A Media Matters cross-post on the coverage of the Solyndra bankruptcy by Joceyln Fong and Shuana Theel.
In the rush to cover the bankruptcy of Solyndra, a solar panel manufacturer that received a loan guarantee from the federal government, many news media outlets have misrepresented or omitted key facts.
CLAIM: Bush Administration Rejected Solyndra’s Application
- ABC News: Under Bush administration, credit committee “made a unanimous decision not to offer a loan commitment to Solyndra.” [ABC News, 9/13/11]
- Fox Nation: “Bush Admin. Voted AGAINST Solyndra Loan.” [Fox Nation, 9/14/11]
- FoxNews.com: Bush credit committee “decided ‘not to engage in further discussions with Solyndra.'” [FoxNews.com, 9/14/11]
- America’s Newsroom: “In January of 2009 the Bush Administration considered it. They backed away from it. But then the checks started going out.” [Fox News, America’s Newsroom, 9/16/11]
- Bill O’Reilly: The Bush administration “shut it down. And then as soon as the president, the current president, Obama took office they started it up again.” [Fox News, The O’Reilly Factor, 9/16/11, via Nexis]
- Fox’s David Asman: Bush administration “nixed the loans.” [Fox Business, America’s Nightly Scoreboard, 9/17/11, via Nexis]
- Fox’s Stephen Hayes: “Bush administration “cut off the discussions with Solyndra.” [Fox News, Special Report, 9/15/11, via Nexis]
FACT: [Bush Admin Advanced the Loan and] Same Panel Of Career Officials Approved The Loan Guarantee
Bush Admin. Advanced 16 Projects, Including Solyndra, Out Of 143 Submissions. The Department of Energy’s Loan Guarantee Program was created by the Energy Policy Act of 2005 and expanded by the American Recovery and Reinvestment Act of 2009. At a congressional hearing, Jonathan Silver, the Executive Director of Department of Energy’s Loan Programs Office, testified that the Bush administration’s DOE [Department of Energy] selected Solyndra from 143 submissions to move forward in the process:
SILVER: The 2006 solicitation resulted in 143 submissions. The loan program staff and others at the department reviewed those for eligibility, which is a thinner review than the full due diligence, and recommended 16 applications to file a full application. A dozen did so. Solyndra was one of those. And the department conducted due diligence on all of those…. [House Energy and Commerce Committee, 9/14/11, via Nexis]
Under Bush Admin., The Credit Committee Remanded The Project “For Further Development Of Information.” During the final days of the Bush administration, the Department of Energy’s loan guarantee credit committee, consisting of career officials, said that although the Solyndra project “appears to have merit,” the committee needed more information in several areas before it could recommend approval of a conditional commitment. The committee “remand[ed]” the loan “without prejudice” for “further development of information.” [Credit Committee, 9/9/09, via Huffington Post]
DOE Under Bush Admin. Set Out Timeline For Completing Solyndra Review. After the credit committee remanded the project for further information, officials at the Department of Energy under the Bush Administration developed a schedule for due diligence on the Solyndra project, envisioning completion in March 2009. [Department of Energy, 9/14/11]
In March, The Same Credit Committee Of Career Civil Servants Recommended Approval. As Climate Progress noted, in March 2009, “The same credit committee [consisting of career civil servants with financial expertise] approves the strengthened loan application. The deal passes on to DOE’s credit review board – political appointees within the DOE issue a conditional commitment setting out terms for a guarantee.” [Climate Progress, 9/13/11]
