Your eyes on California Government

SEPT. 21, 2011

Even with the recent news that bankrupt solar energy company Solyndra received questionable federal loan guarantees, Americans should be demanding, “Show me the money!” While Solyndra appears to have been a black hole of green marketing, the wealthy, politically well-connected investors may just walk away financially intact or better off.

After receiving the $535 million federal loan guarantee in 2009, Solyndra was supposed to have produced 4,000 jobs. Instead, only one month after the approval of the loan in 2009, Solyndra reported to the SEC that the company already accumulated $505 million in losses to date. By September 2011, only two years after receiving the loan, the company filed for bankruptcy and fired its 1,100 employees.

Even where companies that receive government subsidies do create jobs, they do so at such a preposterous cost that the effort cannot be considered successful by any measurement. Government subsidies are nothing more than political favoritism and a way to redistribute wealth — and they certainly don’t work for jobs creation.

The Washington Post reported that the energy department loan guarantee Solyndra received created only one new permanent job for every $5.5 million spent. Given that solar power accounts for less than 1 percent of the electricity generated in the United States, it’s obvious that the love affair with solar power is not just a romantic notion, and is certainly not based on supply or demand.

Green Subsidies Are Bad Investments

Many have been warning that Solyndra and other “green manufacturers” are nothing more than politically motivated, government-funded shell companies — particularly after so many of these green companies received billions of dollars in federally backed loans and stimulus money.

Yet even after warnings from the Office of Management and Budget officials that Solyndra was “NOT ready for prime time,” and that the company was not a good candidate for the half-billion-dollar federal loan, the loan was guaranteed and approved anyway.

Dire warnings from the Government Accountability Office also were ignored. A blistering report from the GAO concluded that the Department of Energy loan program had “treated applicants inconsistently, favoring some and disadvantaging others.”

Follow The Money

In 2009, only nine months into President Barack Obama’s first year, and within 60 days of becoming energy secretary, Steven Chu approved Solyndra’s loan guarantee.  The loan had been fast-tracked to approval, and provided at a ridiculously low quarterly interest rate of 1.025 percent from the Department of Energy.

But nearly all other energy companies that received government guaranteed loans were required to pay interest rates three to four times higher. According to an ABC news report, Solyndra’s loan was “well below that of most energy projects, which ranged from cutting-edge electric car makers to wind and solar ventures.”

Solyndra received this unheard-of deal despite receiving only a “fair” credit rating from Dun & Bradstreet. A “fair” rating is usually a warning sign. D&B ratings vary between “high,” “good,” “fair” and “limited.”

A “New” New Deal

A trip back through history connects the dots for anyone familiar with political favoritism and how politics is funded.

President Barack Obama’s stimulus program has an eerily similar feel to the Works Project Administration (WPA) in the 1930s. With demand for creating work during the Great Depression, the WPA was the largest project of President Franklin D. Roosevelt’s New Deal. The WPA employed millions of unskilled workers for public works projects.

Many argue that Obama’s stimulus program is not much different. Although the “unskilled workers” in Roosevelt’s plan are mostly labor union employees today.

Economists have argued that Obama’s stimulus plan has all along really been about redirecting the taxpayers’ money to certain businesses  and people favored by Democrats. And now with Obama’s reelection bid, stimulus money has been directed at certain regions within the country in order to garner more votes and political contributions.

Roosevelt was also highly criticized that WPA project decisions were politically motivated.

The WPA spent, in total, $11 billion. That include more than $4 billion on highway, road and street projects; more than $1 billion on public buildings; more than $1 billion on publicly owned or operated utilities; and another $1 billion on welfare projects. In inflated 2011 dollars, the total would come to around $190 billion today.

Today, instead of billions, the government is spending trillions of dollars. It’s a well-worn political trick and a sneaky way to shell out taxpayer money to favored businesses, labor unions and special interest groups. These groups will, in turn, make political contributions back to the party in power.

Connecting Fundraisers With the Loan

One of the primary investors in Solyndra, George Kaiser, also was a key campaign contribution “bundler” for Barack Obama during the 2008 presidential campaign for Barack Obama. Kaiser is reported to have raised between $50,000 and $100,000 for Obama’s 2008 Presidential election.

