[See also: Obama’s ‘Crony-Gate’ Scandal Widens — Billions Now Under Scrutiny]
By Andrew McCarthy, NRO
The solar-energy company was a con game.
The Solyndra debacle is not just Obama-style crony socialism as usual. It is a criminal fraud. That is the theory that would be guiding any competent prosecutor’s office in the investigation of a scheme that cost victims — in this case, American taxpayers — a fortune.
Fraud against the United States is one of the most serious felony offenses in the federal penal law. It is even more serious than another apparent Solyndra violation that has captured congressional attention: the Obama administration’s flouting of a statute designed to protect taxpayers.
Homing in on one of the several shocking aspects of the Solyndra scandal, lawmakers noted that, a few months before the “clean energy” enterprise went belly-up last week, the Obama Energy Department signed off on a sweetheart deal. In the event of bankruptcy — the destination to which it was screamingly obvious Solyndra was headed despite the president’s injection of $535 million in federal loans — the cozily connected private investors would be given priority over American taxpayers. In other words, when the busted company’s assets were sold off, Obama pals would recoup some of their losses, while you would be left holding the half-billion-dollar bag.
As Andrew Stiles reported here at NRO, Republicans on the Oversight and Investigations subcommittee say this arrangement ran afoul of the Energy Policy Act of 2005. This law — compassionate conservatism in green bunting — is a monstrosity, under which Leviathan, which can’t run a post office, uses your money to pick winners and losers in the economy’s energy sector. The idea is cockamamie, but Congress did at least write in a mandate that taxpayers who fund these “investments” must be prioritized over other stakeholders. The idea is to prevent cronies from pushing ahead of the public if things go awry — as they are wont to do when pols fancy themselves venture capitalists.
On the Energy Policy Act, the administration’s malfeasance is significant, but secondary. That’s because the act is not a penal statute. It tells the cabinet officials how to structure these “innovative technology” loans, but it provides no remedy if Congress’s directives are ignored.
The criminal law, by contrast, is not content to assume the good faith of government officials. It targets anyone — from low-level swindlers to top elective officeholders — who attempts to influence the issuance of government loans by making false statements; who engages in schemes to defraud the United States; or who conspires “to defraud the United States, or any agency thereof, in any manner or for any purpose.” The penalties are steep: Fraud in connection with government loans, for example, can be punished by up to 30 years in the slammer.
Although Solyndra was a private company, moreover, it was using its government loans as a springboard to go public. When the sale of securities is involved, federal law criminalizes fraudulent schemes, false statements of material fact, and statements that omit any “material fact necessary in order to make the statements made . . . not misleading.” And we’re not just talking about statements made in required SEC filings. Any statement made to deceive the market can be actionable. In 2003, for example, the Justice Department famously charged Martha Stewart with securities fraud. Among other allegations, prosecutors cited public statements she had made in press releases and at a conference for securities analysts — statements in which she withheld damaging information in an effort to inflate the value of her corporation and its stock.
That’s exactly what President Obama did on May 26, 2010, with his Solyndra friends about to launch their initial public offering of stock. The solar-panel company’s California factory was selected as the fitting site for a presidential speech on the virtues of confiscating taxpayer billions to prop up pie-in-the-sky clean-energy businesses.
By then, the con game was already well under way. Solyndra had first tried to get Energy Act funding during the Bush administration, but had been rebuffed shortly before President Bush left office. Small wonder: Solyndra, as former hedge-fund manager Bruce Krasting concluded, was “an absolute complete disaster.” Its operating expenses, including supply costs, nearly doubled its revenue in 2009 — and that’s without factoring in capital expenditures and other costs in what, Krasting observes, is a “low margin” industry. The chance that Solyndra would ever become profitable was essentially nonexistent, particularly given that solar-panel competitors backed by China produce energy at drastically lower prices.
Yet, as Stiles reports, within six days of Obama’s taking office, an Energy Department official acknowledged that the Solyndra “approval process” was suddenly being considered anew. Eventually, the administration made Solyndra the very first recipient of a public loan guarantee when the Energy Act program was beefed up in 2009 — just part of nearly a trillion dollars burned through under the Obama stimulus.
For a while after Solyndra tanked, the administration stonewalled the House subcommittee’s investigation, but we now know that minions in the Energy Department and the Office of Management and Budget had enormous qualms about the Solyndra loan. They realized that the company was hemorrhaging money and, even with the loan, would lack the necessary working capital to turn that equation around. Yet they caved under White House pressure to sign off in time for Vice President Joe Biden to make a ballyhooed announcement of the loan in September 2009. An OMB e-mail laments that the timing of the loan approval was driven by the politics of the announcement “rather than the other way around.”