- DOE Official: “It’s The Same Group Of Career Professionals That Were On The First Committee.” In his testimony, DOE’s Silver stated that the credit committee that remanded the project during the Bush administration “is also exactly the same credit committee that then approved the transaction several months later.” He added that the loan guarantee “didn’t close until September and so additional due diligence takes place from the conditional commitment through the close of the loan.” [House Energy and Commerce Committee, 9/14/11, via Nexis]
CLAIM: Email Saying Deal Was “NOT Ready For Prime Time” Was Warning About Financial Risk
- ABC reported that internal emails “show the Obama administration was keenly monitoring the progress of the loan, even as analysts were voicing serious concerns about the risk involved. ‘This deal is NOT ready for prime time,’ one White House budget analyst wrote in a March 10, 2009 email, nine days before the administration formally announced the loan.” [ABC News, 9/13/11]
- CNN claimed “prime time” email showed “some White House budget analysts questioned early on how financially sound Solyndra was.” [CNN, CNN Newsroom, 9/15/11, via Nexis]
- Fox’s Neil Cavuto: “Prime time” email was warning that “the loan could be very risky for taxpayers.” [Fox News, Your World with Neil Cavuto, 9/14/11, via Nexis]
- Wash. Examiner: “Prime time” email showed “some officials in the Obama Administration thought the loan was a lousy idea.” [Washington Examiner, 9/14/11]
FACT: The Email Did Not Voice Any Concerns About Risk Of Loan
Email Concerned Timing Of Announcement, Not The Merit Of The Loan Guarantee. Republicans on the Energy and Commerce Committee released some of the context around this email, which was written by an analyst with the Office of Management and Budget, according to House Republicans. In response to an email about a potential announcement of the Solyndra loan during the President’s visit to California on March 19, 2009, the analyst argued that the presidential announcement should not be made before the loan deal was completed. The email argued that “This deal is NOT ready for prime time” because there were more steps to be completed before the loan guarantee could be finalized — namely, OMB had to review the credit rating and Solyndra needed to raise an additional $200 million in private captial. [House Energy and Commerce Republicans, 9/14/11]
Obama Did Not Announce A Deal During His March California Trip. On March 19, 2009, Obama visited California and held a town hall meeting in Los Angeles. He did not announce the Solyndra deal. The conditional commitment to Solyndra was issued on March 20 and announced by Energy Secretary Steven Chu in a press release. [Department of Energy, 3/20/09]
VP Announcement Came After Loan Guarantee Was Finalized In September. The Solyndra loan guarantee was formally issued by DOE on September 3, 2009. On September 4, Vice President Joe Biden announced the deal via satellite at the groundbreaking of the plant along with DOE’s Chu and Arnold Schwarzenegger, who was the Governor of California at the time. [Department of Energy, 9/4/09; Contra Costa Times, 9/5/09]
OMB Reviews Credit Subsidy Cost; It Does Not Select Loan Guarantee Recipients. From the Congressional testimony of Jeffrey Zients of the Office of Management and Budget:
ZIENTS: Pursuant to Section 503 of FCRA, OMB reviews and must approve credit subsidy cost estimates for all loan and loan guarantee programs, including the credit subsidy cost estimates generated by DOE for the Title XVII program, to ensure that costs are accounted for appropriately. The Title XVII program provides relatively large-dollar guarantees and because their characteristics, terms, and risks vary greatly from project to project, OMB assesses cost estimates on a loan-by-loan basis. This is the same approach OMB uses for loans or loan guarantees of other similar programs that involve large deals or varied structures, such as those administered by the Overseas Private Investment Corporation and the Export-Import Bank.
