Solyndra Scandal Widens, Chu Pressured to Resign

Published November 19, 2011

A growing number of members of Congress are calling for the resignation of Energy Secretary Steven Chu as the Solyndra scandal widens. Calls for Chu’s resignation have grown more frequent after the Obama administration refused to turn over to the House Energy and Commerce Committee all communications between White House officials and staff relating to the failed solar-panel company that received $535 million in federal loan guarantees.

Favoritism, Lax Oversight

The White House argues it has already handed over 85,000 pages of e-mails (many of them redacted) and it is cooperating fully with the congressional investigation of the bankrupt company. But the explosive content of many of those e-mails has only whetted the appetite of congressional investigators looking into how the administration allowed Solyndra to eat through a $535 million Energy Department loan before going belly-up in late August.

In addition to what appears to have been lax oversight by Secretary Chu’s Energy Department, e-mails released by Republicans on the Energy and Commerce Committee raise serious questions about favoritism shown to one of Solyndra’s leading investors, Oklahoma billionaire and Obama campaign contributor George Kaiser. The e-mails appear to contradict White House claims that no favoritism was shown to the George Kaiser Family Foundation, which invested heavily in Solyndra.

In what is widely considered the most colorful e-mail, Ken Levit, executive director of the foundation, explained to Solyndra board member Steve Mitchell how excited White House officials were about Solyndra during a Feb. 2010 visit company representatives made to the White House. “They about had an orgasm in Biden’s office when we mentioned Solyndra,” Levit reported. 

In another e-mail sent to an undisclosed recipient, Levit wrote about a meeting with Vice President Biden’s staff, saying the latter were “all big fans of Solyndra.” In another e-mail, former Solyndra CEO Chris Gronet described a meeting with the head of the Energy Department’s loan program, John Silver: “So it appears that things are headed in the right direction and Chu’s apparently staying involved in Solyndra’s application and continues to talk up the company as a success story.” 

Obama Insiders Gave Warnings

Solyndra’s close ties to the Obama administration may have blinded Department of Energy (DOE) officials to the company’s precarious financial position. Though the company—once it had secured the $535 million loan in 2009—steadily increased the number of solar panels it manufactured, it sold them at a loss as it tried unsuccessfully to compete with Chinese manufacturers.

While the Energy Department’s Silver assured the Office of Management and Budget (OMB) in a 2010 memo the Solyndra project was “on time and on budget” and Secretary Chu told an interviewer he was “confident” the company would thrive, outside observers were not so impressed. By February 2011, Dan Carol, an Oregon professor who worked on President Obama’s 2008 presidential campaign, was so concerned about the Energy Department mismanaging of the loans he suggested to the White House that Chu be replaced.  

“Secretary Chu is a wonderful and brilliant man, but he is not perfect for the other critical DOE mission: deploying existing technologies at scale and creating jobs,” Carol wrote in an e-mail cited in the Washington Post on Nov. 12. Fearing the worst about the future of Solyndra and the way Chu’s Energy Department had handled the loan, Carol warned, “GOP attacks … are surely coming over Solyndra and other inside DOE deals that have gone to Obama donors and have underperformed. No reason to fuel that coming storm, and believe me it will come.”

Chu and his team will also have to explain how, when Solyndra’s problems could no longer be ignored, DOE struck an unusual deal for the company’s investors to raise $75 million. Under the deal, the investors were put ahead of taxpayers in the event Solyndra went bankrupt. 

Elections Motivated Decisions

Chu and the Obama administration suffered another embarrassment when it was revealed that Energy Department officials pressured Solyndra executives to delay layoffs that were planned for the weeks preceding the November 2010 elections. 

Solyndra, seeking to cut expenses, was preparing to lay off 190 workers in October 2010 but Energy Department officials pressured the company to delay the announcement until after the elections. Solyndra complied and announced the layoffs on the morning after the elections, when the announcement would not hurt the president’s legislative allies. 

Beacon Power Follows Solyndra

DOE will have to answer for other failed federal loan guarantees, as well. Beacon Power, championed by renewable power activists for its promise to develop electricity storage equipment for intermittent renewable power generation, went under shortly after the Solyndra scandal erupted. EnerDel, the parent company of a financially troubled manufacturer of lithium-ion batteries, also went under after accepting federal loan guarantees. 

Predictable Results

“Solyndra is a symbol of what’s wrong with the federal government’s promotion of politically favored energy companies,” said Daniel Simmons, director of state policy for the Institute for Energy Research. “The government spends money on projects that make political sense, not ones that make economic sense. That’s why an ailing company like Solyndra received a half-billion dollars of taxpayers’ money.”

Simmons says “the Solyndra debacle should show everyone that the government needs to get out of the business of picking winners and losers. Let private investors put their money on the line, instead of politicians and bureaucrats placing bets with taxpayer dollars.”

Bonner R. Cohen, Ph. D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.