White House Pressured Solyndra To Delay Layoffs Until After Midterm Elections?

More revelations regarding the relationship between Solyndra and the Obama White House.

The latest revelations about the failed solar energy firm Solyndra, recipient of half a billion dollars in Federally guaranteed loans, provide yet more evidence of the extent of the incestuous nature of the relationship between the company, the Energy Department, and the Obama White House. We’ve already learned that the White House intervened to get the loan approved in the first place, and we’ve seen emails from White House officials pressuring Energy Dept. bureaucrats to act quickly so that they could schedule a political event around the announcement of the loan approval. Now, we’re learning that officials in Washington pressured Solyndra one year ago to delay announcing planned layoffs until after the 2010 midterms:

The Obama administration, which gave the solar company Solyndra a half-billion-dollar loan to help create jobs, asked the company to delay announcing it would lay off workers until after the hotly contested November 2010 midterm elections that imperiled Democratic control of Congress, newly released e-mails show.

The announcement could have been politically damaging because President Obama and others in the administration had held up Solyndra as a poster child of its clean-energy initiative, saying the company’s new factory, built with the help of stimulus money, could create 1,000 jobs. Six months before the midterm elections, Obama visited Solyndra’s California plant to praise its success, even though outside auditors had questioned whether the operation might collapse in debt.

As the contentious 2010 elections approached, Solyndra found itself foundering, and it warned the Energy Department that it would need an emergency cash infusion. A Solyndra investment adviser wrote in an Oct. 30, 2010, e-mail — without explaining the reason — that Energy Department officials were pushing “very hard” to delay making the layoffs public until the day after the elections.

The announcement ultimately was made on Nov. 3, 2010 — immediately following the Nov. 2 vote.

E-mails describing the events were released Tuesday as part of a House Energy and Commerce Committee memo, provided in advance of Energy Secretary Steven Chu’s scheduled testimony before the committee’s investigative panel on Thursday. As a result of the 2010 elections, that committee is now controlled by Republicans, whose aggressive nine-month investigation into Solyndra has focused partly on whether politics played a role in the company’s selection to receive a federal loan.

(…)

In the fall of 2010, Solyndra executives and investors warned the Energy Department that they needed emergency financing to keep the company operating past December.

In the Oct. 25 e-mail, Harrison warned the Energy Department’s loan staff that the story of Solyndra’s financial problems “is starting to leak outside Solyndra.”

He said he would “like to go forward with the internal communication [to employees regarding layoffs] on Thursday, October 28.”

Harrison’s e-mail was forwarded to the Energy Department’s loan program director, Jonathan Silver. Silver forwarded the ­e-mail to Chu’s chief of staff, who then alerted White House climate change czar Carol Browner and Ron Klain, Biden’s point person on stimulus efforts. Browner reportedly asked for more information, and Chu’s chief of staff explained that he had left a voice-mail message on her cellphone.

Browner’s spokesman, David DiMartino, said Tuesday that Browner doesn’t recall the voice-mail and did not advise the Energy Department on how to handle the timing of Solyndra’s layoff announcement.

On Nov. 3, 2010, Solyndra publicly announced that it would lay off 40 workers and 150 contractors and shut down its original factory. The department agreed to continue giving Solyndra loan installments despite its failure to meet key terms of the loan. In February, the agency restructured its loan to give Argonaut and other investors a chance to recover $75 million in new money they put into the company before taxpayers would be repaid.

As with the other revelations that have come out, this reveals a far closer relationship between the Obama Administration and Solyndra than official statements would like us to believe, and raises the possibility that Administration officials were attempting manipulate the news released by Solyndra to its employees, creditors, and potential creditors in order to avoid political embarassment. The White House would like us to think this is no big deal, but it seems fairly obvious that there is something worth investigating here and that, even if there was no legal wrongdoing here, what we are seeing unfold before is a classic example of Crony Capitalism.

John Hinderaker puts it well:

This is one more reason why crony capitalism is such a terrible idea. Business decisions will be made based not on economic considerations, but rather on political expediency. The result is bad for everyone-except, of course, for well-connected executives whose interests will be looked after by their political allies, and politicians who spin fables about “green energy” to fool voters. The Obama administration is less than three years old, but it is already building an impressive record of corruption.

I don’t know that I’d call it corruption per se because it’s not clear that anything illegal happened here. In all likelihood it didn’t, and that’s the real problem. When politically connected donors for the guy who happened to just be elected President of the United States are able to get senior White House officials on the phone to get help with a loan application that had been pending for over a year. Solyndra’s loan was delayed because there were, understandably in retrospect, a lot of questions about the company and its technology. Solyndra had never earned a profit, and its manufacturing process was expensive and relied on materials that could fall into short supply very quickly. It wouldn’t take much for the company to be pushed over the edge even it did manage to become successful.