In performing its statutory role under FCRA, OMB delegates the modeling of credit subsidy costs to agencies, and issues implementing guidance to ensure consistent and accurate estimates of cost. For new programs or programs issuing their first loans or loan guarantees, such as the Title XVII program in 2009, OMB works closely with agencies to create or revise credit subsidy models. Based on these models, OMB reviews and exercises final approval authority over credit subsidy costs to ensure that the costs of direct loans and loan guarantees are presented, and reflect estimated risks, consistently across Federal agencies so that taxpayer funds are invested in a prudent and effective fashion. By contrast, the final decision on whether to issue the loan or guarantee rests with the agency implementing the applicable program – DOE in the case of Title XVII. [House Energy and Commerce Committee, 9/14/11, emphasis added]
CLAIM: Obama Fundraiser George Kaiser Is Personally Invested In Solyndra
- ABC’s Brian Ross: “One of Solyndra’s principal investors, George Kaiser, who was a big Obama fund-raiser, visited the White House at least four times before the loan’s final approval.” [ABC, World News with Diane Sawyer, 9/1/11, via Nexis]
- AP: “One of the company’s investors, George Kaiser of Oklahoma, helped raised money for Obama’s presidential campaign.” [Associated Press, 9/8/11, via CBS News]
- CNN’s Lisa Sylvester: “Records show the main private investor in Solyndra is a man named George Kaiser, a key fund-raiser for Mr. Obama.” [CNN, CNN Newsroom, 9/15/11, via Nexis]
- CBS’s John Blackstone: “The biggest investor in Solyndra is Oklahoma billionaire George Kaiser, a major fundraiser for the Obama presidential campaign.” [CBS Evening News, 9/14/11, via Nexis]
- Politico: “One of Solyndra’s primary investors is George Kaiser, a bundler who raised $50,000 for Obama’s campaign in 2008.” [Politico, 9/15/11]
- LA Times: “Solyndra is backed by one of Obama’s key fundraisers, George Kaiser of Tulsa.” [Los Angeles Times, 9/2/11]
- Michelle Malkin: “One of the hugest investors in the massively failed enterprise just happens to be one of Obama’s largest funders, a man named George Kaiser … You got crony capitalism.” [Fox News, Hannity, 9/14/11, via Nexis]
- Weekly Standard: “It’s probably not surprising to learn that one of Solyndra’s key investors, Tulsa billionaire George Kaiser, was an Obama campaign bundler.” [Weekly Standard, 9/12/11]
FACT: Kaiser’s Nonprofit Foundation Made The Investments, Along With Conservative Walton Family
George Kaiser Family Foundation Made Investment Through Argonaut Ventures. Tulsa World reported:
The filing indicates that Argonaut Ventures, an investment arm of the Tulsa-based foundation [George Kaiser Family Foundation], holds almost 39 percent of Solyndra’s parent, 360 Solar Degree Holdings Inc.
In an emailed statement to the Tulsa World, a representative of the George Kaiser Family Foundation said the organization made the investment through Argonaut.
“George Kaiser is not an investor in Solyndra and did not participate in any discussions with the U.S. government regarding the loan,” the statement said. “GKFF invests in a globally diversified portfolio across many different asset classes.” [Tulsa World, 9/7/11]
- Argonaut Is A “Wholly Owned Subsidiary” Of The Foundation. A spokesperson for the George Kaiser Family Foundation clarified that Argonaut is a “wholly owned subsidiary of the foundation” and that money made or lost by Argonaut was made or lost for the foundation. [Phone conversation, 9/19/11]
Second Largest Investor In Solyndra Was A Major Donor To Republicans. The Los Angeles Times reported:
Although Solyndra’s biggest private investor was a venture capital fund affiliated with Kaiser, its second largest investor was a fund linked to the Walton family, of Wal-Mart renown, a major donor to Republicans. Kaiser has denied he ever spoke to the Obama administration about the Solyndra loan.
The chief executive of Solyndra, Brian Harrison, is a registered Republican, according to the San Jose Mercury News. [Los Angeles Times, 9/13/11]
Politico: Solyndra Had “Close Ties To Both Political Parties.” Politico reported:
In fact, Solyndra’s top brass, its board and its paid lobbyists bring close ties to both political parties.
President and CEO Brian Harrison is a registered Republican. Billionaire George Kaiser, an Obama campaign bundler, was one of the venture capitalists who poured private funding into the clean technology startup.
And another venture capital firm, Madrone Capital Partners, which is tied to the GOP-leaning Walton family, was one of 10 firms that helped Solyndra raise about $144 million in November 2008.
In Washington, Victoria Sanville, one of the company’s two in-house lobbyists, had previously worked for four House Republicans: Sam Graves of Missouri, Peter Roskam of Illinois, John Sweeney of New York and George Gekas of Pennsylvania.
