A single large political donor visited the White House 16 times as the Solyndra loan was under review.. George Kaiser invested in Solyndra and donated large amounts to the Obama campaign. He needed government guarantees that his investment would not go belly up. In return, Solyndra was submissive to left-wing political pressures. Pressures like delaying the announcement of layoffs until November 3rd, 2010. A delay that Energy Secretary Steven Chu admits that "...people in the loan department would know about it." and "I don't think it is a proper way to do business."
The violation is of the Energy Policy Act of 2005 Sec. 1702 section d(3). It is illegal for Department of Energy loans to allow the taxpayers to be subordinated to other investors. No other Department of Energy loans have allowed new investors to be repayed before taxpayer funding. Here is the actual language of the law:
(1) In general.--No guarantee shall be made unless the
Secretary determines that there is reasonable prospect of
repayment of the principal and interest on the obligation by the
(2) Amount.--No guarantee shall be made unless the Secretary
determines that the amount of the obligation (when combined with
amounts available to the borrower from other sources) will be
sufficient to carry out the project.
(3) Subordination.--The obligation shall be subject to the
condition that the obligation is not subordinate to other
The Obama Department of Energy made Solyndra loans subordinate to other investors including George Kaiser during the restructuring of debt. Democrat Representative Gene Green of Texas' 29th district told Secretary Steve Chu during the hearing that "I don't think the taxpayers should be subordinate to new investors" and "those of us who were on the committee and actually helped draft that law and support that program did not intend that."
A draft legal opinion identifying the legal violation was submitted by law firm (and Department of Energy consultant firm) Morrison and Foster. This opinion was dismissed by General Council of the DOE Scott Harris and Susan Richardson, Chief Council of this loan program. These Obama administration lawyers were of the opinion that the subordination clause only applied to initial loans and not to restructured debt or subsequent loans. This opinion clearly violated the letter and intent of the law, so written requests for a Department of Justice review were ignored. Finally, the DOE decision to illegally subordinate the Solyndra loan via restructuring debt was made PRIOR to preparation of the legal memo advising the Department of Energy.
So why would Secretary Steven Chu play ball with this scam?
1. There is no penalty designated to the violation of the Energy Policy Act of 2005.
2. It is not his money or hard work that was risked and lost.
3. It is green energy, so how can it be wrong?
Link to CSPAN video of hearing.