In one of my first posts about this matter, I noted the problem with the kind of public venture capital that this loan program represents:

A private investor is only risking his own money. If he bets right, he stands to benefit big, but he could also lose everything. A venture capitalist is risking money that’s been entrusted to him, and he owns fiduciary duties to his investors that, if violated, could subject him to personal liability for losses. Of course, he also stands to benefit greatly if he bets right, both from the profit his investment earns and from the additional investors he’s likely to attract additional investors. These rewards of success and punishments of failure serve, hopefully, to give him the incentive to choose his investments carefully, targeting companies that are likely to most likely to make a profit rather than those that are politically popular or politically connected.

None of that exists when the investment decisions are being made by government. For one thing, it’s fairly clear in this case that the decision to give guaranteed loan money to Solyndra had nothing to do with any realistic expectation that the government would be making a profit any time soon, or that it would actually be competitive in the solar energy field. Instead, it was part of the Obama Administration’s “Green Jobs” initiative, which is more about politics than economics, and for which there  is very little empirical evidence to support the idea that this will be the big new source of jobs.

We’ve learned since then that there was also politically motivated intervention based on the entreaties of Obama bundlers like George Kaiser, a major contributor and fundraiser for Obama’s 2008 campaign. That’s the essence of what is wrong with our system and it’s going to continue as long as things like the loan program that Solyndra participated in are a part of government. When the government acts to pick winners and losers in the economy, or to aid one industry at the expense of another, the corruption and influence peddling become inevitable. Going to war against “corporations” is only half the battle, when it is the Big Government that is enabling those corporations to benefits at the expense of the taxpayers.

FILED UNDER: Barack Obama, Politicians
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. PD Shaw says:

    I think this is incriminating since I’ve always felt the early 2011 agreement to subordinate the taxpayer’s interest to the lenders was the most suspicious thing. The most benign explanation was stupidity; these allegations suggest political corruption.

    As Il Duce once said, “Everything in the State, nothing outside the State, nothing against the State.”

  2. Hey Norm says:

    First – The government has already chosen winners and losers…the oil and coal industry are the winners and the earth and it’s inhabitants are the losers. The oil and coal industries enjoy such an uneven playing field, because the government has chosen the winners and losers, that were it to be suddenly leveled green energy would already be a winner on it’s own merits. Unfortunately that is not the case and government aid to green energy is about the only alternative to wean us off fossil fuels. The free-market you fantasize about can’t do it because it does not exist.
    Second – You would be hard-pressed to find a new technology developed without government support. The government supported building the transcontinental railroad for christsakes. You probably would have called that terrible idea crony-capitalism if a Democrat had been involved. The iPhone wouldn’t exist without government-developed technology and government-supported education of engineers and scientists. Of course – libertarians hate government.
    Third – The stimulus had something like $90 billion for clean-energy investments, including wind, solar, and geothermal energy, biorefineries, the smart grid, electric vehicles, and factories to manufacture all that stuff. But you just keep harping on the less than 1/2 of 1% of that that went to Solyndra.

    If you were anything more than a partisan hack you would probably be able to find a real story in there somewhere. But you aren’t.

  3. WR says:

    Wow. Thanks to extraordinary government pressure, this news was held back for two entire business days. Man, this is practically Fascism.

  4. jan says:

    Let’s see there is Solyndra, Beacon Power, both who had generous loan guarantees from the Obama Administration, and now have gone bankrupt. In fact, 4 out of every 5 renewable energy companies backed by the Energy Department was “run by or primarily owned by Obama financial backers.” Wow, that’s 80%! Cronyism anyone?

    But, then we have Norm’s oblique comment — when the pressure is on just opine about the gas and coal companies, as they will always provide distraction away from the real issues.

  5. Drew says:

    Hey Norm –

    LOL Good thing you aren’t in my business. After that pathetic rant the investment committee would jam your papers up yer arse, say, “you are fired” and wisk you out the door.

    Incredible.

  6. David M says:

    @jan: Good grief, the fact that renewable energy companies might be donating money to Democratic candidates is news to someone? I thought that would be common knowledge. I know conservatives need to get all outraged over something, anything to keep their world view intact, but this is pretty silly even for that.

  7. Ernieyeball says:

    Norm sez: “The oil and coal industries enjoy such an uneven playing field, because the government has chosen the winners and losers, that were it to be suddenly leveled green energy would already be a winner on it’s own merits.”

    At least one report states ethanol subsidies are higher than the subsidies for the oil industry.
    http://reason.com/blog/2011/05/16/oil-industry-subsidies-21-bill
    Maybe to even the playing field the support for alternative energy should be reduced.
    In the comments thread the author suggests all govt energy subsidies be eliminated.

