Solyndra Report: Obama Admin. Restructured Loan Because of PR Concerns

Email: DOE will be 'sensitive about optics' if solar firm defaults on loan.

August 2, 2012, 10:32 AM

Aug. 2, 2012 — -- Senior Obama Administration officials decided to restructure the government's half-billion-dollar loan to the California solar energy firm Solyndra even after government analysts had concluded it would cost taxpayers far less to allow the company to fail, according to a newly released report on the investigation into the Solyndra matter by House Republicans.

The decision appeared to be made at least in part out of concern with how it would look if Solyndra -- the first recipient of government funds meant to spark growth in the nation's production of cleaner burning fuels -- went bust, according to the report, which quoted extensively from internal administration emails.

"DOE is likely to be very sensitive about optics if it should default," one analyst wrote in an email.

"A meltdown that would likely be very embarrassing for DOE and the Administration," wrote another.

READ the full report here.

Solyndra ultimately did go bankrupt, giving rise to a long running political battle between the Obama Administration and House Republicans over the way the federal government doled out billions of dollars to companies trying to develop cleaner burning fuels and more environmentally friendly technology. The dispute has become a central point of attack against Obama by his Republican rival in the 2012 presidential campaign, Mitt Romney. The government's loss in the Solyndra bankruptcy has become the subject of campaign attack ads, and Romney visited the shuttered company headquarters in Freemont, California to further press the point.

READ the Ross Unit's full Solyndra coverage here.

"Solyndra should serve as a cautionary tale on how political pressures and an administration's desire to create political events to highlight its policies can result in poor decision-making," says the report from Republican members of the House Energy and Commerce Committee.

Democratic members of the committee responded by releasing their own report, saying that "The Republican report contains obvious inaccuracies, frequent misstatements, cherry-picked evidence and glaring omissions of exculpatory information received by the Committee."

The Democratic report said that the majority's report falsely insinuated that Solyndra decisions were influenced by political contributions and made "misleading assertions about Solyndra's economic prospects," and "incorrect claims" about how time pressures had influenced the decision-making process.

White House officials responded to the GOP report Thursday by emphasizing that, in their view, the investigation failed to produce evidence of the most stinging allegation that has been leveled by Republicans – that of political meddling. White House officials have said politics never entered the discussion to loan money to Solyndra, or later to attempt to save the company from failure.

"This is month 18 of this Congressional investigation and everything disclosed in the 215,000 pages of documents, 14 committee staff briefings, five Congressional hearings, 72,000 pages from Solyndra investors, and Committee interview with George Kaiser, affirms what we said on day one: this was a merit-based decision made by the Department of Energy," said White House spokesman Eric Schultz. "As Republicans won't answer how much investigation has cost taxpayers, we believe they should instead be focused on legislation to creating jobs and grow the economy."

This major point of contention -- about the role of politics in the loan-making process -- is not unaddressed in the report. House investigators include evidence, much of it already reported by ABC News and others, that suggests the Department of Energy sped up the loan to Solyndra to allow for the vice president to announce it.

Click Here to Sign Up for Breaking News and Investigation Alerts From The Brian Ross Investigative Unit

But evidence suggesting the influence of a major Obama donor who controlled entities that were large investors in Solyndra was less clear cut. The report includes emails indicating that Oklahoma billionaire Robert Kaiser was concerned about the government loan, but no specific evidence showing he tried to use his influence as a donor to sway the administration's actions.

Democrats Say Republicans Made 'False Claims'

The Democratic report says "the Republican staff report is remarkably silent on the influence of campaign contributions. This is a tacit admission that the record before the Committee does not support the false claims that the Republican leadership of the Committee and prominent national Republicans have been making for months about the Solyndra loan guarantee."

The Democratic report also notes that one White House official recently interviewed by investigators testified that she did not know Kaiser was a Solyndra investor, and a second official said he did not know Kaiser was a donor.

The 150-page Republican report, which is based on interviews with key officials, testimony from five hearings, and on more than 300,000 internal administration emails, focuses considerable attention on the period in late 2010 and early 2011. The company that had been the flagship of President Obama's Green Energy initiative was on the verge of failure.

Inside the administration, the report concludes, a debate ensued between government analysts with the Office of Management and Budget (OMB) and those running the loan program at the Department of Energy. A struggling Solyndra had been missing payments on the government's $535 million loan to the company, and Energy Department officials began working on a plan to restructure the terms of the loan.

The report says OMB analysts concluded the decision to pour more federal money into the failing company was a mistake. And that mistake would be compounded, they wrote in emails, by a perplexing decision to allow the government to give up its position as the first to be repaid in the event of Solyndra's failure.

One analyst wrote that she was "vastly confused by DOE's decision to negotiate away their senior position in this transaction."

Another wrote that the federal government's chance of recovering some portion of the funds it had loaned would be "significantly higher" under an immediate liquidation. The OMB analysis "confirms our earlier concern that DOE's restructuring could effectively result in higher costs than liquidation at this point," the internal email stated.

The Republican report states that emails and documents produced by the White House and OMB confirmed that "the White House was involved in discussions about the Solyndra restructuring and agreed to allow DOE to proceed with the restructuring even after concerns about the transaction had been raised by OMB with the White House."

That assertion is based primarily on internal OMB emails, including one that said "prior to [the] restructuring, OMB staff expressed reservations about the prospects of the company and DOE's proposal. This issue was discussed with the [National Economic Council] and the Chief of Staff."

The report suggests that White House Chief of Staff Jack Lew – who was then the head of the Office of Management and Budget – made a critical decision in January 2011 about the role his agency would play in reviewing the restructuring. Rather than taking an active role in the decision, he took the position that the agency should simply review the financial upsides and downsides, and nothing more.

According to an interview with an OMB staffer cited by the report, in deciding "between a more 'active intervention' and OMB assuming its 'traditional oversight role ... Lew determined that OMB would play its 'traditional statutory role' with respect to the Solyndra restructuring."

Republican House Speaker John Boehner seized on this during remarks Monday, saying the report "exposes [how] Jack Lew, now the White House chief of staff, ignored the warnings of his own Office of Management and Budget staff and failed to shut down Solyndra, which cost taxpayers hundreds of millions of dollars."

"I think Mr. Lew and the White House owe the American people an explanation as to why they squandered hundreds of millions of dollars," Boehner said.

"Because Republicans have found nothing to support their previous politically-driven allegations," responded White House spokesman Eric Schultz, "they are attempting to recycle a baseless issue around Jack Lew that was debunked nine months ago. House Republicans should instead be focused on creating jobs and growing the economy."

The Democratic report on Solyndra also said the GOP members of the House Energy and Commerce Committee had mischaracterized the role of the Office of Management and Budget in the loan restructuring,

The Energy and Commerce Committee had little more evidence showing senior officials were directly involved. According to the report, "the White House provided only a handful of documents from the period during which the Solyndra loan guarantee was being restructured."

Click Here for the Blotter Homepage.

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events