Time and again, the government handed breaks to Solyndra Inc., an upstart California solar panel firm backed by a major supporter of the president.
And, time and again, benefits flowed from Washington despite warning signs that the government's $535 million investment was a risky bet, at best.
The bill for that risk is yet to fully come due, as a criminal investigation expands into whether the company misled the government about its financial health in securing its half billion dollar reward, and in landing a favorable loan refinancing earlier this year.
At the least, taxpayers will lose a chunk of their investment in bankruptcy proceedings. More than 1,100 Solyndra workers already have faced consequences; when the company collapsed Aug. 31, they were fired on the spot.
A deeper political storm has now formed and shows signs of intensifying. The president is facing broadsides about Solyndra from the GOP, criticism sure to escalate as the 2012 election nears. Obama touted the company in a visit to its plant last year, two months after Solyndra's own auditors raised striking questions about the company's viability. Wednesday, a House panel investigating the loan is summoning witnesses, and Democrats have joined Republicans in asking questions.
An iWatch News dissection of the financing - based on records, interviews and documents obtained under the Freedom of Information Act - shows that Obama's Energy Department pressed forth in the face of abundant red flags in awarding its maiden green energy financing. Money approved - even as outside rating agencies assessed the company as speculative. Public announcements heralding the project - before all due diligence was in hand. A presidential visit - even as company auditors questioned Solyndra's future. A rock bottom interest rate and refinancing - for a company far from a sure bet in the industry.
From the start, evidence suggests the government-backed venture was far from a sure thing.
"The general perception was that that company was not going to stay in business for a long time," said M.J. Shiao., an analyst in solar markets for GTM Research, a firm of analysts and strategic consultants focused on the clean technology industry, which has been championed by President Obama. "They were both a technology risk in that this was a new technology," he added, "and they were a finance risk as well."
First signs came in 2008, as Solyndra, then just three years old, pushed ahead with its application for government backing to build a new plant to produce its unique solar panels. An outside rating agency, Fitch, gave Solyndra a B+ credit rating that August. Two months earlier, in June 2008, Dun & Bradstreet issued a credit appraisal of the company. Its assessment: "Fair."
Those are not top of the line scores. Fitch Ratings spokeswoman Cindy Stoller said she could not discuss the Solyndra review specifically, but said of a B+ rating: "It's a non-investment grade rating." She provided a company ratings definition, showing that B+ falls between a "highly speculative" B and "speculative" BB.
Asked about those ratings, and how significantly the department viewed the risk, energy officials said Monday the department conducted "extensive due diligence" on the application, which included consideration of the Fitch rating.
"We believed the rating, which is used to inform our analysis of potential risks associated with the loan, was appropriate for the size, scale and innovative nature of the project and was consistent with the ratings of other innovative start-up companies," said spokesman Damien LaVera.
Seven months after the Fitch rating, Solyndra landed its prized support. In March 2009, Energy Secretary Steven Chu announced that his department's first guarantee, of $535 million, was going to Solyndra. The loan would be provided by the Treasury Department's Federal Financing Bank, with the Energy Department guaranteeing the issue in case of default.
Bottom line: Taxpayers were bankrolling the young company's venture.
For the green energy movement, this was a vital moment. Obama came to office vowing to boost innovative technologies, a pitch with a two-pronged benefit of aiding the environment and the economy. Chosen as the first recipient of that energy backing, Solyndra was in the spotlight. The half-billion-dollar loan allowed Solyndra to build its so-called "Fab 2" plant and rapidly escalate production of its panels.
An Energy Department press release issued that March made clear how quickly the new administration moved to issue that support.
"Secretary Chu initially set a target to have the first conditional commitments out by May - three months into his tenure - but today's announcement significantly outpaces that aggressive timeline," the Energy Department statement said. "Secretary Chu credited the Department's loan team for their work accelerating the process to offer this conditional commitment in less than two months, demonstrating the power of teamwork and the speed at which the Department can operate when barriers to success are removed."