When it comes to campaign contributions, Solyndra officials gave much more to Democrats while still giving money to some Republicans, according to a POLITICO analysis of donation data compiled by OpenSecrets.org. [Politico, 9/14/11]
CLAIM: Administration Restructured Loan To Favor Kaiser Rather Than Taxpayers
- AP Headline: “Obama admin reworked Solyndra loan to favor donor.” [Associated Press, 9/16/11]
- ABC’s Brian Ross: “Even though administration officials knew the company was facing bankruptcy, they agreed to restructure the loan so that in case the company did fail, the first $75 million recovered would go not to taxpayers but to the private investors.” [ABC, World News with Diane Sawyer, 9/14/11, via Nexis]
- New York Times reported that Argonaut alone provided $69 million in new loans, before adding a correction. [New York Times, 9/16/11]
- Fox’s Andrea Tantaros: “The real scandal” is “that George Kaiser, a bundler for Obama, put $75 million of his own money into the company … and he got preferential treatment over the taxpayers in bankruptcy court.” [Fox News, The Five, 9/16/11, via Nexis]
FACT: Walton’s Firm Also Part Of The Deal, Which DOE Expects Will Result In Higher Recovery For Taxpayers
Memo: Walton Family’s Firm Was Part Of The Restructuring Deal. A memo released by the House Energy and Commerce Committee states that both Argonaut Venture Capital, the fund tied to Kaiser’s foundation, and Madrone Capital Partners, which is tied to the Walton family, “negotiated the terms and conditions of an agreement to restructure the Solyndra loan guarantee”:
In the fall of 2010, DOE told Solyndra that, due to the company’s financial problems, the department would refuse its request for a loan disbursement unless Solyndra obtained additional capital. Solyndra, DOE, and two of Solyndra’s lead investors — Argonaut Venture Capital and Madrone Capitol Partners –began negotiations to restructure the Solyndra loan guarantee agreement. On November 3, 2010, Solyndra announced that it was closing its older manufacturing facility, resulting in the layoff of 135 temporary employees and approximately 40 full-time employees.
From December 2010 through February 2011, DOE, Solyndra, and two of its investors, Argonaut Venture Capital and Madrone Capitol Partners, negotiated the terms and conditions of an agreement to restructure the Solyndra loan guarantee. Throughout this process, DOE consulted with OMB about the proposed terms and conditions of this arrangement.
On February 23, 2011, the parties signed an agreement to restructure the Solyndra deal. Under that agreement, Solyndra’s investors agreed to a $75 million credit facility, with the option of a second $75 million. DOE agreed to extend the term of Solyndra’s loan guarantee from seven to 10 years, and to postpone the first repayment installment by one year, from 2012 to 2013. In addition, the agreement provided that, in the event of the company’s liquidation before 2013, the investors have the senior secured position with respect to the first $75 million recovered. DOE has the second senior secured position with respect to the next $150 million recovered in liquidation. If Solyndra had not liquidated or declared bankruptcy by 2013, the investors would have lost their senior secured position to DOE. [House Energy and Commerce Committee, 9/12/11]
AP: “Two Private Investors” Provided The Emergency Loans. Despite its headline, “Obama admin reworked Solyndra loan to favor donor,” the AP article stated that Madrone Partners LP was also part of the deal:
Under terms of the February loan restructuring, two private investors — Argonaut Ventures I LLC and Madrone Partners LP — stand to be repaid before the U.S. government if the solar company is liquidated. The two firms gave the company a total of $69 million in emergency loans. The loans are the only portion of their investments that have repayment priority above the U.S. government. [Associated Press, 9/16/11]
DOE Determined “That The Facility Would Be More Valuable, Even In The Event Of A Future Liquidation, Once Complete.” In his testimony before the House Energy and Commerce Committee, Director of DOE’s Loan Programs Office Jonathan Silver stated that “DOE determined, as part of the restructuring, that the facility would be more valuable, even in the event of a future liquidation, once complete.” He went on to say that “DOE determined that restructuring the loan guarantee gave the U.S. taxpayer the best chance of being repaid”:
SILVER: Unsuccessful in its efforts to raise additional equity, Solyndra approached DOE, in late 2010, asking DOE to increase its loan commitment. DOE refused, indicating that any additional funds would need to come from other sources. Solyndra then sought to secure a new $75 million emergency loan from its current equity investors. The proposed new loan provided terms that were expected to be more favorable to taxpayers than any other financing options that were available to the company at that time. As is typical in cases where distressed companies seek new debt financing, the new financing would have priority, in the event of liquidation, over the company’s existing debt–including the DOE loan guarantee (the investors’ almost $1 billion of original equity investment was, and remains, subordinated to the debt owed to the government).
