Friday, February 10, 2012

Solyndra Strikes Again

The Solyndra scandal just refuses to go away. By now, everyone knows about the money thrown at a pie-in-the-sky solar panel scheme by the unwilling taxpayers on the orders of the Obama administration. The company was shaky at best, but it was run by big contributors to the Obama campaign, so a few (dozen) federal rules and plain common sense were tossed aside to fund another green disaster.

The company failed shortly after receiving the loans, and the taxpayers are now on the hook for the losses. As part of a sweetheart deal between Solyndra’s chief investors, Obama contributors all, and the Department of Energy, Solyndra not only received approximately $535 million in federal guaranteed loans, but in violation of federal law the major shareholders were granted priority in bankruptcy over the taxpayers who coughed up the money for the loan. The Department of Energy has claimed all along that it had no idea whatsoever that Solyndra was about to fall off a financial cliff.

And now we have a new wrinkle to consider. A mere two days before the Solyndra board of directors decided to file for bankruptcy protection, there was a mysterious sell-off of inventory. Allegedly, the sale was to stave off the collapse of the company. It is not an unusual procedure for going concerns which are experiencing short term cash flow problems. But in the real world of healthy, but troubled corporations, these things are carefully-planned and take place weeks or months before a company is facing bankruptcy.

The sell-off has a number of very strange-smelling details. First, there is the question of why the inventory was sold off so cheaply. The inventory was fairly evaluated at $58.1 million. It was sold for cash--$17.5 million in cash. Even very distressed corporations in need of cash can usually find a buyer that will pay the real value of the inventory, or something close to it. Even under the worst possible circumstances, getting only 30% of the actual value is nearly unheard-of.

To any trained accountant (in the Department of Energy, for instance?) this means that the company is not only in trouble—it’s in big trouble. The bankruptcy court must look at the time of the sale, as well as the buyers, and determine if the sale was for reasonably equivalent cash-to-value as well as whether there was any reasonable belief that the infusion of cash would increase liquidity to the point that the corporation might remain viable. Given the bankruptcy filing two days later, that seems unlikely. That leaves the question of who paid the cash.

Even the name of the buyer is suspicious—Solyndra Solar II. That name was picked for the affiliates of Solyndra’s debtor-in-possession lender. And who might that be? Argonaut Private Equity and Madrone Capital Partners. Argonaut is the investment wing of a foundation headed by billionaire George Kaiser. Full circle, ladies and gentlemen. Kaiser is one of those Obama contributors and Solyndra board members who got precedence over the taxpayers in case of bankruptcy. Madrone Partners also has connections to the Waltons of Wal-Mart fame.

An official spokesman for Argonaut, who also served on the Solyndra board, told reporters that the investors (which investors?) did not profit from overall sales of the inventory or the accounts receivable. A separate corporation had been formed to purchase the Solyndra accounts receivable by the same cast of characters, and is named Solyndra Solar LLC. The spokesman, Steve Mitchell, added that the plan was to give the company more time to turn around. Two days? That would be one helluva turnaround.

Solyndra Solar LLC and Solyndra Solar II were both properly listed in the initial bankruptcy filing. But it was not until a much later addendum that the full list of officers and investors of the buyers was added. And it was only at the late filing that the amount of the money, inventory, and accounts receivable became known.

All of this is unusual, but not entirely unheard of in the wonderful world of failing corporations. The purchasers have sometimes managed to make a good deal by which the original company survives and the investors in the special corporations provide the money and own the inventory which they supervise while the original entity changes form, but still remains in business. That most assuredly did not happen in the case of Solyndra.

George Mason University Professor and bankruptcy expert Todd Zywicki gingerly explains it this way: “There’s nothing inherently problematic about that as it is common to want to stockpile cash on the eve of a bankruptcy in order to have a sort of war chest going into the case. It could be a problem, however, if there were particular creditors who were benefited by converting the accounts receivable and inventory to cash for some reason or if those assets were converted for less than reasonably equivalent value."

And therein lies the rub. We await an explanation from George Kaiser, Friend of Obama..

20 comments:

Tennessee Jed said...

When I read this, I thought to myself "this is such a scandal, it should bring about the downfall of the administration. (think Nixon with his big wave as he boarded AF One for the last time.) The question that I simply cannot answer is "Why the F*** these bastards will not be forced to resign in disgrace? and why must I read about it here?" Don't get me wrong, it is a great service you are doing, BUT where is the media??? There is something so fundamentally wrong in this, I fear we have already lost.

Joel Farnham said...

It will be years before we find out how much Obama and company misused the Presidency. As Obama's term draws to a close, I expect more of these questionable actions to surface. Nothing will be done about them unfortunately. Hopefully the stink will linger on any liberals left in office and prompt people to reject any and all solutions from liberals.

LawHawkRFD said...

Tennessee: The MSM won't be able to ignore this entirely. But we all know how big scandals can be turned into small bits and pieces of "news" when the MSM wants to cover up for its liberal buddies. Some small bureaucrat will eventually be blamed for making a "mistake" and then the refrain of "nothing to see here, move on" will be announced.