Why so much pressure to give half a billion dollars to a doomed venture? The administration insists it had nothing whatsoever to do with the fact that Solyndra’s big backers include the George Kaiser Family Foundation. No, of course not. George Kaiser, an Oklahoma oil magnate, just happens to be a major Obama fundraiser who bundled oodles in contributions for the president’s 2008 campaign. Solyndra officers and investors are said to have visited the White House no fewer than 20 times while the loan guarantee was being considered and, later, revised. Kaiser, too, made several visits — but not to worry: Both he and administration officials deny any impropriety. You’re to believe that the White House was just turning up the heat on OMB and DOE because Solyndra seemed like such a swell investment.
Except it didn’t seem so swell to people who knew how to add and subtract, and those people weren’t all at OMB and DOE. Flush with confidence that their mega-loan from Uncle Sam would make the company attractive to private investors, Solyndra’s backers prepared to take the company public. Unfortunately, SEC rules for an initial public offering of stock require the disclosure of more than Obama speeches glowing with solar power. Companies that want access to the market have to reveal their financial condition.
In Solyndra’s case, outside auditors from PricewaterhouseCoopers (PWC) found that condition to be dire. “The company has suffered recurring losses from operations, negative cash flows since inception, and has a net stockholders’ deficit,” the PWC accountants concluded. Even with the gigantic Obama loan, Solyndra was such a basket case that PWC found “substantial doubt about its ability to continue as a going concern.”
The “going concern” language is not boilerplate. As Townhall finance maven John Ransom explains, it is a term of art to which auditors resort when there is an extraordinary need to protect themselves and the company from legal liability. Angry investors who’ve lost their shirts tend to scapegoat the loser company’s accountants. In truth, even if the accountants affixed a neon “going concern” sign to the company’s financial statements, investors would have no one but themselves to blame. But it is unusual: The language is absent from the statements of many companies that actually end up going bankrupt. Auditors reserve it for the hopeless causes — like Solyndra.
With no alternative if they wanted to make a play for market financing, Solyndra’s backers disclosed the auditors’ bleak diagnosis in March 2010. The government had thus been aware of it for two months when President Obama made his May 26 Solyndra speech — the speech Solyndra backers were clearly hoping would mitigate the damage.
As president, Obama had a fiduciary responsibility to be forthright about Solyndra’s grim prospects — in speaking to the American taxpayers whose money he had redistributed, and to the American investors who were about to be solicited for even more funding. Instead, he pulled a Martha Stewart.
The president looked us in the eye and averred that, when it came to channeling public funds into private hands, “We can see the positive impacts right here at Solyndra.” He bragged that the $535 billion loan had enabled the company to build the state-of-the-art factory in which he was then speaking. He said nothing about how Solyndra was continuing to lose money — public money — at a catastrophic pace. Instead, he painted the brightest of pictures: 3,000 construction workers to build the thriving plant; manufacturers in 22 states building an endless stream of supplies; technicians in a dozen states constructing the advanced equipment that would make the factory hum; and Solyndra fully “expect[ing] to hire a thousand workers to manufacture solar panels and sell them across America and around the world.”
Not content with that rosy portrait, the president further predicted a “ripple effect”: Solyndra would “generate business for companies throughout our country who will create jobs supplying this factory with parts and materials.” Sure it would. The auditors had scrutinized Solyndra and found it to have, from its inception, a fatally flawed business model that was hurtling toward collapse. Obama touted it as a redistribution success story that would be rippling jobs, growth, and spectacular success for the foreseeable future.
It was a breathtaking misrepresentation. Happily, it proved insufficient to dupe investors who, unlike taxpayers, get to choose where their money goes. They stacked what the administration was saying against what the PWC auditors were saying and wisely went with PWC. Solyndra had to pull its initial public offering due to lack of interest.
But fraud doesn’t have to be fully successful to be a fraud, and this one still had another chapter to go. As the IPO failed and the company inevitably sank in a sea of red ink, Solyndra’s panicked backers pleaded with the administration to restructure the loan terms — to insulate them from their poor business judgment, allowing them to recoup some of their investment while the public took the fall.
It should go without saying that the duty of soi-disant public servants is to serve the public. In this instance, the proper course was clear. As structured, the loan gave the public first dibs on Solyndra’s assets if it collapsed, and, as we’ve seen, the law requires it. There was no good reason to contemplate a change.
