Politics Trumped Due Diligence in Solyndra Loan Approval
A report issued Thursday by the House Energy and Commerce committee documents the extent to which political concerns trumped due diligence in the Solyndra loan approval. The report shows that the initial announcement of the DOE loan guarantee to the company was scheduled before the loan had even been approved by the Office of Management and Budget. The OMB had just nine days to approve the deal instead of the 28 days it normally takes.
Initially, the White House planned to have President Obama speak by video at the Solyndra DOE loan announcement on September 8, 2009. The plan changed at the last minute and Vice President Biden was offered on September 4th instead. This scheduling, which also included an in-person appearance by Secretary Chu and Governor Schwarzenegger, was made August 25th the same day the Office of Management and Budget began its final review of the loan. Intense pressure was then placed on OMB to get the approval ready in time for the political event. The committee report documents the fact that staff working on the OMB review was well aware of the time pressure and even left uncorrected errors in its review in order to meet the deadline.
On the afternoon of August 27, one OMB staff member in the Budget Review Division informed the Director of that division, Courtney Timberlake, that the credit subsidy model OMB was using to review the Solyndra deal was based on a different recovery scenario than the one submitted by DOE—the OMB model assumed a workout scenario whereas the DOE model assumed liquidation. Although the credit subsidy models assumed different factors, the OMB employee noted that “[g]iven the time pressure we are under to sign-off on Solyndra, we don’t have time to change the model.” Ms. Timberlake replied, “As long as we make it crystal clear to DOE that this is only in the interest of time, and that there’s no precedent set, then I’m okay with it. But we also need to make sure they don’t jam us on later deals so there isn’t time to negotiate those, too.” [page 42]
Kevin Carroll, Chief of the OMB Energy Branch, was so frustrated by the pressure to get the approval done in time for the announcement that he took it up with a member of VP Biden's senior staff:
On August 31, 2009, Mr. Carroll asked [VP Biden’s Domestic Policy Advisor Terrell] McSweeny, “[W]ho schedules announcements and events with the Department of Energy that you folks are participating in? We have ended up in a situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week). We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around.” [page 44]
On September 1st, just three days before the scheduled announcement in California, the OMB staff met to decide whether to approve the DOE loan guarantee to Solyndra. At this meeting, it was noted that Solyndra had not provided the kind of "gold standard" comparison which would justify its market claims:
On the morning of September 1, 2009, OMB staff debated whether DOE had provided sufficient information to answer OMB’s question about Solyndra’s panel efficiency. Although one staff member thought that the company had provided some information to validate their results, he stated, “Solyndra has not commissioned a test which I think is really the gold standard – comparison of the performance of Solyndra vs. regular panel installations at scale on similar roofs. This really should be possible, and I find it disturbing that only modeling results for such a comparison are available.” [page 45]
The OMB granted its approval that evening with a “one notch reduction in the credit rating.” This was to account for the "lack of firm performance data . . . as well as the weakening world market prices for solar generally." Two years later this is exactly the issue that Solyndra would cite as the chief cause of its bankruptcy.
The loan announcement went ahead as planned on September 4th. The CEO of Solyndra, Christian Gronet, wrote to an investor in October 2009saying of the DOE loan,"The Bank of Washington continues to help us!" Here is the video of the announcement event featuring VP Biden: