Newly-Obtained Emails Show Further Treasury Concern Over Solyndra Restructuring
Treasury officials, on several occasions, questioned the legality of the Department of Energy’s approval of a loan restructuring for the now-bankrupt solar panel manufacturer, Solyndra, according to internal government emails obtained by FOX Business.
The emails show Treasury officials and a handful of accounts raised concerns with officials at the Departments of Energy and Justice that the proposed restructuring violated federal regulations.
The Department of Energy eventually approved the agreement that brought in more private capital on the condition those investors would largely stand before the federal government in the event Solyndra filed for bankruptcy. The solar company did so nearly seven months later.
“The Title XVII statute and the DOE regulations both require that the guaranteed loan shall not be subordinate to any loan or other debt obligation,” wrote one Treasury official in an email to another in August. “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.”
As government officials considered the restructuring in February, a Treasury official wrote to the Department of Energy that “Unless DOE has other authorities, these adjustments may require approval of the Department of Justice ... this statute rests with DOJ the authority to accept the compromise of a claim of the U.S. Government.” The Energy Department official responded that “I believe there is a gross misunderstanding of the outcome of the negotiated restructuring of the Solyndra obligation to DOE …”
“What the latest round of emails show is that senior officials within the Obama Administration had significant concerns about its legal basis, and those concerns were simply ignored," said Rep. Cliff Stearns, (R-FL), while chairing a Friday hearing.
While there was concern among staff, Treasury’s role was only to consult with the Department of Energy, not to determine whether their restructuring agreement violated the law, said officials.
“Treasury’s limited role of consulting with DOE on the terms and conditions of guarantees falls within the context of a broader undertaking by DOE,” said Gary Grippo, Treasury’s deputy assistant secretary for government financial policy.
“They (Department of Energy staff) believed … they did not compromise the claim (and possibly violate the law),” said Gary Burner, the chief financial officer of the Treasury Federal Financing Bank. Burner added it would have been “wise” for the Department of Energy to consult with the Department of Justice on the details of the restructuring.
Committee Republicans argued a yet-to-be-released memo from the Department of Energy reveals its legal reasoning fails to reach a sound legal conclusion justifying the restructuring.
“There was no legal reasoning in the memo, simply a footnote that the secretary had broad authority to do whatever he wanted,” said Rep. Morgan Griffith, (R-VA), during Friday's hearing. “I think what happened here, DOE made a bad loan, they realized they made a bad loan, they were trying to figure out a way to cover up the fact that, not that they had done anything illegal, but cover up the fact they made a bad loan, and they went and broke the law.”
Democrats characterized the hearing as useless, because of the exclusion of testimony from Department of Energy officials.
This investigation is beginning to resemble a kangaroo court,” said Rep Henry Waxman, (D-CA).
Rep. Cliff Stearns, (R-FA), assured Democrats he will invite Energy Secretary Steven Chu to appear.
Additional emails obtained by FOX Business show details of a last-ditch effort by some in the administration to offer a second restructuring to save Solyndra. A discussion among Treasury and Office of Management and Budget officials on Aug. 17, reveal “ … DOE has learned that the company has begun shut down planning … we’re now in a place where this could break at any time …”.
Less than two weeks later, one Treasury official emailed another: “Why are the investors offering to put up another 10MM given the forecasted recovery levels and the USG’s senior position?” The official added: “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 (and hence USG collateral), in which case it’s clearly in the investors’ interest regardless of the firm’s prospects.”
Eventually, the government decided against a second restructuring. Solyndra announced it would file for bankruptcy on Aug. 31. The federal government, through the Federal Financing Bank, extended $527 million dollars to the company.
Treasury Concerns Regarding the Possible Illegality of DOE Loan Restructuring
Treasury official to DOE official (2/10/11)
DOE Response (2/10/11)
FFB official to DOE officials (2/10/11)
“Will you be referring the contemplated adjustment to DOJ or are there other authorities that DOE is using to compromise this debt?”
Treasury official to DOJ official (1/7/11)
“I just want to be sure I’m up-to-date when I say to another agency: ‘You need to talk to DOJ before you start going down that road.’”
Treasury official to Treasury officials (8/16/11)
“The Title XVII statute and the DOE regulations both require that the guaranteed loan shall not be subordinate to any loan or other debt obligation … 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.”
Administration Discussion of a Possible Second Restructuring
Treasury official to Treasury official (8/28/11)
“Why are the investors offering to put up another 10MM given the forecasted recovery levels and the USG’s senior position?”
“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 (and hence USG collateral), in which case it’s clearly in the investors’ interest regardless of the firm’s prospects.”
The Final Days of Solyndra
Email forwarded between OMB and Treasury officials (8/17/11)
“ … DOE has learned that the company has begun shut down planning … we’re now in a place where this could break at any time …”
Griffith, Virginia:
when i first read this memo several weeks ago, i made comment on it then that it looked like a law school project. i even texted my staff and asked them if they could find out when susan richardson was admitted to the bar, because i believe it must have been only about 3 months before the memo was written. turns out she was admitted in 1983, but that was a surprise to me because of the quality of the work.
I think what happened here, DOE made a bad loan, they realized they made a bad loan, they were trying to figure out a way to cover up the fact that, not that they had done anything illegal, but cover up the fact they made a bad loan, and they went and broke the law.