manufacturing operations and file for bankruptcy protection."

The government loan guarantee was supposed to spur 1,000 full-time jobs once Solyndra's solar plant was fully operational. Instead, as the company announced Chapter 11 bankruptcy today, reports surfaced that 1,100 would lose their jobs.

The department also sought to emphasize that the Solyndra loan guarantee "was pursued by both the Bush and Obama Administrations." However it was the efforts of Obama's energy team that first caught the attention of government auditors in 2010.

That's when the Government Accountability Office issued an unusually blunt assessment of the Energy Department's loan program, concluding 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."