Two House Democrats, including one from Colorado, are looking to question a pair of investors about solar panel manufacturer Solyndra’s financial flameout in Northern California.
U.S. Reps. Diana DeGette, D-Colo., and Henry A. Waxman, D-Calif., sent a letter Monday to Oversight and Investigations Subcommittee Chairman Cliff Stearns requesting that executives from two of Solyndra’s largest private investors, Argonaut Private Equity and Madrone Capital Partners, be called to testify at a hearing Friday or in the future.
“One important question for the Committee to examine is whether there were sound reasons to make an investment in Solyndra,” they wrote. “Some sophisticated and experienced private venture capital investors thought the answer was yes, and they invested over $1 billion in Solyndra – twice the support provided by the federal government. The Committee would benefit from hearing the views of these private investors as we assess the merits of federal decisions regarding the Solyndra loan guarantee.
“In particular, we ask that you seek testimony from Argonaut and Madrone, the two top private investors in the company,” they wrote. “Representatives of each, Argonaut Managing Director Steve Mitchell, and Madrone Founder and General Partner Jameson McJunkin, served on Solyndra’s board and should be well acquainted with the company. Mr. Mitchell and Mr. McJunkin could provide the Committee with perspective on why Solyndra attracted so much private capital, Solyndra’s representations about its economic prospects, and the external factors that have been affecting the U.S. solar industry.”
Solyndra’s bankruptcy and its laying off of 1,100 workers have left the solar industry with a black eye, and enflamed conservatives who are blasting the Obama administration over its $535 million loan guarantee to the Fremont, Calif., company. As Fortune magazine points out, Argonaut is among several firms that invested nearly $1 billion of equity in Solyndra, but most of it came before the Department of Energy provided Solyndra with loan guarantees. Argonaut Private Equity is funded through the George Kaiser Family Foundation, whose namesake is a major donor and political ally of President Obama.
“None of that $1 billion has been ‘reworked’ to the benefit of Solyndra’s equity investors,” Fortune Senior Editor Dan Primack wrote in a column posted online yesterday. “They all are subordinate to the federal loan, and will likely get wiped out. What Drudge and others are referring to, however, is $75 million in debt financing that Solyndra raised after the DoE loan. Basically, the company was floundering and this was a last-ditch effort to turn the company around. The primary debt providers were Argonaut and another existing Solyndra investor called Madrone Capital Partners. This is the money that has priority to the feds (assuming anyone ultimately buys Solyndra’s assets).”
Stoking the partisan flames are media misrepresentations engulfing the Solyndra story. It was a credit committee consisting of financially astute civil servants under the Bush administration that actually selected the solar manufacturing company for the loan guarantee program. Solyndra was one of 16 projects chosen out of 143 submissions. The same credit committee approved the loan guarantee in 2009, when Obama was in office, after the application worked its ways through the committee’s checks and balances.
Still, there are many questions to be asked and lessons to be learned from Solyndra’s collapse. Solyndra Chief Executive Brian Harrison and Chief Financial Officer W.G. Stover Jr. are expected to testify Friday before the Oversight and Investigations Subcommittee, of which DeGette is a ranking member.
Whether Solyndra’s executives made misleading statements or omissions in their dealings with federal officials will be an area of focus. DeGette, according to the Los Angeles Times, is upset Solyndra executives told her this summer that the company would double its revenue this year. “I’m perplexed how they could be in my office in July telling me things were looking better and filing for bankruptcy two months later,” DeGette said.
Solyndra is the third solar company to file for bankruptcy in the last few months as a consequence of falling demand from European countries that have cut subsidies for the industry, worsening macroeconomic conditions, and excess capacity combined with low pricing from competition in China that have hit the sector hard.