Compare this with the non-issue, non-scandal of Scooter Libby which the MSM turned into a cause celebre as if Libby's misrembering of an irrelevant fact in a non-security matter was something approaching an act of treason. The MSM have no ethics, they're in bed with the Obama administration, and they feel no shame.

LawHawkRFD said...

Joel: I feel very much the same way. If there are this many scandals and even quasi-criminal actions that we do know about, how many are there that we don't know about, yet? Let's hope that the worst of these offenses don't go entirely unpunished, but the new Republican administration could lose its focus if it spends too much time trying to right all the wrongs of the Obamists. There needs to be enough action from the new administration to make the public aware that every dime being spent by the federal government should be given extreme scrutiny.

T-Rav said...

Jed, "where is the media" you ask? Well, to judge by what I was hearing on TV this morning, they're busy wondering about whether Santorum is a sexist or how much Romney hates the poor or why Catholics are being such hypocrites. Rarely has a nation been so poorly served by its "Fourth Estate" as ours is right now.

Tehachapi Tom said...

Hawk
Interesting that the stock holders in this enterprise were protected and the stock holders in GM were not.
Precedents be damned is the rule for these crooks.
Hate is so inadequate and more energy demanding than any of them are worth.

LawHawkRFD said...

Tehachapi Tom: The shareholders in Chrysler and GM were largely not cronies of Obama's, so they got the shaft along with the taxpayers. In addition, there was no "save the unions" issue in Solyndra, so Obama could just let the corporation fail, let the taxpayers eat the loss, and reward his loyalists, all at the same time.

Individualist said...

George Kaiser

thou art the Andy Fastow ......

Well in Andy's defence at least he gave the companies creative names like Raptor and Jedi but then again you have the right "connections" don't you

rlaWTX said...

shocked.
surprised.
~ I wish I were... ~

AndrewPrice said...

This stuff is scandalous. Unfortunately, this is exactly the kind of thing to which the public does not listen. That's why governments get away with cronyism because it's too almost always too complex for the public to care. That's sad.

LawHawkRFD said...

Indi: Fastow did a better job of fooling the feds than Solyndra and Kaiser, but the analogy is apt. In the Enron case, the flags were there but well-hidden behind a very complicated financial scheme. Solyndra was transparent to anyone who cared to look. Those flags were highly-visible, and the administration chose to pretend they weren't there.

At least Fastow 'fessed up and named names (even if it was in exchange for a reduced sentence). Will Kaiser do the same? Will he even be prosecuted, since the feds themselves went along with the scheme to put him ahead of the taxpayers in bankruptcy?

tryanmax said...

Is it that it is so complex? Or that the media just won't boil it down? Everyone seemed to grasp Watergate pretty well, and that was a pretty involved affair.

LawHawkRFD said...

rlaWTX: I know the feeling. Maybe that's the plan. Have so many scandals before the administration gets kicked out that people will just say "big deal, it was politics as usual."

LawHawkRFD said...

Andrew: Isn't it interesting how complex the MSM tries to paint the Solyndra scandal? Unlike many scams in the past, this one was easily figured out, fairly early on, and certainly before the big loan was guaranteed. But it makes the administration look bad, so they downplay the news and muddy it up with details while at the same time cooperating in leaking the worst parts of the scandal piecemeal.

LawHawkRFD said...

tryanmax: Solyndra isn't at all complex. Pure crony socialism and misfeasance from the public treasury to support the administration's green agenda. The MSM is making it complex purposely in hopes that the public will not grasp the obvious, as Andrew pointed out. Enron, on the other hand really was complex, but the MSM went out of its way to make the whole thing clear to the public because it considered Enron to be a capitalist-Republican plot to defraud.

tryanmax said...

LawHawk, Enron is a much better counterpoint to Solyndra. I'm still not confident that I fully grasp Enron, but the media made it seem as simple as a burglary.

LawHawkRFD said...

T-Rav: Did you see Obama this morning? He says he's working with the Catholics to find a "solution." But he didn't back off the mandate. And of course, he completely ignores the religious issue by calling it "certain people playing politics with health care." His game is to try to convince the public (and of course, Catholics) that the institutions and their employees won't have to pay for the coverage, it will be paid for by the insurance companies. It's free, you see. Somebody forgot to tell Obama that there's no such thing as a free lunch.

LawHawkRFD said...

tryanmax: Do you suppose there might be a pattern here? LOL

StanH said...

There are dozens of Solyndra’s out there waiting for Barry’s ousting in November. However, be certain that establishment Washington as it stands, will not do a damn thing. We must continue the firings of 2010 and maybe in a couple more election cycles we get some of these bastards fitted for orange jump suits. The Beltway needs to be flipped, fight on America. Insightful Lawhawk.

LawHawkRFD said...

Stan: We'll never be able to corral all these miscreants, but at least we can go after the big bulls. We can't let the worst of these excesses go unanswered. Issa's off to a good start.

Post a Comment