Yet that quickened pace came with a costly shortcut. The department made the announcement before final marketing and legal reviews were in hand - an omission Government Accountability Office auditors chided, in a 2010 report, as the type of shortcut that showed favoritism and put taxpayers at risk.
The GAO did not name the companies involved, but iWatch News and ABC News, as part of an ongoing exploration of the connections between green energy contracts and politically active investors, disclosed in May that Solyndra was among those case studies cited in its report.
"We believe that all the steps of the due diligence process, especially these main reports, are obviously very important to be able to appropriately assess risk," Frank Rusco, the GAO auditor who authored the 2010 report, said in an interview. "It confers a benefit for them but also potentially opens the door to risk to taxpayers. There's a question about how well the department could have assessed the risk. Those steps are very important."
Recurring losses and negative cash flows
Analysts have long had questions, too, most notably about Solyndra's cost to manufacture its unusual cylindrical tubes - costs the industry found were significantly greater than competitors' more traditional panels.
"If you were going to a bank for a loan for your large solar insulation, the last thing you want is to use a product from a company you don't think is going to stay in business. When you add those two risks together, Solyndra had a really uphill battle in front of it," said clean technology business analyst Shiao.
In interviews over the last several months, Energy officials have said they felt they were on firm ground in issuing the backing. Notably, they said, they received all due diligence in hand before closing the loan in September 2009. They said no applicants received favorable treatment, Solyndra included.
And, the Energy Department has noted that "sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment."
Buoyed by its government support, Solyndra made plans to go public. In December 2009, the company filed a registration statement with the Securities and Exchange Commission in preparation for an initial public offering of stock.
Yet in March 2010 came a dose of reality. Solyndra's own auditor, PricewaterhouseCoopers LLP, issued a report that questioned the company's viability.
"The Company has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders' deficit that, among other factors, raise substantial doubt about its ability to continue as a going concern," PricewaterhouseCoopers wrote.
Two months later, in May 2010, President Obama traveled to Fremont, California to visit the new plant being built with taxpayer dollars.
Making no mention of the company's tenuous financial standing, Obama instead praised Solyndra as a symbol of progress.
"The true engine of economic growth will always be companies like Solyndra," he said to rounds of applause from company workers, executives and California political leaders.
His visit, like the guarantee, was a major boost to a company founded in 2005. Scores of innovative companies seek government funding, but only a fraction snare that prize. Those that do separate themselves from the pack - and often lure in new investors, helping them even more.
Solyndra already had a heavyweight behind it: George Kaiser, an Oklahoma oil billionaire who raised at least $50,000 for Obama's 2008 campaign and is a frequent visitor to the White House. Through his corporate affiliates, Kaiser has long stood as Solyndra's single largest investor. When Solyndra filed bankruptcy papers earlier this month, it said Kaiser's Argonaut Ventures owned 39 percent of its parent company. Kaiser has not responded to interview requests since March.
Solyndra said political connections were not a factor. Administration officials noted that the company's initial application was filed under Bush, though it won fast-track approval from the Obama administration. Some top company executives and key investors, including Madrone Capital Partners, an investment firm affiliated with Wal-Mart Stores chairman Rob Walton, have supported GOP candidates.
In June 2010, a month after Obama's visit, Solyndra canceled its IPO. To outsiders, that was clear evidence the company continued to stand on shaky ground.
Soon, its top investors - and the Department of Energy - would rescue it once more.
In February 2011, Kaiser and other investors raised $75 million to push the company forward. At the same time, the DOE refinanced its loan to push back the payoff date. Already, that loan carried a rock bottom interest rate of 1 to 2 percent. Now, the government was giving Solyndra room to breathe.
In interviews with iWatch News and ABC in May, Jonathan Silver, executive director of the Energy Department's Loan Programs Office, said the modification "was an effort on our part to ensure we had the tightest and best structured project."
According to an agreement between the Energy Department and Solyndra, in bankruptcy court investors including Argonaut will stand in line before the federal government and other creditors. After private investors recover $75 million, the U.S. government would next have a chance to seek $150 million of its investment.
