Treasury officials testify on controversial Solyndra loan

McClatchy NewspapersOctober 14, 2011 

WASHINGTON — Congressional Republicans who question whether the Energy Department broke the law in the way it handled a loan for the California solar company Solyndra called in two senior Treasury Department officials Friday, but the officials didn't provide any evidence of illegal doings.

The hearing, by the investigations panel of the House Energy and Commerce Committee, focused on how the Energy Department restructured a loan in February, when Solyndra was in financial trouble. Two private companies agreed to lend Solyndra $75 million, as long as they'd get their money back first if Solyndra failed and had to be liquidated.

The federal government had made a $535 million loan guarantee to Solyndra in 2009. The agreement on the restructuring meant that taxpayers would be second in line for repayment.

"I and other members of this subcommittee have continuously questioned the legal basis for this unprecedented decision," said the panel's chairman, Rep. Cliff Stearns, R-Fla.

"It's clear to me the Department of Energy violated the law when they agreed to subordinate taxpayers' money to private investors, some of whom appear to have been heavy contributors to President Obama's campaign," said Rep. Joe Barton, R-Texas.

Republicans held Friday's hearing to follow up on the release of emails from a Treasury Department official, Assistant Secretary Mary Miller, who wrote in August that the Energy Department hadn't responded to Treasury's requests for information about Solyndra.

Miller also said in the email, which was written to an official in the White House Office of Management and Budget, that her department's lawyers thought the Energy Department wasn't proceeding legally when it allowed the second, private loan to get repayment priorities over the federal loan.

Stearns said those emails showed that senior officials in the administration had concerns about the legal basis of the loan restructuring and the Energy Department had ignored them.

The Republican-controlled Energy and Commerce Committee also released an email Friday that was written Dec. 15, 2010, before the Energy Department restructured the loan.

The email had the sender line blacked out, but the committee said in a news release that it was from senior officials at the White House Office of Management and Budget. The message said there were some questions from OMB staffers about the legality of the Energy Department's plans to give priority for repayment to the private investors.

Miller didn't testify Friday, but two of her subordinates did. One was Gary Grippo, who oversees a policy staff that makes recommendations on government borrowing and lending and also oversees the Federal Financing Bank, which made the government loan to Solyndra.

Grippo testified that the Department of Energy had consulted with his department over the terms of the loan, as it was required to do. He said the Treasury Department didn't have the authority to approve or reject the loan, but could raise questions in a consulting capacity.

He said the Treasury Department hadn't given a legal opinion about the loan restructuring. He said it wasn't his department's responsibility to tell the Energy Department how to follow the energy law. Instead, he said, his department "flagged the issue for them" and made suggestions.

Energy Department spokesman Damien LaVera said in an email to reporters Friday that officials in the department's loan program and the agency's top lawyers had analyzed the restructuring before it proceeded and determined that it was legal and didn't require a review by the Justice Department.

LaVera said the department was trying to protect the taxpayers by making it possible for Solyndra to get a new loan and stay afloat.

The other Treasury official at the hearing was Gary Burner, a 28-year veteran of the department and the chief financial officer of the Federal Financing Bank.

Stearns asked Burner whether he'd ever seen a similar case in which taxpayers' money was put second after commercial companies for repayment when loans went bad. Burner said he had not.

At one point sparks flew at the hearing.

Rep. Henry Waxman, D-Calif., complained that the investigation was being conducted unfairly.

"It is a rigged proceeding," Waxman said. He complained that Energy Department officials weren't asked to explain their rationale for how they'd handled the loan restructuring, and he accused Republicans of withholding a key Energy Department memo.

"That's a lie!" countered Rep. Michael Burgess, R-Texas.

Waxman said he saw no evidence of illegal actions by government officials, "just a bad investment decision."

Solyndra declared bankruptcy in September.

Stearns agreed to release the memo and said Energy officials would testify at a later hearing.

The memo, dated Feb. 15, was from Susan Richardson, the chief counsel of the loan programs office at the Energy Department, to the department's top attorney.

Richardson argued that the department's decision to agree that the private investors would be paid back first was permitted under the 2005 Energy Policy Act. A nearly identical copy of the memo was sent to Energy Secretary Steven Chu.

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