What did Solyndra's executive team know and when did they know it?
It looks like Friday is the day that key that the senior executives in Solyndra, the now-bankrupt Fremont, California thin-film solar firm, get questioned by Reps. Henry A. Waxman (D-CA) and Diana DeGette (D-Colo.) at the House Energy and Commerce investigative subcommittee to testify about the collapse of the startup, the recipient of a $535 million loan from the DOE.
But they won't be talking. They'll plead the fifth. Here's the relevant excerpt from the firm's statement:
...on the advice of their counsel, they [the CEO and CFO] will be unable to provide substantive answers to the Subcommittee’s questions and that present circumstances require both gentlemen to exercise their fifth amendment rights in the face of questioning that might occur.
Here's the full statement from the company:
Statement Regarding Hearing of Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, U.S. House of Representatives
Today Solyndra’s President and CEO, Brian Harrison, and its CFO, Bill Stover, communicated to Chairman Stearns and Members of the House Subcommittee on Oversight and Investigations that, due to the ongoing Department of Justice investigation and on the advice of their counsel, they will be unable to provide substantive answers to the Subcommittee’s questions and that present circumstances require both gentlemen to exercise their fifth amendment rights in the face of questioning that might occur.
The company is not aware of any wrongdoing by Solyndra officers, directors or employees in conjunction with the DOE loan guarantee or otherwise, and the company is cooperating fully with the office of the United States Attorney for the Northern District of California in its investigation. The company believes that the record will establish that Solyndra carefully followed the rules of the competitive application process, starting in December 2006 under the Bush administration and continuing under the Obama administration. The Department of Energy (DOE) conducted extensive due diligence on Solyndra prior to final approval of the DOE loan guarantee. Consistent with the DOE loan guarantee program requirements, all loan proceeds were used to build out the company’s state of the art Fab 2 facility from green field to a working fab that was already producing panels at an annual run rate of over 100 megawatts when operations were suspended in connection with the Chapter 11 reorganization filing.
At the same time Solyndra was successfully building out its Fab 2 facility, the competitive landscape for solar photovoltaic panels was changing dramatically. Market conditions led to an oversupply of panels worldwide, which had a substantial negative impact on pricing of the company’s panels and the company’s ability to rapidly ramp its sales. As late as August, the company believed that existing investors and the DOE would come to a financing arrangement that would have secured the capital the company needed to achieve positive cash flow from operations. The Company’s investors had offered a transaction pursuant to which the required capital would have been invested, however, the terms of such transaction were not acceptable to the DOE. Ultimately, it was a failure to secure this financing that left the company with no other option but to seek to reorganize through a bankruptcy filing under Chapter 11.
The decision to suspend operations and file for reorganization has had a devastating effect on the company’s talented workforce as well as a negative impact on the businesses of Solyndra’s valued partners, suppliers and customers. This was not a decision taken lightly. The majority of Solyndra’s workforce was in the United States and the company did all that it could to keep these manufacturing jobs that are so vital to the country, in place. A small number of employees remain while Solyndra evaluates options, including a sale of the business and the licensing of its advanced CIGS technology and manufacturing expertise in order to maximize the value of the assets for Solyndra’s creditors, including the DOE.
The company is confident that the investigation will clarify the facts surrounding the events leading to the DOE loan guarantee to Solyndra and looks forward to a time when its executives can more freely discuss their views on these events.
This is a perspective piece so allow me to offer my perspective.
Behind all the political posturing and grandstanding, accusations of graft and cronyism, and mispronunciations of the word "photovoltaics" by politicians and newscasters -- here is the opinion of your humble narrator, a reporter, technologist, and veteran of both failed and successful startups.
The core technology of this company was novel, innovative, and not worth commercializing. As reported, I've spoken to one of the original Solyndra inventors and patent holders who told me that the packaging requirements for this design rendered it incapable of being competitive. He told me this three years ago. After he left the company.
Entrepreneurs fall in love with their technology and become blinded to market reality every day. Venture capitalists are supposed to know better than to let this happen to them, but that's what happened here. This technology was a bad bet before China Inc. came onto the solar scene and before solar panel prices plunged to their current levels. The DOE is guilty of the same misjudgment on the technology. The DOE also made market misjudgments.
Optimism and denial by the company? Yes.
Poor due diligence by the VCs and the DOE? Absolutely.
Criminal activity? Not at this point in the company's timeline, at least. No smoking gun email with political motives will be found because none likely exists. Save the desire to get a factory built, money deployed, and jobs created. Maybe a few corners cut to get to that objective at the DOE.
The problems start to occur when the IPO is suspended, the reality of cost targets become clear, and a new CEO is put in place.
Brian Harrison, the new CEO, is installed at the helm of this Titanic at a salary of more than $400,000, and not to defend him, but he's inserted into an untenable position. No management skills or manufacturing process skills could alter the course of this company.
Harrison looked me in the eye at a recent interview and told me to my face that the firm would not need to take any additional funding. He was either in denial or being disingenuous.
The more solar modules the company shipped, the more the company lost and the faster the money was running out.
The CEO and the CFO had to know this.
Somewhere in a file, wastebasket, or hard disk drive is the evidence that the FBI is seeking -- that the officers of the company knew, as their auditors declared a year ago, that they were not a "going concern," and that the hammer was going to come down hard and soon.
That they failed to notify their investors and the DOE in a honest fashion is the issue here. Is it corporate malfeasance and negligence? Without a doubt. Is it a crime? We'll soon find out.