    By the way if the current administration supports loans for Solyndra isn’t that the government “choosing a winner”?

  8. David M says:

    @Ernieyeball: I’m pretty sure you fell for a fast one Reason tried to pull there. They compared current oil subsidies to potential future biofuel subsidies in 2022. Still, biofuels from food are dumb and I doubt that’s what most people are referring to when they say they support green energy.

  9. Eric Florack says:

    Well, someone figured out how to get the panel on “Morning Joe” over at PMS-NBC to shut up.Apparently, the magic word is “Solyndra”.

  10. Pete says:

    @Hey Norm: Wow, Norm, you really are a partisan hack yourself, if you believe all the alternative energy bunk. Did you ever take Econ 101? Supply and demand? Fossil fuels are the cheapest energy source in large enough, viable supply. When a green energy source, cheap and viable enough comes along, both the private sector and perhaps the government will develop it and bring it to market. The problem with the government funding research is that there are few boy scouts associated with the government. End of story.

  11. Ernieyeball says:

    @David M: I read the entire post including the part that says “…if current laws are maintained until 2022, the biofuels industry will receive more than $60 billion per year in subsidies, more than six times the $9.5 billion in support received in 2008.”

  12. David M says:

    Seems to be a good time to point out that solar is still decreasing in cost pretty steadily, and likely to end up the cheapest energy source within a decade or so. Given that it’s of the future of energy, why so much complaining about the government trying to help keep the American firms competitive with the rest of the world. I’d like to see programs like this expanded, even it means supporting more Solyndras.

  13. Eric Florack says:

    Seems to be a good time to point out that solar is still decreasing in cost pretty steadily, and likely to end up the cheapest energy source within a decade or so.

    The production costs will go back up once you remove the artificial supports. Also, consider the price of buggy whips is fairly low because nobody’s buying them.

  14. Ernieyeball says:

    @David M: Get out yer checkbook and start buying stock in the companies that you believe will emulate Solyndra. Just don’t force…er…ask me to flush my cash down the solar toilet.

  15. jan says:

    @David M:

    I know conservatives need to get all outraged over something, anything to keep their world view intact, but this is pretty silly even for that.

    It’s not silly when the companies are going bankrupt and it’s the public that is paying for such experimentation. If the shoe were on the other foot, and it was a republican experiment that was foolhearty in looking into the qualifications of the people it was giving loan guarantees to, how many of you would be singing a different tune?

  16. Dave Schuler says:

    The actual text of the emails is here and the terse email noting the the Department of Energy wanted Solyndra to delay announcing layoffs until after the election appears pretty damning.

  17. David M says:

    @Ernieyeball: Then you agree this statement is false:

    At least one report states ethanol subsidies are higher than the subsidies for the oil industry.

    No where did they compare types of subsidies and amounts for the same year. It’s pretty easy to look it up and see fossil fuels receive more subsidies than green energy.

    @jan: It’s a loan guarantee program, bankruptcies are expected. If there were no bankruptcies at all, it’d be a good sign the program wasn’t being administered properly.

  18. Herb says:

    “whose aggressive nine-month investigation into Solyndra ”

    Nine months of aggressive investigation for this? Clearly we need to give up on this “green jobs” business, eh?

  19. jan says:

    @David M:

    If there were no bankruptcies at all, it’d be a good sign the program wasn’t being administered properly.

    What???????? That makes no sense. You’re looking in any corner you can to find a rationalization for this debacle.

  20. David M says:

    @jan: If there were no bankruptcies at all, it’d be a sign the program was guaranteeing loans the private market should have made anyway. The program is designed to provide loan guarantees for emerging technologies that are riskier, to help our country innovate.

  21. Rob in CT says:

    Whether the government should be in the loan guarantee business is one issue (I don’t have a strong opinion on this, though my gut says “no,” preferring to fund research, even though I do want the government to be doing something to speed along the development of non-fossil fuel energy).

    If the answer to the first question is yes, whether Solyandra was a bad bet or not is another issue, and whether the betting was influenced by cronyism is a key part of that. This seems possible; even likely.

    Whether the Obama administration pressured Solyandra to hold off on announcing layoffs (and, thus, making their failure public) until after an election is yet another issue: and it certainly seems that this happened. And it’s corrupt, and should result in egg-on-face.

    Most of you are fighting about the first issue. That’s fine and all, but it distracts from the corruption.