With Solyndra hitting financial hurdles, Energy Department officials said they had a choice: See the company collapse, or back its original investment.
"In late 2010, Solyndra faced a cash flow crisis that is very common for innovative start-up companies that are growing quickly," LaVera wrote. "The Department reached an agreement with Solyndra that gave the company and its 1,100 employees a fighting chance to go forward."
As part of the restructuring, DOE started sending a representative to sit in on board meetings of Solyndra, ABC and iWatch News reported.
"As one of the conditions for agreeing to approve the restructuring of the loan, the Department gained observer status on the Solyndra board," LaVera wrote in response to questions last week.
Beyond confirming its "observer status," Energy Department officials did not answer questions about how many meetings officials attended, what they learned - and what they did about it.
Still, the status is significant. It means that, in the months leading to Solyndra's implosion, the Energy Department paid particularly close interest. If it saw problems privately, it was not sharing them publicly.
In the May interview, Silver still pitched the loan as a good bet for taxpayers. "I have never seen a company go straight up without a bump along the way," Silver said. "I have no doubt they will continue to hire more people."
Silver has not responded to interview requests in recent weeks. He is among the witnesses invited to appear at a House Energy and Commerce hearing scheduled for Wednesday.
A CEO's assertions - and congressional doubts
In July, as the House Subcommittee on Oversight and Investigations escalated its examination of DOE spending by focusing on Solyndra, company President and CEO Brian Harrison came to Washington, meeting with journalists and members of Congress. His pitch: Solyndra was on the way up.
He brought a slide presentation titled, "The Real Story About Solyndra."
And, he wrote to subcommittee chair Cliff Stearns (R-Fla.), ranking member Diana DeGette (D-Colo.) and other members of Congress about just how well Solyndra was doing, saying its revenues were skyrocketing and its shipments hitting record numbers.
"The company has experienced a total net direct employment increase of over 300 regular, full-time jobs since the DOE made its conditional commitment and Fab 2 planning began. The company continues to hire and grow as our Fab 2 manufacturing ramp continues," Harrison, named CEO a year earlier, wrote July 13.
David Miller, a Solyndra spokesman, said the company was hopeful it would land more financing to move forward. "When we were there, the circumstances of the company, business was good, we had record shipments. We had momentum in the marketplace," Miller said in an interview last week.
Little more than a month and a half after Harrison's letter, on August 31, Solyndra dismissed more than 1,100 full and part-time workers, leaving just a skeletal crew as it looks to sell its assets while in bankruptcy.
Now members of Congress - including Democrats who months earlier had voted against subpoenaing Obama's Office of Management and Budget for records on Solyndra - want to hear from Harrison. The OMB had reviewed the loan guarantee in 2009, and concluded the risk was greater to taxpayers than DOE had calculated, iWatch News disclosed.
The House committee has called the Solyndra CEO among its witnesses Wednesday.
"Less than two months ago, Mr. Harrison met with us and other Committee members to assure us that Solyndra was in a strong financial position and in no danger of failing," DeGette and Henry Waxman (D-Calif.) wrote to Republicans leading the investigation.
"At that time, he said the company was projected to double its revenues in 2011, there was 'strong demand in the United States' for its shipments, and the company was expected to double the megawatts of panel production shipped this year. These assurances appear to contrast starkly with his company's decision to file for bankruptcy last week."
They closed: "Any thorough examination of the Solyndra loan guarantee should include the opportunity to ask Mr. Harrison about his representations. He did not convey to us the perilous condition of the company and the Committee should know why."
That question - whether Solyndra misled the government about its financial health - appears central to the federal investigation now underway.
When FBI agents surprised Solyndra by showing up at its headquarters early last Thursday morning, seizing boxes of records, they were joined by agents from the Energy Department Inspector General. Federal agents also visited the homes of company CEO Harrison and two founders in an investigation still in its preliminary stages.
The IG's appearance is a clear signal the half billion dollar loan guarantee, announced with such fanfare but now plagued by a trail of failed promises, is key to the mushrooming investigation.