Solyndra: Did Energy Department break the law?

The Obama administration's decision to restructure a half-billion dollar loan to a failing solar energy company is back in the spotlight as a House panel resumes hearings on solar panel maker Solyndra.

Newly released emails show that the Treasury Department was concerned that the loan restructuring, approved earlier this year, could violate federal law. The deal was structured so that private investors moved ahead of taxpayers for repayment on part of the loan in case of a default by Solyndra.

Administration officials have defended the loan restructuring, saying that without an infusion of cash earlier this year, Solyndra would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.

Even with the federal help, Solyndra closed its doors Aug. 31 and let all of its workers go.

Leaders of the House Energy and Commerce Committee say the hearing Friday will focus on whether the Energy Department broke the law when it agreed to restructure Solyndra' s debt in February.

The lawmakers cite emails showing that Mary Miller, an assistant treasury secretary, said the deal could violate the law because it put investors' interests ahead of taxpayers. Miller told a top White House budget official that she had advised that any proposed restructuring be reviewed by the Justice Department before it was approved.

"To our knowledge that has never happened," Miller wrote in an Aug. 17 memo to the White House Office of Management and Budget.

Rep. Cliff Stearns, R-Fla., called Miller's memo "startling" and said it appears that DOE violated "the plain letter of the law" in approving the restructuring.

"We need insight into Treasury's role in reviewing this loan guarantee," said Stearns, chairman of the energy panel's subcommittee on oversight and investigations.

Emails released last week show a wide disagreement among officials at the Energy Department, Treasury and Office of Management and Budget about Solyndra. Officials at the latter two agencies raised questions about the quality of the DOE's loan-vetting process and the special treatment Solyndra was given as its finances deteriorated.

Gary Grippo, a deputy assistant treasury secretary, and Gary Burner, chief financial officer at the Federal Financing Bank, are expected to testify. The financing bank made a $528 million loan to Solyndra in 2009.

The Fremont, Calif.-based company was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model. Obama visited the company's Silicon Valley headquarters last year, and Vice President Joe Biden spoke by satellite at its groundbreaking.

Since then, the company's implosion and revelations that the administration hurried budget officials to finish their review of the loan in time for the September 2009 groundbreaking has become an embarrassment for Obama.

Damien LaVera, a spokesman for the Energy Department, said Thursday that the loan restructuring was legal.

"Based on a careful analysis of the terms of the restructuring, the career officials in the DOE loan program determined that the restructuring was legal and that it did not require Justice Department review," LaVera said.

Energy Department officials say the statute cited by the Treasury Department requires the Justice Department to approve a loan "compromise," in which a borrower is allowed to pay back less than the full amount of the loan. That was not the case in the Solyndra deal, they said.

And while one portion of the law makes clear that a federal debt cannot be subordinate to other financing at the time of the loan, another section provides officials with broad authority to take action to protect the taxpayer in an emergency situation, they said.

Energy Secretary Steven Chu approved the restructuring in February.