Published — August 31, 2011 Updated — May 19, 2014 at 12:19 pm ET

Obama-backed solar firm collapses after big federal loan guarantee

Outside Solyndra's Fremont, Calif. headquarters. Paul Sakuma/AP

Instead of creating jobs, heralded renewable energy firm puts people out of work. For how much will taxpayers be on the hook?


Solyndra Inc., a renewable energy firm that became a darling of the Obama Administration, shut the doors of its California headquarters Wednesday, raising fresh questions from critics about political favoritism and wasted money in the federal loan program.

The manufacturer of rooftop solar panels opened its doors in 2005, and in 2009 became the first recipient of an Obama administration energy loan guarantee – a $535 million federal commitment that helped minimize the risk to venture capital firms backing the solar start-up. Obama visited the factory last year to herald its future.

“The promise of clean energy isn’t just an article of faith — not anymore,” Obama told Solyndra workers then. “The future is here.”

The government loan guarantee was supposed to spur 1,000 fulltime jobs once Solyndra’s solar plant was fully operating. Instead, the company announced Wednesday it intends to file for Chapter 11 bankruptcy and that 1,100 full and part time employees had been laid off “effective immediately,” without severance. Some said they no longer have health insurance, either.

Now, the company’s collapse is sure to rekindle questions about how well the Energy Department vetted the deal before putting taxpayer dollars on the table – and about whether the public will have to pick up the $535 million tab. The full bill may not be clear until bankruptcy proceedings. How much taxpayers and other creditors recover could depend on the total value of the company’s assets.

The Center for Public Integrity’s iWatch News and ABC News first reported on questions about the Solyndra loan in May, after the Energy Department disclosed it was being forced to restructure its loan package for the company. One of Solyndra’s major investors was George Kaiser, an Oklahoma billionaire who raised between $50,000 and $100,000 for Obama during the 2008 election.

The news reports revealed that DOE had issued a conditional commitment to back Solyndra in 2009 without first receiving full marketing or legal reviews. That shortcut drew the attention of government auditors, who feared the Energy Department was putting taxpayer dollars at risk as it rushed to announce Obama’s maiden energy loan guarantee in March 2009.

The Energy Department itself had boasted of its quick movement in handing Solyndra the highly sought after backing. Energy Secretary Steven Chu had initially set a target of May 2009 to unveil the department’s first loan guarantee, “but today’s announcement significantly outpaces that aggressive timeline. Secretary Chu credited the Department’s loan team for their work accelerating the process to offer this conditional commitment in less than two months, demonstrating the power of teamwork and the speed at which the Department can operate when barriers to success are removed,” the department said then.

Officials at the Energy Department told iWatch News and ABC that it used objective factors in selecting Solyndra and received all due diligence before closing the deal.

President Obama visited Solyndra in May 2010, heralding the company as “leading the way toward a brighter and more prosperous future.” He also cited it as a success story from the government’s $787 billion economic stimulus package. “Less than a year ago, we were standing on what was an empty lot. But through the Recovery Act, this company received a loan to expand its operations,” Obama said at the time. “This new factory is the result of those loans.”

Solyndra and the White House initially estimated that government financing for Solyndra would help create 4,000 jobs.The company had received at least $475 million and created just 585 jobs, according to the most recent figures posted on, which tracks Recovery Act projects. Solyndra argued that it created several thousand temporary construction jobs while its plant was built.

On Wednesday the department released a statement on its web site blaming changing economics in the industry – including a major push by Chinese firms to drive down solar panel prices – for the company’s collapse. “Changing economics have affected a number of solar manufacturers in recent months, including unfortunately, Solyndra, a once very promising company that has increased its sales revenue by 2000 percent in three years and sold more than 1000 installations in 20 countries,” the Energy Department web post states. “As a result, Solyndra now plans to suspend its manufacturing operations and file for bankruptcy protection.”

The department also sought to emphasize that the Solyndra loan guarantee “was pursued by both the Bush and Obama Administrations.”

However it was the efforts of Obama’s energy team that first caught the attention of government auditors.

Last year, the Government Accountability Office issued an unusually blunt assessment of the Energy Department’s loan program, concluding that the department had “treated applicants inconsistently, favoring some and disadvantaging others.” The report did not name companies, but iWatch and ABC disclosed that Solyndra was among those cited for receiving preferential treatment.