In addition, as Andrew Stiles relates, OMB had figured out that there was no economic sense in restructuring: Solyndra was heading for bankruptcy anyway, and an immediate liquidation would net the government a better deal — about $170 million better. The case for leaving things where they stood was so palpable that OMB openly feared “questions will be asked” if DOE proceeded with an unjustifiable restructuring. So, with numbing predictability, the Obama administration proceeded with an unjustifiable restructuring. In exchange for lending some of their own money and thus buying more time, Solyndra officials were given priority over taxpayers with respect to the first $75 million in the event of a bankruptcy — the event all the insiders and government officials could see coming from the start, and that hit the rest of us like a $535 billion thunderbolt last week.
The administration’s rationalization is priceless. According to DOE officials, the restructuring was necessary “to create a situation whereby investors felt there was a value in their investment.” Of course, the value in an investment is the value created by the business in which the investment is made. Here, Solyndra had no value. Investors could be enticed only by an invalid arrangement to recoup some of their losses — by a scheme to make the public an even bigger sap.
The word for such schemes is fraud.
— Andrew C. McCarthy, a senior fellow at the National Review Institute, is the author, most recently, of The Grand Jihad: How Islam and the Left Sabotage America.
I think you mentioned it in an earlier thread some time back; I’ll probably lay hands on it sometime soon. My thanks for the lead.
Thanks to you and the infamous 78% of American Jews.
Dweller is right. The Democrats gage success by how many are dependent on government. The Republicans gage success on how few people are dependent on government.
Dweller, please buy and read the new book Reckless Endangerment by Pulitzer Prize winning journalist Gretchen Morgenson, which details how the Democrats starting with Bill Clinton who created, protected and defended the fundamentally flawed social engineering program to spread the wealth that collapsed as the financial crisis, so you can counter any poppycock on this issue.
This administration (and the Demo Party more generally) encourages it. It NEEDS large numbers of people to be dependent on the State for sustenance.
The higher the number of slaves on the plantation, the greater the influence in the halls of power.
I told you already, Yamit, I never supported the bail-outs: any of them.
Don’t think so. There’s certainly more than enough blame to go around — but market speculation serves a legitimate function, and G-S should stay buried.
No fear of that happening, my man. I learned long ago to take the MSM with a grain of salt. Nobody does my thinking for me — and nobody does my research for me either.
Furthermore, unlike Malcolm (and, it seems, yourself as well), I discovered — quite early in life — that “the oppressed” and “the oppressors” have a funny way of turning out to be the same people
— and that “hate” is a luxury an objective mind cannot afford.
But back on-point: The financial crisis was most directly set in motion by the mortgage debacle, and as I observed in an earlier thread [last month]:
Well, Yamit, given the crisply delineated, divergence of opinion between us in these kinds of matters, it’s clear enough that ONE of us is “brainwashed” — and no “maybes” about it.
We all know you don’t care, but the rest of us do because “taxing the rich” DECREASES revenues to the Treasury, INCREASES deficits, DECREASES economic growth and INCREASES unemployment rates. These effects may be desirable for a saboteur, but not for the rest of us. In the US the top 10% of income earners already pay 70% of the income taxes whereas the bottom 47% pay no taxes.
Typical poppycock talking points from the far left loon fringe. Obama’s approval ratings are continuing to decline. Most Americans want to be rich someday, not to tear down those who are rich. The list of who is rich changes constantly over time as fortunes wax and wane.
More ignorant poppycock. He did the exact opposite – he promised to be a post-partisan and post-racial president – and 53% of the electorate, including 78% of American Jews – bought this bullshit even though he had a history of using race and partisanship in Chicago’s corrupt politics.
I have always said that Yamit makes my points better than I could. He pretends to support Israel while working even harder then Hamas to weaken the Israeli-American alliance that sustains and underwrites Israel’s survival. He pretends to have a monoply on the truth and then we see him here use as a source a George Soros web site dedicated to mis-information about the US.
In any honest discussion on Obamanomics – which one cannot assume when Yamit is involved – it is the US income tax situation that is relevent, not what local and state taxes are that pay for local and state services and infrastructure.
Here are the facts on who pays US income taxes according to the National Taxpayers Union which is not funded by George Soros:
http://ntu.org/tax-basics/who-pays-income-taxes.html
dweller I believe you have been Brainwashed,at least Maybe?
