Solyndra’s funny money flow

September 23, 2011

Solyndra is the bankrupt solar company that received the first Department of Energy loan under the 2009 American Recovery and Reinvestment Act. It also is notorious in that its largest financial backer, George Kaiser, was a substantial supporter of President Barack Obama in 2008 and regularly visited the White House following the election.

Many media outlets have been covering the contacts between George Kaiser, Solyndra officials, administration officials and members of Congress. A rich paper trail will no doubt yield the facts of SolyndraGate. But my interest has always been in following the money trail and trying to understand how the United States, contrary to law, became subordinate to George Kaiser’s Argonaut in bankruptcy court. I previously quoted the applicible law:

US law 10 C.F.R. §609.10(d)(13), the government should have become first in line for repayment (page 2):

Any Guaranteed Obligation may not be subordinate to any other debt and must have a first lien position on all assets of the project and all additional collateral pledged as security for any project debt.

Reuters reported today that the Deputy Secretary of the Department of Energy believed that the subordination of U.S. financial interests to private investors was within the law. From Reuters:

“The statute is quite clear when you are issuing a loan: you have to have priority and we did. The statute is also equally clear that the Secretary of Energy has a responsibility to maximize taxpayer interest,” he added.

When faced with the opportunity to restructure the deal the first time around [February, 2011], Poneman said the department had to make “hard choices” about whether taxpayers would get more return from attempting to keep the company afloat or whether it would be better to let the company go into liquidation.

The decision was made at that time to revise the deal, which Poneman said was “entirely legal.”

The DOE may feel confident that they had legal justification in February 2011, but a private round of $175 million was raised eight months before the February DOE subordination which did not have precedence over the DOE loan. It’s also hard to understand when looking at the funding chart below that DOE officials thought this company could survive in the face of falling solar prices and impossibly high burn rate. The start-up raised and blasted through $1,400,000,000 in about five years. It feels like the DOE made a desperate political decision to keep the company afloat in February, 2011 when they allowed Argonaut step in front of US interests.

The New York Times dismissed the subordination of U.S. government interests with a quote from a restructuring attorney:

Experts said the decision made by the Energy Department in February is routine in the commercial world. “It happens all the time,” said Evan Flaschen, head of the financial restructuring group at Bracewell & Giuliani. But, he said, “A new lender coming in is going to want to be the first money out. The new money would want to be senior.”

This may be true for commercial transactions without government investors but why didn’t the June 2010 private round (line 11 above) have precedence over the DOE loan? I’ve also read many commentators asking where all the money went. The bankruptcy filing lists the top 35 unsecured creditors along with the numerous mechanic liens filed against Solyndra. The company was a financial mess for years and it’s still not clear how the DOE saw a way out for the company in February 2011.

The House Energy Committee’s Subcommittee on Oversight and Investigations is holding a hearing tomorrow to question Solyndra executives. I hope they are able to shed some light on these issues. There are still a lot of unanswered questions in the tale of Solydra.


Solyndra:  Full spreedsheet of fundraising

Media Matters: What The Press Is Getting Wrong About Solyndra

SEC:  Solyndra S-1  filing

Fremont County Records Office: Solyndra Mechanic Lien filings


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KC-Solar listed as Charlotte, North Carolina actually has their billing address in Cambodia. Wonder what they had for an interest in Solyndra?

Posted by Wickedmainah | Report as abusive

The officials have pleaded the fifth, so no new developments came about. News stories have arisen that the Solyndra investors were interested in an IPO to get their investment back. Given the testimonies from the top officials in June of this year about the viability of the company, this would translate into securities fraud. The media needs to call them out on the carpet and demand why they not only lied to Congress, but why did they lie to potential investors. I do understand that financial prospectuses do inflate sales projections, but usually those rosy projections are backed by market analysis, competitive analysis and hard facts.
As for the lame excuse given by the DOE, this Administration continues to do it because they know the media will take their word for it and not challenge their word. This is what happens when our Fourth Estate abandons its role as a protector of the American taxpayer.

Posted by djaymick | Report as abusive

Have you seen the Taj Mahal corporate building of Solyndra? It looks like the Air and Space Museum. How much did they spend on this palatial digs? I think we need to move the UN out there to occupy this building, see the Real Estate in NY and get our 535 million back.
Those two boys better take the 5th because they are going down like Enron boys for violation of the RICO statute and SEC infractions.

Posted by esfritzi | Report as abusive

@ djaymick: “… This is what happens when our Fourth Estate abandons its role as a protector of the American taxpayer.”

The “4th-estate” of lore & legend morphed itself into a 5th-column long ago, some as early as LBJ’s “Great Society”, but any stragglers were caught up in the rush after Woodward & Bernstein’s “All the President’s Men” tell-all on Nixon & Watergate…

J-schools far & wide abandoned all the old standards of objective reporting, and adopted the *teaching* mantra that the only raison d’etre for journalists & journalism is to “change the world”. They have done their very best ever since to make themselves the very heart of “bleeding-heart liberalism”. They have deliberately cultivated their immunity to facts, logic & reasoned debate, much like their long-time partners in social upheaval, the eco-fascists, with whom they have a symbiotic relationship as parasites of the Republic we’ve known and loved… *sigh*

“Cogito, ergo TEA Party!” ~ DeepWheat

Posted by DeepWheat | Report as abusive

Solyndra Landlord Objects to Sale, Demands Names of Bidders for Factory  /solyndra-landlord-objects-to-sale-dema nds-names-of-bidders-for-factory.html

Posted by Cate_Long | Report as abusive

Solyndra executives and board members donated $87,050 to Obama’s campaign.

With this payment, Solyndra obtained a $535,000,000 essentially unsecured taxpayer financed loan. This represents a 6146% return on investment.

Similar rates of return on investment can be seen with George Soros’ support for, yet personal exemption from, the economically horrific Frank-Dodd Soros also contributed to support the Obama Administration imposing an Off Shore USA Oil Drilling Moratorium with low cost federal Loans to Soros’ Brazilian off shore oil exploration.

From an investment perspective, there is no other greater return on earth than payments to the democrat party.

Posted by ACLUmember | Report as abusive

U.S. Seeks Trustee to Oversee Solyndra 052970204226204576603250885667120.html

Posted by Cate_Long | Report as abusive

Wow, Kate Long, great article.I wonder if Reuters has banished you yet…

Posted by CatherineD | Report as abusive