Newly-released emails cast new light on the Obama Administration’s unconventional decision to rewrite the terms of the nearly half-billion Solyndra loan to favor a major campaign donor as the company careened towards bankruptcy.

In late 2010 it was becoming apparent to government officials that Solyndra could not survive without a massive infusion of cash. And private investors were unwilling to contribute more to the struggling solar manufacturing company. To make the deal more attractive to them, namely the high-profile Obama donor George Kaiser, Department of Energy officials offered to “subordinate” taxpayer debt to the investor debt. Meaning, in the event of bankruptcy, investors would be paid back before taxpayers.

The Energy Policy Act of 2005, however, states DOE loans “shall be subject to the condition that the obligation is not subordinate to other financing.” Under the law, taxpayers should always be paid first. But DOE insisted the “is” in that statute means that taxpayer debt only needed to be prioritized when the deal is originally made and could be changed later. Staff at the Office of Management and Budget legally tasked with reviewing the deal disagreed, setting of a months-long behind-the-scenes debate between the two agencies.

OMB Energy Program Analyst Kelly Colyar, formerly the Credit Policy Director at the DOE loan programs office, wrote in one email she was “vastly confused by DOE’s decision to negotiate away their senior position in the transaction” because doing so would “displac [e] DOE’s potential for recoveries.”

Her Branch Chief, Kevin Caroll, wrote an email to his superior that said, “[t}here are questions at the staff level about how DOE is going about the restructuring of Solyndra. At least one involves the legal question of what 1703(d)(3) means for their plan to make some of the debt ‘junior’ to the new debt…I think they have stretched the definition beyond its limits.”

Another email from OMB staff complained that OMB had “[d]eferred to DOE on several ‘stretch’ interpretations of statutes/rules” including “Solyndra restructuring, even when OMB analysts suggested different courses of action might be appropriate.”

OMB’s cost estimates showed it would be better to let Solyndra go under than to restructure the deal in the way DOE was proposing In other words, taxpayers would be better off liquidating the company than modifying the loan or working it out differently.

Still, DOE insisted that restructuring the loan to favor investors and OMB Director Jacob Lew, who later became President Obama’s chief of staff, was unwilling to hold up the deal. OMB staff told congressional investigators senior staff had decided to take a more “traditional” oversight role, rather than taking “active intervention.”

Treasury officials appeared to be uncomfortable with the loan was well. Gary Burner, chief financial officer or the Federal Financing Bank, emailed Richardson and the Director of Portfolio Management in the Loans Programs Office Frances Nwachuku on February 10, 2011 advising them to seek approval from the Department of Justice. They did not.

DOE restructured loan closed later that month.

Solyndra continued to fail.

Obama bundler George Kaiser had the most to lose among the investors. He had invested a whopping $430 million in Solyndra and owned a 39 percent stake, making him the company’s single-largest investor. Kaiser was periodically updated by Steve Mitchell, a member of Solyndra’s board of directors and managing director of the investing arm of the George Kaiser Family Foundation called Argonaut.

An April 23, 2011 email from Mitchell to Kaiser said, “The financial situation of the company remains unchanged.”

Mitchell continued to communicate with DOE through the summer, as the company’s outlook got progressively worse. Solyndra announced at its July 2011 board meeting it had a 19 percent drop in shipments, 23 percent drop in revenue, and 10 percent decline in Average Sales Price.

Investors were unwilling to pay the $20 million needed to keep the company operating and members of the Obama Administration became desperate to find a way to keep the company that was a centerpiece of its green agenda afloat.

Mitchell sent Kaiser an update on August 11. “DOE clearly wants to try and find an outcome that provides a political viable option for the company to continue operations,” he said. Mitchell also mentioned that DOE’s Loan Programs Officer Jonathan Silver wanted to communicate with Kaiser directly. Kaiser declined

Silver called Kaiser’s assistant later that evening. Kaiser forwarded the message to Mitchell saying, “I do not plan to call him back.”

Silver tried Kaiser’s assistant again on August 18. At that point Mitchell complained, "This is certainly not us trying to influence the government, it is obviously the other way around.”

While Solyndra investors were able to convince the government to give them a $535 million loan, the government couldn’t convince them to spend enough money to keep the company alive.

Solyndra declared bankruptcy on August 31.

Under the new deal $75 million in private money from Argonaut and other private investors would have to be paid back before the taxpayers ever saw a dime.

Republicans investigating the restructured deal say it was illegal. “DOE knowingly violated the law when it restructured the terms of the loan guarantee and subordinated taxpayers’ interest to the interests of private investors,” their report said.

Last June Senator Jim DeMint (R.-S.C) offered an amendment to ban all government loan guarantees, such as the one that funded Solyndra. Only 18 senators, all Republicans, voted in favor of it, leaving the door open for the government to keep ripping off taxpayers, and fund many more Solyndras in the future.

Republicans and Democrats on the House Energy & Commerce Committee joined together on August 1 to pass the “No More Solyndras Act” 29-19 to terminate the DOE’s loan program and prohibit any new applications.

Note: Last June Senator Jim DeMint (R-SC) offered an amendment to ban all government loan guarantees, such as the one that funded Solyndra. Only 18 senators, all Republicans, voted in favor of it, leaving the door open for the government to keep ripping off taxpayers, and fund many more Solyndras in the future.

Republicans and Democrats on the House Energy & Commerce Committee joined together on August 1 to pass the “No More Solyndras Act” 29-19 to terminate the DOE’s loan program and prohibit any new applications.


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