    Basically, my position is this: our political system is depressingly corrupt. It seems to me we ought to call this out as consistently as possible, regardless of our underlying ideology. If we just revert to Team Blue vs. Team Red, where does that get us?

    p.s. The 80% figure doesn’t actually surprise me, since I’d expect green energy to be overwhelmingly associated with the Dems. You don’t think Dick Cheney’s energy plan involved much green tech do you? The question, I suppose, is whether other potentially worthy green companies that didn’t give Obama money were snubbed in favor of the cronies (entirely possible, of course). Given that Republicans generally don’t think there is such a thing (a green energy company worthy of government subsidies/loan guarantees), that question might get lost in the screaming match.

  22. Hey Norm says:

    I see all the wingnuts are here…
    We have Jan – who doesn’t think oil and coal subsidies have any relation to green energy loans.
    We have Drew – fantasizing about his business acumen. Our own Donald Trump.
    We have Pete – who fantasizes that fossil fuels are cheap.
    And my favorite, Eric – who thinks artificial supports for green energy are bad but good for fossil fuels.
    There are no facts in any of their comments…no meat to their arguments…but lots of passion for the 19th century.

    In my lifetime the US has given – given, not loaned – $600B in direct subsidies to fossil fuels. Now this is the direct giveaway only…and is just the tip of the iceberg. The external costs of the fossil fuels industry, which we all pay, far, far more extensive. There are military costs. There are environmental costs. There are infrastructure costs. There are huge health care costs – 20,000 people a year die prematurely because of pollution from fossil fuels. A Harvard study found that using coal alone costs us over $300B a year in life cycle effects the waste stream generated. The BP oil spill alone cost taxpayers $10B in tax revenue…on top of subsidies we pay to BP. Gulf tourism suffered anywhere from $7-20B in damage depending on who you listen to.
    Worldwide we spend a boatload of money trying to make fossil fuels affordable.
    But you wingnuts, including Mataconis, have a bright shiny to distract you from reality. You’re like friggin’ cats chasing a beam of light reflecting off a watch. Fun to watch…but ultimately mindless, and pathetic.

  23. David M says:

    @Rob in CT: I don’t disagree with anything you’ve said there, and I don’t have a huge opinion one way or another on the Solyndra specifics as we really don’t know enough one way or the other yet. My issues were with the idiotic ideas that green energy receives more subsidies than fossil fuels or that a single bankruptcy in a loan guarantee program means anything by itself. Other facts may come out and show the Solyndra should not have qualified, but the bankruptcy alone doesn’t prove that.

  24. Hey Norm says:

    Secretary of Energy Chu, in testimony today, denied Republican aspersions about the loan guarantee, including the Republican talkiing points that make up the bulk of this post.
    I’m sure we will see another post regarding this new information soon.

  25. Hey Norm

    Oh an Obama political flunky told us there’s nothing to worry about? I feel so much better now

    /sarcasm

  26. Hey Norm says:

    And Republican flunkies told you, via cherry-picked emails, that there was.
    You, of course, believed the Republican flunkies absent any real proof.

  27. Pete says:

    @Hey Norm: Norm are you off your meds again? BTW, To help your cause, I bought a Prius and mounted a snowplow on it. I plan to plow driveways for free this winter to eliminate the need for those gas guzzling Chevy Kodiacs. Of course, I hope we don’t get over 3 inches of snow at a time.

  28. Hey Norm says:

    Not sure if anyone is still following this thread…but today Bachmann said Solyndra is bigger than Watergate. Why are republicans so ignorant???

  29. Hey Norm says:

    Pete…
    Sucks to be you… I have a Bobcat with an 8 foot snow auger that blows snow 65′ in any direction I desire. AGW ain’t gonna f*** with me.

  30. Eric Florack says:

    Wow. Thanks to extraordinary government pressure, this news was held back for two entire business days. Man, this is practically Fascism.

    I suppose the severity of the infraction would entirely depend on what two particular days we’re discussing here. If, for example, the information came up the day before election day and is held from public view until after election day ….

  31. Eric Florack says:

    Norm are you off your meds again?

    How does one tell?

    BTW, To help your cause, I bought a Prius and mounted a snowplow on it. I plan to plow driveways for free this winter to eliminate the need for those gas guzzling Chevy Kodiacs. Of course, I hope we don’t get over 3 inches of snow at a time.

    I drive on the order of 3000 to 3500 miles a week. Over the last couple of years I have noticed a pattern that came to mind on reading your comments to norm. The pattern is that the people that think they’re saving the planet by what they are driving, usually end up driving like idiots. Last night for example , there was a pre is coming up route 81 who insisted on being less than three car lengths away from my front bumper. I’d slow down, he’d slow down. Everybody else, of course is roaring by the two of us.

    You can tell where that scenario was going. That description in mind I will give you another; the previous is the ideal car for people that feel guilty about driving. It dispenses its own punishments.