Report: Solyndra misrepresented facts to get loan guarantee

AP News
|
Posted: Aug 26, 2015 6:29 PM
Report: Solyndra misrepresented facts to get loan guarantee

WASHINGTON (AP) — A four-year investigation has concluded that officials of the solar company Solyndra misrepresented facts and omitted key information in their efforts to get a $535 million loan guarantee from the federal government.

Solyndra was the first company to get federal loan guarantees under a program that was created in 2005 and expanded by President Barack Obama's 2009 economic stimulus package.

The company's failure soon after receiving the loan guarantee likely will cost taxpayers more than $500 million. Republicans and other critics cite it as an example of wasteful spending under the stimulus program.

The report by the Energy Department's inspector general was released Wednesday. It's designed to provide federal officials with lessons learned as it proceeds to grant billions of dollars in additional loan guarantees. The inspector general found fault with the department, describing its due diligence work as "less than fully effective." The report also said department employees felt tremendous pressure to process loan guarantee applications.

In the end, however, the inspector general said the actions of the Solyndra officials "were at the heart of this matter."

"In our view, the investigative record suggests that the actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the department," the IG's report said.

The federal loan guarantee program for energy projects was established under President George W. Bush's administration. After it was expanded by the 2009 stimulus law, the department disbursed more than $500 million to Solyndra. Obama personally visited the plant in 2010 to cite it as an example of economic progress stemming from the Democratic-led stimulus bill.

But in September 2011, the company laid off 1,100 employees, ceased operations and filed for bankruptcy protection.

The IG's report did not identify by name any particular Solyndra leader who gave misleading information.

Miles Ehrlich, counsel for the company's former CEO, Chris Gronet, disputed the findings. "Solyndra executives were completely truthful and accurate in their representations during this loan process, and the DOE was never misled about Solyndra's business or prospects," Ehrlich said in a statement provided by his law office.

Ehrlich said the real cause of Solyndra's failure had nothing to do with fraud, but was caused by the unexpected dumping of solar panels subsidized by China's government.

The report notes that federal prosecutors and the Federal Bureau of Investigation also participated in the interviewing of witnesses and the examination of hundreds of thousands of documents. In early 2015, the Justice Department informed the inspector general's office that it would not pursue criminal prosecution of any Solyndra officials.

The inspector general's report said the department relied on third-party evaluations for part of its analysis of Solyndra. In one case, an engineering firm, R.W. Beck Inc., issued a report on the solar panel market relying on company representations that it had $1.4 billion in revenue under contract through 2012. The report said Solyndra's "firm" sales contracts supported its financial model. But by the time Beck issued its final report, all four of Solyndra's customers had been offered price concessions.

"Solyndra's failure to directly disclose these significant material changes in its contractual relationships distorted the view the department and its consultants had of the market for Solyndra's products," the inspector general said.

Solyndra was also required to hire an outside firm, Fitch Ratings Inc., to prepare a credit assessment of the project, located in Fremont, Calif. A Fitch official told investigators that he asked Solyndra if any contract customers had received price concessions and was told no. Additionally, the company's largest customer had informed the company it would not buy more panels in 2009 because Solyndra's price was too high. A Fitch official told investigators that if it had been aware of price concessions it would have assigned Solyndra a lower credit rating.

The report was less detailed about the Energy Department's shortcomings in conducting due diligence. It said the department needed to consider using "new and more intrusive validation techniques." It also said consultants the department hires must be held accountable for their work.

Solyndra's failure was the subject of numerous congressional hearings and a report from Republicans on the House Energy and Commerce Committee. The August 2012 report concluded that Solyndra was a cautionary tale on how political pressures and other factors can result in poor decision-making.

"The red flags about Solyndra's financial condition and the turbulence in the solar market were there for DOE to see when it reviewed Solyndra's application in 2009. DOE staff and (Office of Management and Budget) staff noted these concerns at the time the loan guarantee was under consideration," the congressional report concluded.