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The Solyndra Fraud
The solar-energy company was a con game.

By Andrew C. McCarthy


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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.

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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.

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COMMENTS   71

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The Raven
   09/17/11 07:09

You could also note that the big-wigs of the company gave themselves a hefty pay raise after the guarantee, though I am sure their counsel would point out it was because the were running a larger company.

Truth is, they and the Administration will have a plausible answer to any of the charges levied against them. Did Big O speak untruths, or did he simply leave facts unsaid? Doesn't matter, since Republican leadership, afraid to say boo for fear of being branded racist, will let this one whither on the vine.

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   09/17/11 07:13

Mr McCarthy, well done. Bring this to fruition.

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Lee Steele
   09/17/11 08:15

You say $535 Billion when you meant Million twice in the article.

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 Belt
   09/17/11 08:41

Wait, isn't it a 500 million dollar loan, not billion? You start out using million at the beginning of the article, and then switch to billion later. I think you've some typos to clean up there.

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Timboalogo
   09/17/11 18:27

Where he says "$535 billion like a thunderbolt", I believe he is referring to the cost of the new jobs bill, not the loan guarantee.

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   09/18/11 06:48

In the case of General Motors and Chrysler they could just take the money of investors who followed every law and rule. Shouldn't they now cut out the investors in Solyndra who have broken many laws and many rules? This would have the added benefit of poisoning the financials of any firm getting public financing. Who would want to invest where there money could be scarfed up at any time?

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   09/17/11 09:02

The word for such schemes is NOT fraud, it's Obamanomics. In its purest form.

Now, if that happens to be the same as fraud, it's not like you couldn't see it coming before the 2008 election. We the people get the government we deserve (even if we didn't vote for this pinhead).

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Bill Gauhs
   09/17/11 09:17

Excellent article. This is really big. What we need is some real Woodward and Bernstein type action - continuously. My concern is with the current field of reporters, no one will have the guts to go after this fraudulent Administration. I pray I'm wrong.

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   09/17/11 09:37

This is HUGE. $500,000,000 is no Bill Clinton getting a haircut on Air Force one at the LA Airport.

Talk about an abuse of power. Somebody belongs in jail...

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   09/17/11 09:39

solyndra, fast and furious, and a general pressured to commit perjury. what does it take to reach critical mass?

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   09/17/11 09:54

Solyndra proves that Obama is one part crony capitalist and one part socialist. The irony is that he is so incompetent at the easier of the two. In playing king maker, he didn't bother to pick a company that's even a cut above mediocre.

Sadly, most leftist and libs have such a weak grasp on the private sector that this story only re-enforces the notion that all business is crony capitalism.

Us unlucky schlubs that work in the private sector sans political connections know that Solyndra and many others (FNMA & FHLMC come to mind) exist b/c of dirty politics. Not the other way around.

Prepare to hear a chorus of "Haliburton received $XX" from the state controlled media. As if delivering 2 million sporks to Kabul or 10K port-a-potties to Basra can be accomplished by 2 Guys and a Truck or Tony's Army Surplus on Astoria Blvd. if only Cheney hadn't given the contract to Haliburton.

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   09/17/11 18:15

Lawdawg
True enough - but this goes beyond incompetence. The term "criminal" is thrown around like "racist." But in this case, you've got the administration restructuring contracts to protect political friends at the expense of taxpayers ... and through legislation that nobody had a chance to read. This is getting UGLY!

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gaslolit
   09/17/11 09:55

But, enquiring minds want to know, is it an impeachable offense?

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JefTop
   09/17/11 10:17

Combine corruption with a complete ignorance of how business works and, voila, another case of taxpayers getting reamed by politicians. What else is new? You didn't work THAT hard for that money, did you?

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   09/17/11 10:37

Watch out for AttackWatch. Notwithstanding the million/billion typo, I'm trying to figure out the fiduciary duty legal angle of a President in a fraud here. Not that making AttackWatch isn't a patriotic honor and duty.

But yes, Obama knowingly made misleading statements contrary to all the known facts. I wonder if he actually believed he was right anyway. The question in a fraud case also would depend on whether or not the investor (or the tax payer) reasonably relied on his statements. With all the publicly available information to the contrary and the knowledge that this guy based his whole campaign on meaningless [bluff] about hope, change, transparency, etc., and the fact that green investors invest in large part on the basis of a hyped belief that they can help force a change that Obama was truly working to effect, it's just extreme puffery misunderstimated as ordinary puffery.

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   09/17/11 18:35

The stimulus was designed to be confusing and "unread." One would logically assume that some crooks got a slice of this $800 billion pie ... with the help of some of the crafters. Oh yeah ... and here we have Obama restructuring a campaign donor's contract to get him off the hook.

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miles hall
   09/17/11 11:26

shov·el[shuhv-uhl]
noun
1. an implement consisting of a broad blade or scoop attached to a long handle, used for taking up, removing, or throwing loose matter, as earth, snow, or coal.

read·y [red-ee]
adjective
1. completely prepared or in fit condition for immediate action or use: troops ready for battle; Dinner is ready.

proj·ect [proj-ekt, -ikt]
noun
1. something that is contemplated, devised, or planned; plan; scheme.

shov·el read·y proj·ect[shuhv-uhl red-ee proj-ekt, -ikt]

noun
1. deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.

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   09/17/11 15:39

"That is the theory that would be guiding any competent prosecutor’s office...."

You can stop reading right there.

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   09/17/11 16:05

...I know there are some in this chamber and watching at home who are skeptical of whether this plan will work. I understand that skepticism. Here in Washington, we’ve all seen how quickly good intentions can turn into broken promises and wasteful spending. And with a plan of this scale comes enormous responsibility to get it right.
That is why I have asked Vice President Biden to lead a tough, unprecedented oversight effort – because nobody messes with Joe. I have told each member of my Cabinet as well as mayors and governors across the country that they will be held accountable by me and the American people for every dollar they spend. I have appointed a proven and aggressive Inspector General to ferret out any and all cases of waste and fraud. And we have created a new website called recovery.gov so that every American can find out how and where their money is being spent.

Remarks of President Barack Obama – As Prepared for Delivery
Address to Joint Session of Congress
Tuesday, February 24th, 2009

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 Bugg
   09/17/11 16:39

Crony capitalism invariably has government picking losers for a big government check. A good idea doesn't need such help.

And as to "green jobs", increasingly petroleum, natural gas, coal and nuclear are the new green in every way. Who ever the GOP nominee is has to make domestice energy production a priority. And bash Obama off the head with this scandal and the ongoing the green jobs fiasco.

Someone has to ask The One how it is he banned drilling in the Gulf of Mexicao to allow Petrobras and Soros to use the same exact equipment off Brazil. Yet the questions about this crony socialism go unasked.

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