Story by Electric Power Magazine
An official four-year-long investigation into the Solyndra debacle confirms that the bankrupt maker of cylindrical solar photovoltaic panels misled the Department of Energy (DOE) to get a $535 million federal loan guarantee, but it also reveals that the DOE didn’t properly vet those facts, missing opportunities to catch inaccuracies, possibly due to political pressure.
The DOE’s Office of Inspector General (OIG) concluded in its Aug. 24 report that the “actions of the Solyndra officials were at the heart of this matter.” Solyndra, it said, provided the DOE with statements, assertions, and certifications that were inaccurate and misleading, misrepresented known facts, and in some instances, omitted information that was relevant to the loan guarantee.
“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,” the OIG said.
The investigation reportedly consisted of hundreds of interviews and the scrutiny of hundreds of thousands of documents by the OIG, along with the FBI.
The Department of Justice, however, will not pursue criminal prosecution of Solyndra officials. As DOJ spokesman Peter Carr told POWER in an e-mailed statement, “The DOJ reviewed the evidence and elected to not pursue charges based on the Federal Principles of Prosecution, which include whether the person’s conduct constitutes a Federal offense and whether the admissible evidence will be sufficient to obtain and sustain a conviction.”
Setting the Bar
Solyndra made history in March 2009, when it received DOE conditional approval of a $535 million loan—the first ever loan guarantee funded by the American Recovery and Reinvestment Act—to build a second commercial manufacturing plant.
But in September 2011, just weeks after Evergreen Solar and Spectrawatt filed for bankruptcy, the company followed suit. The company blamed its failure on the global oversupply of solar panels and “severe compression of prices,” saying its advanced thin-film copper indium gallium diselenide technology and manufacturing expertise wasn’t enough to compete in the near-term with the resources of larger foreign manufacturers.
The new report reveals that the OIG launched its investigation in 2010 after discovering an apparent inconsistency between Solyndra’s loan guarantee application and a publicly available Form S-1, Registration Statement Under the Securities Act of 1933, which the company had filed with the U.S. Securities and Exchange Commission. The filing said that Solydra had “framework agreements” with customers, which set volume and price expectations but don’t result in a firm purchase commitment until a purchase order is issued. “In contrast, while seeking the loan guarantee from the Department, Solyndra asserted it had successfully concluded firm sales contracts with its customers with selling price commitments,” the report says.
The investigation showed that Solyndra misled the agency as early as November and December 2008, when it told the DOE in a meeting that it had four sales contracts totaling more than $1.4 billion over the next five years. The report says “a different narrative” emerged, however, after the investigation brought to light that at least one of those four customers had told the company before the DOE meeting that unless Solyndra gave it a significantly discounted price, it would not buy more panels.
Meanwhile, red flags raised at the DOE were ignored, the report says. A consultant, for example, muted the significance of an amendment to a sales contract essentially voiding a customer’s obligation to buy more panels. Later, the consultant said in a loan monitoring memorandum that the contract still required the customer to buy more than $300 million worth of product from Solyndra.
“Knowledge of this change for even a single contract customer could have provided the Department with a strong indicator that the market acceptance of Solyndra’s product was not nearly as robust as that portrayed by Solyndra’s executives,” says the report.
In another incident about a week before loan closing, for example, a loan office employee e-mailed two senior DOE loan officials, calling attention to an unrelated DOE report that projected the cost of rooftop solar systems would be $2.50/W in 2015—much lower than the $3.19/W projected for Solyndra’s product. “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 OIG.
“While not the focus of the investigation, we were mindful of the concerns that had been raised regarding possible political pressure applied in the Solyndra decision-making process,” the report says. “Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications. They suggested the pressure was based on the significant interest in the program from Department leadership, the Administration, Congress, and the applicants.”
The report also alleges that Solyndra’s pattern of false and misleading statements extended to interactions with Congress. In June 2011, for example, it gave the House Energy and Commerce Committee a document that said it was making “excellent progress,” even though it was on track to miss a planned revenue metric by 15%.
Meanwhile, two months before it declared bankruptcy, it hired a D.C. firm to burnish its image, sending letters to Congressional leaders with misleading information that painted a positive picture of the firm.