The Lie About Who Pays America’s Taxes
Who Pays? A Distributional Analysis of the
Tax Systems in All 50 States
dweller major cities with poverty rates of over 25%
America’s Fastest-Dying Cities
dweller: Seems you are one of those that Malcom X warned about when he said: “‘If you’re not careful the newspapers will have you hating the oppressed and loving the people doing the oppressing.’”
dweller says lo Tignov?
Those that created and are directly responsible for the economic collapse of America and even possibly the entire global economy are the same ones who not only are not penalized or punished for their perfidy but have increased their wealth up to 5 times what it was before 2007. It is the American midle class who have borne the brunt of their economic maleficence aided and abetted by the political elites who in all probability take their marching orders from those who own them those same 1 per centers.
Those that abolished Glass–Steagall Act, are largely responsible and should be tried in a court of law and then hung, shot , gassed or injected, a garrote is also nice to imagine.
Glass–Steagall Act must be reinstated yesterday.
dweller says lo Tignov:
Right!
The Richest 0.1% Have Launched A War On Us – It’s Time To Fight Back And Hold These 400 Billionaires Personally Responsible For Our Economic Crisis
“Over 46 million Americans are currently relying on food stamps to feed their family, over 50 million can’t afford health care, 62 million have zero or negative net worth and 64% of Americans have less than $1000 saved. As the economic downturn begins to accelerate once again, the majority of the population, which has been struggling for over three years now, is going to be pushed to a breaking point.
Meanwhile, in this time of national crisis, as we keep hearing calls for “shared sacrifice,” tens of trillions of dollars are consolidated within the hands of the economic top one-tenth of one percent of the population. This unprecedented consolidation of wealth continues unabated, as we now have the most severe inequality of wealth in American history. US millionaire households now have over $46 trillion in wealth, yet only one-tenth of one percent of the population makes over $1 million per year.
Let me be clear, I don’t fault a person for being rich. If you are great at what you do and work hard, you should be financially better off than people who slack off, are bad at what they do and don’t work hard. Almost all Americans agree with that. However, the problem we currently have is that people who are extremely bad at what they do are now all too often the people who have the most money. For example, the very people who caused this economic crisis have profited off of it and are now among the richest people in the world.
The reality of our current crisis is that we now have an aristocracy in this country that lives beyond the rule of law. They have used their wealth to rig the government and the economy. Through campaign finance, lobbying and the revolving door between Washington and the most powerful global corporations, the world’s richest people have now effectively rigged the system against hardworking Americans. This economic crisis is the result of a deliberate systemic looting engineered by the global financial elite. To attempt to dismiss this reality as some unproven conspiracy theory is to display a stunning level of ignorance.”
I agree Lo Tignov; Question is who is stealing from whom?
Wall Street Aristocracy Got $1.2 Trillion in Secret Loans
Audit: Fed gave $16 trillion in emergency loans
Record Breaking Poverty in America: 52.8 Million and Growing; 46 Million on Food Stamps; 34 Million in Need of Work; Over 1 Million Deaths Annually; World’s Largest Prison Population
lo tignov. . . .
They are taxed. Their federal income taxes account for 80 percent of all federal revenues. (Yes, you read that right; not a typo. 80%.)
“[W]hy should you care”?
You might as well ask: “What do you have against stealing from the rich? Unless you are yourself, why should you care?”
Unless you can clearly establish that the wealth of the rich is a direct, inevitable and irreversible cause of other people’s poverty, then to take it from them is nothing short of robbery.
Furthermore, from the standpoint of sheer mathematics, even if you were to confiscate all of the assets (not merely tax their income, but take everything they have) from everybody grossing upwards of $200 K per year — assuming they would stand still & let you — it STILL wouldn’t generate enough revenue to cover the US deficit. There simply aren’t enough of such persons.
And make no mistake about it:
Should the precedent be established that you can take another bite out of a small group of wage earners this way, it will then be that much easier — when that bite proves insufficient (as it most surely will) to pay the bill — to take another bite out of the next larger (and less wealthy) group, and then the next. . . .
What goes around, boyz-&-gurlz
— comes around. Think about it.
That has the distinct air of wishful thinking.
Don’t know what you’ve been smoking, Yamit, but your links fail to support your assertion.
The truth is that class warfare has “legs” only among the public-sector unions, the MSM and the ivory-tower, university ding-a-lings; in other words, the kooky wing of the Demo’s. The “overwhelming majority of Americans” reject the proposition — and that’s a fact.
Bilgewater.
It’s based on a lot of ENVY.
“You cannot strengthen the weak by weakening the strong.
You cannot help small men by tearing down big men.
You cannot help the poor by destroying the rich.
You cannot lift the wage earner by pulling down the wage payer.
