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Originally published October 7, 2011 at 10:05 PM | Page modified October 7, 2011 at 10:18 PM

Feds were warned about Solyndra loan

Energy Department officials were warned their plan to help a failing solar company by restructuring its $535 million federal loan could violate the law, according to newly obtained emails from within the Obama administration.

The Washington Post

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WASHINGTON — Energy Department officials were warned their plan to help a failing solar company by restructuring its $535 million federal loan could violate the law and should be cleared with the Justice Department, according to newly released Obama administration emails.

The emails show Energy Department officials moved ahead anyway with a deal that would repay company investors before taxpayers if the company defaulted. The emails show for the first time concerns within the administration about the legality of the Energy Department's extraordinary efforts to help Solyndra, the California solar company that went bankrupt Aug. 31.

The FBI raided Solyndra last month, shortly after it closed.

The records provided Friday by a government source also show that an Energy Department stimulus adviser, Steve Spinner, pushed for Solyndra's loan despite having recused himself because his wife's law firm did work for the company. Spinner, who left in September 2010, did not respond to requests for comment.

The documents offer new evidence of disagreement between officials at the DOE and officials at the Treasury Department and Office of Management and Budget (OMB), where questions were raised about the carefulness of the loan-vetting process used to select Solyndra and the special help it was given as its finances deteriorated.

The Solyndra controversy has escalated with each new release of documents to a Republican-led House energy subcommittee investigating the matter. President Obama defended the Energy Department on Thursday, saying its decisions were made by career professionals.

A DOE spokesman, Damien LaVera, said Friday that agency officials had listened to Treasury's advice to consult the Justice Department on the loan restructuring but felt otherwise: "Ultimately, DOE's determination that the restructuring was legal was made by career lawyers in the loan program based on a careful analysis of the statute."

The emails show Mary Miller, an assistant Treasury secretary, wrote to Jeffrey Zients, deputy OMB director, expressing concern the Energy Department had not asked Treasury to review the loan restructuring as required. She said the deal could violate federal law because it put investors' interests ahead of taxpayers' and she had advised it should be reviewed by Justice.

"To our knowledge that never happened," Miller wrote in an Aug. 17, 2011, memo to the OMB.

In February, the restructuring was approved by Energy Secretary Steven Chu. Company executives said they needed a quick cash infusion to save the company, and private investors agreed to contribute $75 million if loan-repayment terms were modified.

Solyndra ran out of money anyway and declared bankruptcy, leaving 1,100 employees out of work.

The Treasury Department's general counsel had concluded the renegotiated loan violated the law because it allowed private investors to be first in line for repayment in case of a default. Those private investors include investment funds linked to George Kaiser, a billionaire and Obama fundraiser. Kaiser has said he had no involvement in the loan.

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