Published October 14, 2011
WASHINGTON – Treasury Department officials testified Friday that they've never in their careers seen the government handle a loan quite like the Energy Department handled the $528 million in taxpayer dollars that was lent to failed solar firm Solyndra.
At a tense hearing on Capitol Hill, two Treasury officials acknowledged that the government's restructuring of the loan earlier this year was unusual, if not unprecedented. Through that process, Solyndra investors, not taxpayers, were put at the front of the line for recovering money in case of bankruptcy.
Gary Burner, chief financial officer of the Treasury Federal Financing Bank responsible for the loan and a 28-year veteran of the Treasury Department, said he's never heard of a case where private money was prioritized ahead of taxpayer money in a loan.
Gary Grippo, deputy assistant secretary at the department, said he was never personally "involved" in a case like that.
The two were questioned as Republicans on the House Energy and Commerce oversight subcommittee tried to bare warning signs that were popping up inside the Obama administration as the Solyndra loan situation developed.
Panel Chairman Rep. Cliff. Stearns, R-Fla., charged that some senior officials inside the administration knew the loan was a "bad bet that was destined to fail," but were ignored by the Department of Energy.
"Recent emails ... clearly show that numerous members of the Obama administration from the most senior levels of the West Wing down to the career professionals at (the Office of Management and Budget) and (Department of Energy) knew that Solyndra was a bad bet that was destined to fail," Stearns said.
Newly released emails show that the Treasury Department was concerned that the loan restructuring, approved earlier this year, could violate federal law.
One August 2011 email from a Treasury official obtained by Fox Business Network stated that federal regulations say the taxpayer money "shall not be subordinate" to other investments. "I will bet a quarter that the DOE lawyers have some kind of theory on how whatever restructuring they have done and whatever they are considering doing does not violate these requirements. Can't wait to hear it," the official said.
Another August email questioned why investors were even considering putting more money into the company. "I think DOE should be thinking through whether the proposed deal is just giving the investors more time to extract more value from the firm before bankruptcy," the Treasury official said.
The GOP lawmakers cited other emails showing that Mary Miller, an assistant treasury secretary, said the restructuring deal could violate the law because it put investors' interests ahead of taxpayers. Miller told a top White House budget official that she had advised that any proposed restructuring be reviewed by the Justice Department before it was approved.
"To our knowledge that has never happened," Miller wrote in an Aug. 17 memo to the White House Office of Management and Budget.
She said Treasury had asked the Energy Department for briefings on Solyndra's finances and restructuring terms since July 2010 but only heard back from the White House budget office.
Under questioning from a Democratic lawmaker, Grippo acknowledged Friday that Treasury cannot and did not render a legal opinion on the restructuring.
At times, the hearing was a forum for Democrats and Republicans to trade charges about the nature of the Solyndra probe itself. Rep. Henry Waxman, D-Calif., and others complained that Energy Department officials were not at the hearing to give their side. Waxman also said the GOP was withholding a vital memo with Energy Department information.
"We're only going to get one side of the story," Waxman said, accusing Republicans of conducting an unfair investigation while trying to "maintain our addiction to fossil fuels."
Administration officials have defended the loan restructuring, saying that without an infusion of cash earlier this year, Solyndra would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.
Damien LaVera, a spokesman for the Energy Department, said Thursday that the loan restructuring was legal.
"Based on a careful analysis of the terms of the restructuring, the career officials in the DOE loan program determined that the restructuring was legal and that it did not require Justice Department review," LaVera said.
Energy Department officials say the statute cited by the Treasury Department requires the Justice Department to approve a loan "compromise," in which a borrower is allowed to pay back less than the full amount of the loan. That was not the case in the Solyndra deal, they said.
And while one portion of the law makes clear that a federal debt cannot be subordinate to other financing at the time of the loan, another section provides officials with broad authority to take action to protect the taxpayer in an emergency situation, they said.
Energy Secretary Steven Chu approved the restructuring in February.
Even with the federal help, Solyndra closed its doors Aug. 31 and let all of its workers go.
Emails released last week show a wide disagreement among officials at the Energy Department, Treasury and Office of Management and Budget about Solyndra. Officials at the latter two agencies raised questions about the quality of the DOE's loan-vetting process and the special treatment Solyndra was given as its finances deteriorated.
The Fremont, Calif.-based company was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model. Obama visited the company's Silicon Valley headquarters last year, and Vice President Joe Biden spoke by satellite at its groundbreaking.
The Associated Press contributed to this report.