You cannot keep out of trouble by spending more than your income.
You cannot further the brotherhood of man by inciting class hatreds.
You cannot establish security on borrowed money.
You cannot build character and courage by taking away a man’s initiative and independence.
You cannot help men permanently by doing for them what they could and should do for themselves.”
— William J. H. Boetcker, 1916 (often attributed, erroneously, to Abraham Lincoln)
What do you have against taxing the rich? Unless you are yourself, why should you care? I would be concerned not about the amt. of taxes but the use of the taxes accrued to governments. Like the trillions used for immoral and un-winnable wars. Personally I have no more loyalty to the wealthy than than they have to anyone else. I don’t care about the wealth but the power that wealth influences the political social and economic wellbeing of the state and thus all of it’s citizenry. The people have the power to mitigate some of that power by reducing it’s influence in reducing their wealth.
Class warfare may be an Obama ploy ( No president has enriched the wealthy more than Obama) but it has legs and the support of the overwhelming majority of Americans in both parties and could level the playing field for Obama in 2012. To joke about it is to deny the power of the message that is resonating and will continue, unless the Republicans adopt it, thereby removing a serious weapon in the Obama political arsenal.
Taxing financial transactions on Wall Street is gathering support in high places.
Let Wall Street Pay for the Restoration of Main Street Bill
Obama used race successfully in 2008 and Class warfare might do it again mainly because it’s based on a lot of truth.
What’s the difference between BB and Livni? Gender? Naw. 🙂
Impeachment is not fundamentally a judicial process (notwithstanding the surface form of it)
but a political one
— and there are not presently sufficient votes in the Senate to secure a conviction.
A flagrant attempt at generating confusion…
This story had nothing whatsoever to do with Bibi.
Why do you raise the issue of Bibi?
Why are you doing this, Abie?
Why are we surprised? Bush may not have been as “smart” as Obama, but this loan guarantee was obtained by fraud, provided that the news reports are anywhere near accurate. “Cronyism,” Republican, Democratic, Libertarian, Independent,etc., is the thing of which politics is made. Or as the old saying goes, an acquaintance may be an SOB, but the more important thing is, “Is he my SOB?” It has always been this way. I doubt that anyone will suffer any great penalty for this fraudulent act, unless voters are made aware and are upset enough to come to the polls and make corrections in the body politic where they need to be made. The stimulus money was granted to the Executive Branch with little or no strings attached. The executive branch did what they always do…give the money away without adequate safeguards…Solyndra executives may suffer some, and there may be one or two resignations in the energy department when all is said and done. It will be impossible to correct the problem as long as we elect people without integrity who pick people without integrity to run the executive branch of government, and as long as the Congress continues to abdicate it’s responsibility for supervision of the process. Just rememeber, it is our money they are using, and we are going to give them more? The definition of insanity is to keep doing the same thing and expect different results. We deserve to have our tax money spent in a wise, humane, charitable, safe way, and yes, we need to help the poor and unfortunate as much as is reasonably possible. It strikes me that the $541 million guarantee on the loan, now to be reimbursed to the lendor, could have gone a long way toward taking care of the programs which help all people. Maybe, just maybe, we will look beyond cronyism someday, and base the executive decisions on the “facts on the ground.”
An aide burst into Obamas office saying that a comet was going to strike the Mid-West. “What should we do, Mr. President?”
Obama: “Tax the rich.”
We should impeach him and get him outta there. Only Yamit and 54% of American Jews will be disappointed.
What could possibly go wrong if you elect a Chicago thug politician with a muslim name?
Sorry, but Solyndra is not the biggest story out there.The biggest story is that Obama is not only a criminal, but ineligible for the office of president. But who in the media or amongst the Republican presidential hopefuls will admit to that?
problem is that if you get rid of bibi, you get livni
How about the Bibi incompetence?. That man is bent on Israel’s destruction.
When we get rid of Bibi we will know that their is a G-d in heaven and he is on our side. Until then we are cursed to destruction.
This is yet another challenge to the Congress and the government bureaucracy. Will justice prevail against this criminal gang in the White House or not?
Obama has gotten away with so much fraud so far that I fear he may even get away with this new crime.
You don’t look very hard?.
Solyndra Scandal CNBC It was all the fault of Bush? 🙂
Solyndra the ‘tip of the iceberg’? UPI
White House worried about Solyndra “optics” in January
Wrong. Its the biggest story out there.
I don’t see “Solyndra” anywhere in the news. Perhaps, like Mark Twain before him, Obama isn’t dead, after all.