Solyndra Was Asked to Delay Layoff News Till After Midterms, Memo Says

WASHINGTON — The Energy Department asked the Solyndra solar equipment company to delay an announcement about impending layoffs until after last year’s midterm elections, according to a memoby the Republican staff of the House subcommittee that will call the energy secretary to testify Thursday about a government loan to Solyndra.

The Republican memo quotes from an e-mail written by a staff member at Argonaut, a venture capital firm that was a major investor in the company, that says of the Energy Department, “They did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd.” The midterm election was Nov. 2.

“Oddly they didn’t give a reason for that date,” the committee staff quotes the e-mail as saying. The e-mail itself was not released, and no government e-mail requesting a delay has been found.

A spokesman for the Energy Department, Damien LaVera, asked about the e-mail, did not dispute the report, which he said referred to the timing of a press release. But, he added, “as the 180,000 pages of documents that the Department of Energy turned over to the committee indicate, the department’s decisions about this loan were made on the merits, based on extensive review by the experts in the loan program — and nothing in this Republican committee memo changes that.” The memo makes two other points that, if confirmed, would support the Republicans’ position that the $535 million loan guarantee was rushed through and handled badly.

One is on the question of how the government gave away its place as first creditor in line in case of a liquidation. Federal law requires that when the government is owed money, it is the first creditor. But as Solyndra’s financial situation worsened, the private investors came forward with a new $75 million loan, and under an agreement that the Energy Department consented to, that debt became “senior” to what was owed the government.

Republicans on the committee argue that before approving the arrangement, the Energy Department should have referred the question to the Justice Department.

Energy Department officials have said in testimony that while the law requires the government debt be senior at the time the loan is made, it allows more senior debt to be incurred later. And letting Solyndra borrow more money from other sources increased the possibility that it would survive and earn revenues that could pay back the loan, the officials said. (They turned out to be wrong; the company ran out of money at the end of August, and is now being liquidated.)

According to the Republican staff report, the Office of Management and Budget, part of the White House, initially believed that the loan modification would cost the government money and was not permissible, but later changed its mind. The reason for the turnaround was not made clear in the Republican memo.

The memo also referred to a news item carried by Dow Jones newswires on July 7, 2009, when the company and the department were in the late stages of negotiations over the loan guarantee, in which Energy Secretary Steven Chu is quoted as saying that the Solyndra loan guarantee was imminent, and that “the loan is theirs, as soon as they get the additional capital that’s required by statute.”

But according to the Republican memo, a staff member in the Energy Department’s Loan Program office wrote in an e-mail that he had “no idea” where Dr. Chu got information about an increase in equity, but that “the conclusion that ‘the loan is theirs’ doesn’t help our negotiations.”