By Melinda Rose, Senior Editor
WASHINGTON, Sept. 23, 2011 — Two top executives from defunct solar company Solyndra invoked their Fifth Amendment rights under the Constitution against self-incrimination Friday morning during a hearing of the House Energy and Commerce Subcommittee on Oversight and Investigations. The executives refused to answer questions as part of the subcommittee's investigation into Solyndra's bankruptcy filing after receiving a $535 million government loan just two years ago.
In 2009, California-based Solyndra was the first company to receive Department of Energy (DoE) loan guarantee funds from the stimulus package.
On Sept. 6, Solyndra announced it was laying off more than 1100 employees and filing for bankruptcy (See Solyndra Files for Chapter 11). Two days later, the company was raided by the FBI and agents from the DoE's Office of Inspector General.
In its bankruptcy filing, Solyndra revealed that it owes lenders, including the federal government, $783.8 million. Its top creditor outside of taxpayers is specialty glass maker Schott North America Inc., to which it owes nearly $7.7 million.
The company also owes money to other photonics industry companies, including Rofin-Sinar, Coherent, Edmund Optics, Newport Corp., CVI Laser, Ocean Optics, Linos Photonics and Jenoptik Laser Technology, according to Optics.org.
On Friday, both Solyndra President and CEO Brian Harrison and Senior Vice President and CFO William G. Stover Jr. sat stone-faced through most of the one-hour-plus hearing, mainly speaking only to assert their Fifth Amendment rights. Their counsel had previously informed the subcommittee that the pair would not testify.
"The company is not aware of any wrongdoing by Solyndra officers, directors or employees ... [and] is cooperating fully with the office of the United States Attorney for the Northern DIstrict of California in its investigation," Solyndra's lawyer said.
In Solyndra's filing in US Bankruptcy Court, Stover said the company's financial difficulties were in part the result of a glut of cheap solar panels on the market, especially from Asia, as well as the reduction or elimination of solar incentives, especially in Europe.
House Republicans have pounced on the issue, saying that the DoE and the Office of Management and Budget (OMB) were aware of these market concerns during their review of the loan guarantee but approved it anyway. They also raised questions about the February 2011 restructuring of the original Solyndra agreement. The loan restructuring was necessary because the company was almost out of cash by late fall 2010, when DoE negotiations with Solyndra and two of its main investors took place.
The new agreement allows Solyndra investors to have priority over the government with respect to the first $75 million recovered if the company went bankrupt, something that directly violates the Energy Policy Act of 2005, House Republicans say. In a legal opinion, DoE counsel said the new agreement was permissible under the act.
In a Sept. 14 hearing by the House Subcommittee on Oversight and Investigations, Chairman Cliff Stearns, R-Fla., said Solyndra's financial troubles became "increasingly severe" only six months after the government loan closed, with an independent auditor issuing a statement that its recurring losses from operations, negative cash flow since inception and net stockholders' deficit "raise substantial doubt about its ability to continue as a going concern."
Today's hearing was convened to examine what Solyndra's executives knew about the company's financial condition and how it represented that condition to the DoE, the White House and members of the committee, Stearns said.
"Only two months ago, Solyndra CEO Brian Harrison met with me in the committee offices," Stearns said this morning in his opening remarks. "He looked me in the eye and assured me that everything was just fine and the company was on track to become cash flow positive."
Stearns said Harrison went on to say that the company was making excellent progress, it was meeting all its cost and performance milestones, and that revenues were projected to nearly double in 2011. He said the CEO should have known then that the company was on the brink of financial collapse.
Ranking subcommittee member Rep. Diana DeGette, D-Colo., said that she and Energy and Commerce Committee ranking member Henry A. Waxman, D-Calif., have asked Stearns to convene hearings to assess whether US policies and incentives are adequate to ensure that US manufacturers can compete in the global clean energy market.
"We've already heard testimony in our investigation that China's share of the solar market has jumped from six percent in 2005 to 54 percent just six years later," DeGette said. "And we've heard that half of the 10 largest solar panel manufacturers are now based in China."
Rep. Frank Upton, R-Mich., Energy and Commerce Committee chairman, likened the Solyndra episode to the 1963 Great Train Robbery in England that netted about $7.5 million. "It appears that we have a great heist of over half a billion dollars," he said.
Several Democratic members of the committee accused Republicans of using the Solyndra case as an excuse to kill green energy policies, citing a bill passed by the Republican-led House on Thursday to cut the DoE loan guarantee program, which expires Sept. 30, and other renewable energy projects.
"This is a shortsighted mistake that will undermine our ability to complete in the global energy sector," said Rep. Jan Schakowsky, D-Ill.
As of Sept. 16, the DoE has made commitments to 42 energy projects under the program, sparking private investment of more than $40 billion that will create tens of thousands of jobs nationwide, said the Solar Energies Industry Association, the national trade association of the US solar energy industry.
The association is eager to distance the rest of the industry from Solyndra. Earlier this week, the association released its quarterly US Solar Market Insight report showing that more than 100,000 Americans are employed at more than 5000 companies in the solar industry, twice as many as in 2009.
To watch the subcommittee hearing, visit: http://www.c-spanvideo.org/program/Solyndr