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Emails raise questions about Energy, Treasury disagreement on Solyndra
House Republicans released an email Friday evening showing that a senior Treasury Department official in August expressed concern that the Energy Department’s early 2011 restructuring of the solar company Solyndra’s $535 million loan guarantee may have been illegal.
The restructuring put private investors, who were providing another $75 million to the struggling company, first in line for repayment if the company went under. In addition, House Republicans probing Solyndra – which collapsed several weeks ago – say DOE may have violated requirements to consult with Treasury on the revision of the loan agreement.
They are questioning whether DOE ran afoul of a provision in a 2005 statute, which first authorized the loan program, that requires DOE to consult with Treasury on loan guarantees and major subsequent changes in the terms.
“In the course of our investigation, we have uncovered information that raises questions as to whether the Department of Energy satisfied the requirement to consult with the Department of the Treasury about the $535 million loan guarantee issued to Solyndra in September 2009 and the restructuring of that agreement in February 2011,” states the letter from Rep. Fred Upton (R-Mich.) and Rep. Cliff Stearns (R-Fla.), who heads the committee’s investigations panel.
They cite an August 17, 2011, email from Treasury's Assistant Secretary for Financial Markets Mary J. Miller to Jeffrey D. Zients, the deputy director of the White House Office of Management and Budget.
The email, according to the Republicans, states:
[O]ur legal counsel believes that the statute and the DOE regulations both require that the guaranteed loan should not be subordinate to any loan or other debt obligation. The DOE regulations also state that DOE shall consult with OMB and Treasury before any ‘deviation’ is granted from the financial terms of the Loan Guarantee Agreement. In February, we requested in writing that DOE seek the Department of Justice’s approval of any proposed restructuring. To our knowledge, that has never happened.
But according to DOE, critics are relying on an incorrect reading of the statute when alleging the “subordination” of federal government to private investors in the restructuring was illegal. DOE has defended the restructuring, arguing it gave the struggling company the best chance to stay afloat in the competitive solar panel market.
DOE spokesman Damien LaVera emphasized federal attorneys gave the restructuring the green light and disputed claims that DOE did not consult adequately with Treasury.
“Assistant Secretary Miller's email was written in August 2011, six months after the restructuring decision was finalized. When the Treasury Department raised questions with the Energy Department in February, the career staff at the two departments discussed these issues. Ultimately, DOE's determination that the restructuring was legal was made by career lawyers in the loan program based on a careful analysis of the statute,” he said in a statement to The Hill.
The same August 2011 message from Miller to Zients questions whether DOE wrongly kept Treasury out of the loop. “[s]ince July of 2010, Treasury has asked DOE for briefings on Solyndra’s financial condition and any restructuring of terms. The only information we have received about this has been through OMB, as DOE has not responded to any requests for information about Solyndra,” the email states, according to the letter to Geithner.
However, emails released by the Obama administration Friday include exchanges about the restucturing in early February between DOE loan program officials and a Treasury Department official, Gary Burner, who had expressed concerns about the matter.
In one February 10 exchange, DOE’s Frances Nwachuku – director of the portfolio management division in DOE’s loan program office – writes to Burner that there appears to be a “gross misunderstanding” of the restructuring and suggests a discussion. The email thread then describes their plans to speak.
Treasury’s Federal Financing Bank provided the half-billion dollar loan to Solyndra that DOE was guaranteeing. Republicans have pounced on the company’s collapse, alleging the White House rushed the financing for political reasons.
They’re more broadly using the demise of Solyndra, which filed for bankruptcy in early September, to attack Obama administration green energy programs.
The Energy and Commerce Committee will hold its next hearing on Solyndra on Friday, October 14.
