“It’s here that companies like Solyndra are leading the way toward a brighter and more prosperous future,” said President Obama in May 2010 while visiting the plant of government-supported solar panel manufacturer Solyndra. Just over a year later, the company announced that it was going bankrupt, leaving taxpayers to foot the $535 million bill promised under Obama’s stimulus package.
This week, a new report emerged concluding that Solyndra misrepresented its financials and that the government’s verification efforts were “less than fully effective.”
Solyndra was the first company to receive funding from a government program giving loans to green-energy projects. It went bankrupt by the fall of 2011, citing its inability to compete with lower-priced solar panels. More than 1,000 Solyndra employees were laid off and taxpayers were on the hook for more than $500 million.
The new report details the findings of a 4-year investigation conducted by the Inspector General of the Department of Energy (DoE). First and foremost, it blames Solyndra executives for providing misleading information to DoE officials, including inflating sales projections. According to the report, Solyndra told the government and a firm conducting independent market analysis that it had locked in four significant sales contracts. By the time the independent report was published, however, Solyndra had offered price concessions on all of these contracts. At the time, Solyndra denied the change in an e-mail to the DoE Loan Office.
According to the report, Solyndra also lied about the price concessions to Fitch, a rating agency, to achieve a higher credit rating.
“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,” said the report.
Department of Energy officials also did not perform adequate due diligence, said the report. In one case, for example, DoE officials did not read Solyndra’s financial spreadsheets closely enough to recognize that the company was selling the panels for lower than promised. In another case, the DoE mistakenly concluded that Solyndra had beat its revenue projections for the first half of 2009 by 2 percent, when actually it had missed the projections by 16 percent.
Most concerning was the incident that occurred a week before the loan’s final closing. A DoE loan employee recognized that Solyndra’s projected cost for providing solar power was higher than expected for rooftop solar systems. The employee sent three e-mails to two senior DoE loan officials, yet no action was taken.
“This information should have raised serious questions concerning the viability of Solyndra’s financial model and Solyndra’s corresponding ability to service its debt payments,” said the report. “Instead, it was apparently disregarded.”
E-mails released soon after Solyndra’s bankruptcy demonstrate that pushing the company’s success was a high priority for the Obama administration, suggesting that political motives may have played a factor in approving the loan.
In one case, the DoE reportedly pressured Solyndra to avoid laying off employees until after the 2010 elections, because the government was concerned about the bad publicity. Investors also warned the Obama administration before the president’s May visit of several warning signs, but to no avail.
Department of Energy officials and Solyndra executives continued to argue after the bankruptcy that the $535 million loan was granted entirely on its merits. Even if that is true, this new report shows that the government isn’t too skilled at picking winners and losers.