DOE faced a choice: whether to (1) refuse to allow the restructuring, thereby ensuring that Solyndra would close its doors immediately, and that the U.S. taxpayer would recover only a modest amount of the loan; or (2) allow the company to accept the emergency financing, thereby giving it and its almost 1,000 workers a fighting chance at success, and the government a higher expected recovery on its loan.
The decision was not an easy one, and it was made only after significant analysis and deliberation, using the same sort of tools and rigor that private sector lenders use in such scenarios. DOE had commissioned a new and comprehensive analysis of Solyndra’s prospects in the global solar market (conducted by Navigant, a leading market research firm), and undertook — with the aid of experienced financial consultants — a complete review of the company’s financial condition, business plan, and assets.9 Both the market study and the financial modeling suggested that the company’s value as a going concern was greater than what the government was likely to recover in liquidation at that time. Accordingly, DOE determined that restructuring the loan guarantee gave the U.S. taxpayer the best chance of being repaid on the loan. [House Energy and Commerce Committee, 9/14/11]
DOE Expects Recovery of Taxpayer Money To Be Larger Due To Restructuring. During the hearing, John Dingell said: “I would note that the government’s chance of recovery from that reorganization are better both in amount and certainty than if we had seen Solyndra go into bankruptcy earlier. Is that right?” Silver replied:
SILVER: We expect so. We’ll have to see what happens, actually, in the bankruptcy process. But we have a completed an operating plant fully fitted out, inventory and all kinds of things that did not exist during the first restructuring. [House Energy and Commerce Committee, 9/14/11]
NY Times: Experts Said DOE’s Decision To Restructure “Is Routine In The Commercial World.” From a September 16, New York Times article:
Bankruptcy experts said Friday that the normal pattern was for the management of a bankrupt company to be given first crack at developing a plan, one that would either distribute ownership of the company to its creditors, in some agreed-upon proportion, or end in liquidation. The Energy Department believes that Solyndra has valuable patents.
Experts said the decision made by the Energy Department in February is routine in the commercial world. “It happens all the time,” said Evan Flaschen, head of the financial restructuring group at Bracewell & Giuliani. But, he said, “A new lender coming in is going to want to be the first money out. The new money would want to be senior.”
Martin Bienenstock, of Dewey & LeBoef, said that letting in another lender was often “the smart thing to do even though it’s painful,” because at worst, it would increase the company’s scrap value. [New York Times, 9/16/11]
VentureWire: DOE “Squeezed The Terms Of Its Loan In Its Favor.” VentureWire reported in March:
Making matters worse for the venture backers, the federal government has squeezed the terms of its loan in its favor, in hopes of increasing the chance of repayment even as the loan is being scrutinized. The Department of Energy could change some terms of the loan with each increment that it puts forward.
