This Isn’t ‘Lending’ — It’s More Like Looting
Solyndra's unlearned lessons.
October 9, 2011 - 12:08 am
One of the definitions of “loot” as a verb is: “to rob, as by burglary or corrupt activity in public office.”
Excuse the pun, but as bankrupt Solyndra sinks into the sunset, two levels of needed lesson-learning to prevent future looting as just defined are not taking place.
The first lesson should be that there are consequences if you do something extraordinarily dumb, and even more serious consequences if you commit criminal acts. I’d like to be wrong about this, but it looks like those responsible for this debacle will never be brought to account for offenses ranging from colossal incompetence to serious criminal malfeasance. (A convenient low-level scapegoat has resigned, but landed on his feet at a lefty think tank.) Because of this, it’s reasonable to expect that there will be similar future failures, possibly larger in scope.
That Solyndra requires a top-to-bottom forensic audit could not be more clear, both to determine what its executives knew and when they knew it concerning the company’s dreadfully obvious lack of viability, and to determine how much money was drained from it by excessive and possibly fraud-driven spending.
Is the necessary unfettered investigation occurring? The FBI has raided the place, but Solyndra management is stonewalling. With government acquiescence, Solyndra’s key investors moved themselves, possibly illegally, to the front of the line in priority during bankruptcy. One of those investors is a prominent Democratic Party campaign contributions bundler. Eric Holder, Obama’s chief protector, is attorney general. You do the math.
The guess here is that Solyndra’s execs knew that the company had little if any chance of surviving shortly after and possibly even before it began drawing down its loan-guarantee money. Yet they kept drawing and drawing. Why? The explanation seems to go far beyond merely wishing to keep themselves and others employed.
Fundamentally, the company’s business model was terminally flawed. It would have been an embarrassment both to the company and the Obama administration to admit as much. As Grace Wyler at Business Insider explains:
Its unique cylindrical, silicon solar cells were innovative, but only made sense when solar panel prices were high. By the time the Department of Energy (DOE) approved Solyndra’s loan — the first granted by the department’s loan guarantee program — Chinese and Canadian manufacturers with low-cost structures had priced Solyndra out of the market.
Solyndra’s management had to know this. Even if they didn’t tell those in the government who reviewed its loan-guarantee application (and of course they should have), anything resembling decent due diligence should have identified the problem. But, as Wyler notes, due diligence wasn’t a priority: In March 2009, “Solyndra’s loan application … was fast-tracked through the DOE, despite the fact that the department had not completed its review of the company’s financial viability.” The folks at the Office of Management and Budget, which did raise some financial questions about the deal before approving it in September 2009 — after also getting pressure from others in the White House to speed it along — likely did not have the technical or market knowledge to know what DOE could have and should have detected.
Solyndra’s spending spigots were wide open even before the company got its government-guaranteed money. The firm’s S-1 Registration Statement for its withdrawn attempt at an initial public offering, which included the now-infamous “going concern” opinion from PricewaterhouseCoopers, revealed that it had already spent $415 million on property, plant, and equipment by the end of 2009. From the time its $535 million in loan guarantees was approved until it shut its doors, the company spent roughly $300 million more on what was touted as an advanced manufacturing facility; it had hoped to spend $80 million more before repeatedly selling its product at an out-of-pocket loss caused the money well to run dry. All told, the company “invested” over $700 million to make a high-tech yet relatively uncomplicated product: “photovoltaic systems for commercial rooftops.” By comparison, Honda Manufacturing of North America built a complete 1,700-acre automobile assembly plant in Greensburg, Indiana, for $550 million.