House Energy Committee: Obama’s Solyndra bailout illegal

The House Energy and Commerce Committee reports the Department of Energy’s decision to move Solyndra’s wealthy investors ahead of taxpayers in the restructuring of the solar company’s $535 million loan guarantee violated the law.

According to the committee’s findings, DOE had already agreed on the terms of the restructuring and the preferential treatment of private investors before conducting a legal analysis of whether its actions were in compliance with the law. DOE’s legal justification hinged on the definition of the word “is.”

As detailed in today’s Washington Examiner:

The House Energy and Commerce Committee released a report today on the Energy Department’s decision to subordinate taxpayers to private investors in the ill-fated Solyndra project. That is, the taxpayers would have to wait in line behind the private investors and let them recoup all of their losses first. Only after that could taxpayers could get any money back – assuming there would be any money to recoup at this point. In this case, that would be a reported $328 million of the $335 million federal loan guarantee to Solyndra.

This is significant because the plain language of the department’s own rules for loan guarantees states that taxpayers must not be subordinate and instead must come first. The committee’s report argues that Energy Department officials made a spur of the moment decision to violate this standard as part of a desperate attempt to keep the company afloat, then scrambled after the fact to justify their action..

…Why did the administration go to such lengths to help these private investors recoup their loses first? Administration officials have argued it was necessary to attract private capital to support the company. But they may have had another motivation. Argonaut is the investment vehicle The George Kaiser Family Foundation. Through it GKFF owned a 35% stake in Solyndra. Despite being called a foundation, GKFF is not a nonprofit in the conventional understanding of the term, but an exotic variation that allows the wealthy to park their assets tax-free. The foundation’s namesake is a major fundraiser of President Obama’s. He was often a guest in the White House and even discussed Solyndra with officials there.

In any event, the Energy Department officials then worked to produce a legal opinion that would justify this decision to put taxpayers behind private investors. That proved difficult because other administration officials at Treasury Department and the Office of Management and Budget were not on board with this.