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Treasury officials: Never saw a loan like Solyndra

House Oversight and Investigations subcommittee member Rep. Henry Waxman, D-Calif., holds up a memo on Capitol Hill in Washington, Friday, Oct. 14, 2011, during the subcommittee's hearing on 'Continuing Developments Regarding the Solyndra Loan Guarantee.' House Oversight and Investigations subcommittee member Rep. Henry Waxman, D-Calif., holds up a memo on Capitol Hill in Washington, Friday, Oct. 14, 2011, during the subcommittee's hearing on "Continuing Developments Regarding the Solyndra Loan Guarantee." (AP Photo/Jacquelyn Martin)
By Matthew Daly
Associated Press / October 14, 2011

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WASHINGTON—Two senior Treasury officials said Friday that they had never seen a loan restructuring similar to an Energy Department loan to a failed solar panel maker.

The half-billion dollar loan to Solyndra Inc. was restructured earlier this year so that private investors moved ahead of taxpayers for repayment on part of the loan in case of a default.

Treasury officials Gary Grippo and Gary Burner told a House committee they had never seen that occur in a federal loan. Grippo is a deputy assistant treasury secretary and Burner is chief financial officer at the Federal Financing Bank, which made a $528 million loan to Solyndra in 2009.

The two Treasury officials stopped short of declaring the loan restructuring illegal, as some Republicans allege.

"I can't give you a legal interpretation on that, sir," Burner told Rep. Cliff Stearns, R-Fla.

Grippo, who oversees the financing bank, said it was not Treasury's job to make legal interpretations. Instead, he said Treasury officials correctly raised questions about the deal in a series of emails and memos.

"Our role is to be as helpful as we can," Grippo told the House Energy and Commerce Committee Friday.

Hours later, the panel's Republican majority released an email showing that a White House budget official also questioned the loan restructuring.

"I think they have stretched this definition beyond its limits," the budget official said in a December 2010 email, referring to DOE officials that were advocating the deal.

The release of the email came after a hearing on the Solyndra loan erupted in a partisan skirmish. Rep. Henry Waxman, D-Calif., called the hearing "a rigged proceeding" and a "kangaroo court."

Solyndra, of Fremont, Calif., was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model. President Barack Obama visited the company's headquarters last year, and Vice President Joe Biden spoke by satellite at a groundbreaking ceremony for a new manufacturing plant.

Since then, the company's implosion and revelations that it received preferential treatment from federal officials have become an embarrassment for Obama and a focal point of GOP criticism of the president's green energy policies.

Waxman and other Democrats on the House energy panel criticized Republicans for not allowing the Energy Department to testify Friday and for blocking the release of an Energy Department memo that outlined the legal basis for its decision to restructure the $528 million loan to Solyndra.

"We are going to get only one side of the story. That's no way to run an investigation," said Waxman, a former chairman of the energy committee.

Republicans said Democrats were aware of the hearing terms before it started, but later agreed to enter the Energy Department memo into the record. Energy officials will be called to testify at a later hearing.

Democrats say they want "to get the facts on the table," said Rep. Joe Barton, R-Texas. "That's what we're trying to do."

The three-hour hearing focused on newly released emails that show that the Treasury Department was concerned that the loan restructuring, approved earlier this year, could violate federal law.

Administration officials have defended the loan restructuring, saying that without an infusion of cash earlier this year, Solyndra would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.

Even with the federal help, Solyndra closed its doors Aug. 31 and let all its workers go.

A six-page memo released by the committee Friday outlines the legal basis for the Energy Department's decision to ensure that investors who provided additional funding to Solyndra would be repaid before the federal government if the company defaulted on the loan.

The Feb. 15 memo by Susan Richardson, the loan program's top lawyer, said the restructuring was allowed because a clause preventing private investors from moving ahead of taxpayers only applies to the original loan.

Continuing to block subordination -- the legal term for placing taxpayers' interest second -- is "inconsistent with the statutory scheme" and would make it harder for the government to restructure loans for troubled companies, Richardson wrote.

Under terms of the February loan restructuring, two private investors -- Argonaut Ventures I LLC and Madrone Partners LP -- stand to be repaid before the U.S. government if the solar company is liquidated. The two firms gave the company a total of $69 million in emergency loans. The loans are the only portion of their investments that have repayment priority above the U.S. government.

Argonaut is an investment vehicle of the George Kaiser Family Foundation of Tulsa, Okla. The foundation is headed by billionaire George Kaiser, a major Obama campaign contributor and a frequent visitor to the White House.

Madrone Partners is affiliated with the Walton family, descendants of Wal-Mart founder Sam Walton.

Barton and other Republicans ridiculed the Richardson memo, which Barton likened to a "fairy tale" that allowed DOE officials to do whatever they wanted.

"They basically say, we think we can subordinate it because the secretary of Energy has broad authority to do whatever he wants to do. That's not a real, reasoned legal opinion," Barton said.

He and other GOP lawmakers cited emails from Mary Miller, an assistant treasury secretary, indicating that the deal could violate the law because it put investors' interests ahead of taxpayers. Miller told a top White House budget official that she had advised that any proposed restructuring be reviewed by the Justice Department before it was approved.

"To our knowledge that has never happened," Miller wrote in an Aug. 17 memo.

Rep. Cliff Stearns, R-Fla., called Miller's memo "startling" and said it appears that DOE violated "the plain letter of the law" in approving the restructuring.

Rep. John Dingell, D-Mich., called the GOP claims overstated.

"There was no criminal or serious misbehavior here, there just was some dumbness," Dingell said.


Follow Matthew Daly's energy coverage at