The Center for Public Integrity reported, “One of Solyndra’s major investors was George Kaiser, an Oklahoma oil billionaire who raised large sums of money for Obama during the 2008 election. This raised concerns that politics my have played a role in putting taxpayer dollars at risk in making this loan guarantee.”

It has been widely reported that the loan was used to construct a state-of-the-art robotic production plant. And that Solyndra claimed that they would be hiring 3,000 people during the building process. But there is little information available about the process or the cost of building the production plant.

Where did the money go?

According to the Solyndra website, the company was founded in 2005. In 2006, the Fremont, Calif. headquarters was established. The company began solar panel production in 2007, and shipping panels in 2008. The Website states that, in 2009, Solyndra “Received $535 million DOE loan guarantee for construction of Fab 2” panel product, and “reached $100 million in annual revenues.”

After the infusion of $535 million in federally backed loans, the company should show $100 million in annual revenues.

Vice President Joe Biden made a show-stopping visit to the Fremont plant in 2009. During his speech, he maintained that the jobs created by Solyndra would “allow America to compete and to lead like we did in the 20th century.”

But remember — only one month after the approval of the loan in 2009, Solyndra reported to the SEC that the company already accumulated $505 million in losses to date. Many have asked how Solyndra could claim $100 million in annual revenues, but report millions of dollars in losses to the SEC.

After being notified of the solar company’s losses, in May 26, 2010, Obama made a speech at the Solyndra plant touting it as the poster child of the stimulus package passed by Congress. Obama spoke about Solyndra’s new factory, expected to employ thousands of long-term employees. He called it “a testament to American ingenuity and dynamism.”

Nearly one year later, Solyndra wasn’t making the loan payments and wanted a loan refinance. “In 2011, Solyndra’s CEO communicated with members of Congress, claiming that the company was on sound financial footing and would be able to repay a refinanced loan. DOE had a man attending Solyndra’s meetings, so they should have known whether the CEO was telling the truth. DOE arranged for refinancing,” the Daily Caller reported.

Solyndra’s loan refinance went through in February 2011, re-prioritizing Kaiser’s investment firm Argonaut Private Equity above the Department of Energy as the first in line to be repaid.

Only months after receiving the loan refinancing, in September 2011, Solyndra laid off the 1,100 “long-term” employees and filed for bankruptcy.

But where things get even more strange is how Kaiser’s investment would be allowed by the bankruptcy court to be repaid. Did the Department of Energy allow George Kaiser and other investors to recover their investments before making any attempt to recover the taxpayer-funded $535 million? If so, this is an unheard-of move in bankruptcy court.

With business bankruptcies, all payments made to creditors within the 90 days preceding the bankruptcy filing must be repaid to the debtor’s estate. This is done to prevent preferential payments from being made to favored creditors. It’s a painful process for business creditors who are already owed money by the debtor.

And, investors’ money is long gone by the time a bankruptcy is filed. The questionable loan refinancing putting Kaiser in a position to be guaranteed investment money back should be investigated more closely.

House Investigation

Fortunately, the House Judiciary Committee has requested that the Justice Department appoint a special examiner to investigate the Solyndra bankruptcy.

As for money that Solyndra actually spent, ABC news reported that, of the loan, $519 million was spent, and more than half of that went to a Redwood City-based contractor, Rudolph & Sletten, for plant construction. Interestingly, however, in 2005 Rudolph & Sletten was acquired by Tutor Perini Corporation (NYSE:TPC), one of the country’s largest general contractors, with more than $5.6 billion in annual revenue as of 2008.

Pay-to-play politics is an all-too-common practice in the United States. But the high-level-politics-for-money schemes between the federal government and giant corporations are costing American taxpayers not billions, but trillions of dollars.

– Katy Grimes

Tags: California, California budget, Democrats, Department of Energy, federal government, global warming, government, green jobs, jobs, Katy Grimes, President Obama, regulations, stimulus money, subsidies, Taxes, unions, waste