The author of the GAO report, Franklin Rusco, said in an interview that Energy Department officials used an opaque process to select loan recipients. He said the agency could not, or would not, explain why some companies were given a quick green light for approval, while others waited years for a response.

“I think it’s problematic,” Rusco said. “I think they need to have a systematic, transparent and equitable process. And I think if they’re not seen to have that, it’s going to create issues, it’s going to create perception problems. And there may be real problems underlying this as well that we haven’t uncovered yet.”

This year, the House Committee on Energy and Commerce launched an investigation into the loan program – with a sharp focus on the guarantee to Solyndra.

On Wednesday, the committee released a statement saying Solyndra’s failing only confirms some members’ fears – and likely comes with a heavy price for taxpayers.

“We smelled a rat from the onset. As the highly celebrated first stimulus loan guarantee awarded by DOE, the $535 million loan for Solyndra was suspect from day one,” said the statement from House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-Fla).

“It is clear that Solyndra was a dubious investment, but DOE doubled down in March of this year and restructured the loan, possibly further increasing taxpayers’ liability. That is a question we want answered. In this time of record debt such disregard for taxpayer dollars cannot be tolerated.”

The committee recently subpoenaed the Office of Management and Budget for thousands of pages of records on the loan guarantee, and the budget office agreed to turn over the records. Its investigation will likely gain even more significance with the news of Solyndra’s financial breakdown.

Just last month, Solyndra President and CEO Brian Harrison came to Washington to meet with members of Congress and journalists to tout the company’s successes.

On Wednesday, the company released a statement citing market conditions for its pending bankruptcy. “We are incredibly proud of our employees, and we would like to thank our investors, channel partners, customers and suppliers, for the years of support that allowed us to bring our innovative technology to market.”

Its statement did not mention the $535 million loan guarantee from the Department of Energy.

“We have always recognized that not every one of the innovative companies supported by our loans and loan guarantees would succeed, but we can’t stop investing in game-changing technologies that are key to America’s leadership in the global economy,” Energy Department spokesman Dan Leistikow wrote Wednesday.

For months before Wednesday’s announcement, iWatch News and ABC News have disclosed significant questions about the DOE’s financing to a company whose financial backers include Obama bundler Kaiser. The Oklahoma oil billionaire has declined interview requests.

Last month, iWatch News reported that Obama’s Office of Management and Budget viewed the loan guarantee as a greater risk to taxpayers than the Department of Energy had. That assessment forced the government to set aside millions more in case of a company default.

The company’s troubles also have caught the attention of some industry analysts, who have said for more than a year that Solyndra would have difficulty competing on a world stage in the solar panel market.

“There’s a lot at stake here, not just for Solyndra,” Shyam Mehta, senior solar analyst at Greentech Media Research, said in a May interview. “This is going to be held up as a cautionary tale if things don’t work out for Solyndra. People are watching very closely from all angles.”

Still, even Mehta was surprised by Solyndra’s rapid fall. In an interview Wednesday, Mehta said he didn’t expect the fall “to unfold so quickly or so soon.”

“It’s been a much speedier kind of unfolding of events than we originally witnessed. We definitely did not expect to see Solyndra go out of business in August 2011,” he said.

With the collapse, Mehta said, key questions resurface: Who from the government was responsible for examining Solyndra’s prospects in the global marketplace? How fully did the U.S. explore potential risks before backing the half billion dollar guarantee?

“All these questions have been asked. And they will be asked, and should be asked, again,” Mehta said.

And now, another question looms: To what extent is the public on the hook with Solyndra’s collapse? The OMB referred calls Wednesday to the Department of Energy. A DOE spokesman did not answer the question.

The San Jose Mercury News described the scene at Solyndra’s California headquarters: “A stream of workers steadily filed out of the building as they lugged boxes packed with their belongings. Security guards steered them to a specific building to receive dismissal notices.”

The newspaper described the experience of one worker, Matthew Henry, who had just purchased a new car and signed a lease on an apartment. Other employees said their health insurance had been canceled. “It’s devastating,” Henry told the Mercury News. “There was no compassion.”

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