Solyndra agreed to change the terms of the federal loan so that it is now secured by all the assets of the company, including Solyndra’s intellectual property. Previously, the loan was secured only by the solar panel factory it is helping fund. This is also true of the loan provided by private investors. [Dow Jones VentureWire, 3/3/11, via Factiva]
CLAIM: It Was Obvious Before Loan Guarantee Was Granted That Solyndra Would Fail
- Diane Sawyer: “Did a half billion dollars of your taxpayer money go to a company certain to fail? And why?” [ABC, World News with Diane Sawyer, 9/14/11, via Nexis]
- Investor’s Business Daily: “Solyndra was not a good investment and the White House knew it.” [Investor’s Business Daily, 9/14/11]
- Fox’s Trace Gallagher: “[M]any experts say there was nothing about this company that was at all promising.” [Fox News, America Live, 9/15/11]
- David Webb on Fox: Solyndra “was never viable.” [Fox Business, America’s Nightly Scoreboard, 9/15/11, via Nexis]
- Forbes op-ed: “Few, if any, lenders thought that giving [Solyndra] money was a very good idea.” [Forbes.com, 9/13/11]
FACT: Solyndra Was Seen By Many As Promising
Solyndra Raised $1 Billion In Private Capital. Time noted that “in addition to government loan guarantees, Solyndra also scored over $1 billion in private capital–including from GOP-friendly investors like the Walton family of Wal-Mart.” [Time, 9/15/11]
WSJ Ranked Solyndra As The Top U.S. Clean Tech Company. In 2010, the Wall Street Journal ranked Solyndra the top clean-tech company with the “capital, executive experience and investor know-how to succeed in an increasingly crowded field.” The “research firm VentureSource (owned by NewsCorp., which also owns Dow Jones & Co., publisher of the Journal) calculated the rankings, applying a set of financial criteria to some 350 U.S.-based venture-backed businesses in clean technology.” [Wall Street Journal, 3/7/10]
WSJ Also Ranked Solyndra In Top Five “Next Big” Venture-Backed Companies. The Wall Street Journal ranked Solyndra number five in a list of the “top 50 venture-backed companies.” The rankings were calculated based on “the track record of success for the venture-capital investors who sit on the company’s board (Board Ranking); the amount of capital raised by the company over the last three years, in comparison to its peers (Total Equity Ranking); the track record of success for the company’s founders and chief executive (Executive Ranking);” “the recent growth in the value of the company (Valuation Ranking)” and the rankings of Dow Jones venture capital reporters and editors. [Wall Street Journal, 3/9/10]
MIT’s Technology Review Chose Solyndra As One Of The World’s 50 Most Innovative Companies. The Technology Review evaluated companies based on their “business model[s], strategies for deploying and scaling up its technologies, and the likelihood of success.” [Technology Review, 2/23/10]
Analyst Cited Solyndra As A Company That Could Have A “Breakthrough Around Cost And Efficiency.” From an April 2009 San Jose Mercury News report:
Craig Irwin, an energy analyst with Merriman Curhan Ford in San Francisco, agrees the current slowdown in the solar industry ”will filter out the most innovative companies and really help promote the next generation of leaders” to produce lower cost solar technologies.
“As the economic equation is really squeezed, people want to see better performing (solar) panels and lower costs,” he said.
Irwin cited Fremont-based Solyndra as a company he believes has some “very interesting technologies that could allow a real breakthrough around cost and efficiency.” [San Jose Mercury News, 4/17/09, via Nexis]
Reuters: Venture Capitalists Point To Solyndra As One Of The Top 10 Companies “Ripest” To Go Public. Reuters reported in August 2009:
An informal poll of venture capitalists and others pointed to six privately held companies as the ripest for acquisition or readiness to go public, out of 34 cited in industries ranging from alternative energy to social networking.
For now, the Silicon Valley Six say they intend to keep growing rather than agreeing to be acquired or go public during the recession.
The top four are business social network LinkedIn, solar panel maker Solyndra, smart grid company Silver Spring, and Zynga, a casual games company whose products run on social networks like Facebook. [Reuters, 8/19/09, via CNNMoney]
Market Conditions Shifted Significantly from 2009 to 2011. A Bloomberg News report noted that Solyndra had “advantages that were more important in 2009 when it received a $535 million U.S. loan guarantee to build a factory” than they are now, noting that the price of the silicon-based panels with which Solyndra was competing “has fallen 46 percent since then.” The article also quoted Julian Hawking of Abound Solar Inc., who stated: “When Solyndra started up it was a completely different time for the industry. Nobody expected the huge drop in polysilicon prices.” [Bloomberg, 9/14/11]