"The welfare of humanity is always the alibi of tyrants" - Albert Camus

Friday, October 14, 2011

Administration Outdoes Solyndra Debacle

I know, it would be hard to believe that the $535 million federal loan guarantee to the failed solar venture Solyndra could be outdone.  Well get ready for something more outrageous to be filed under 'crony capitalism gone wild'.

SunPower, a failing California solar company, recieved $1.2 billion federal loan guarantee under the DOE 1705 program on the last day of September, only hours before the deadline.  This one stinks to high heaven so much that I don't know where to begin. 

One would expect the federal government to evaluate the potential recipients of government largesse for integrity and financial as well as business plan soundness.  It is the governments fiduciary duty to assure that taxpayer dollars do not benefit shady companies, are not risked on ventures that are not feasible or do not stand to benefit the public in general.  Companies like Solyndra or Evergreen stand no chance to succeed in a free market environment (as they eventually proved to be the type of losers that only government foolishness can temporarily prop up).  Believe me, if there was a demand for their product/service, they would not need the government to succeed. 

A Bleak Financial Picture:

SunPower (SPWRA - NASDAQ) is a troubled company in the solar energy sector that is heavily shorted (ninth most shorted solar stock in major indices with nearly 11 million short positions - 15x daily volume!) and beset by multiple ongoing share holder law suits including a serious federal securities law violation charge.  It's market cap is down 94% from its high of $13 billion to $800 million while it is indebted to the tune of $820 million.  It's prospects for survival is iffy at best.  Not the kind of company U.S. taxpayers should be risking their borrowed tax dollars on!
Chart forSunPower Corporation (SPWRA)

Cost per Job Created:

Then there is the issue of jobs proposed to be created by this ill-concieved project.  According to the Department of Energy (DOE) website, the SunPower's CVSR project (which the loan was earmarked for) will create 10-15 permanent jobs.  Lets see....$1.2 billion divided by 10 or 15......oh, a veritable bargain at $80 to 120 million per job created


As if that is not enough, there is the troubling (and common place under this regime) cronyism issue, complete with questionably convenient timing.  First, the loan guarantee was heavily lobbied for by a congressman, George Miller (D-CA) and his lobbyist son.  The loan guarantee was literally granted on the last day before the program expired and three weeks after the company announced that it was building a factory in Mexico (so much for creating jobs in the U.S.) to build the panels for the California project.  In other words, they had started building a factory to manufacture the equipment necessary for a project they had no loan guarantees for.  Rather puzzling, if not outright troubling detail! 

This being the Obama Administration, you may be wondering if there were any previous financial ties between Obama/Democrats and SunPower like the campaign cash bundling backers of Solyndra, Evergreen Solar, and others.  Wonder no more. 

SunPower’s political action committee (PAC) was not shy about participating in the political process.  According to the SunPower PAC filings for its activities in the 2010 midterm election campaign cycle, it donated more than $36,000, 94% of which unsurprisingly went to Democrats including Congressman Miller who was instrumental in pushing the federal approval.  While SunPower was a financial partner in the congressman’s reelection campaign, it straight-out hired his son - an obvious ethical faux-pas.  Oh, by the way, Rep. Miller's son is not registered to lobby in Washington. 
SunPower's CEO Thomas Werner was also a regular contributor to Democrats throughout the past couple election cycles as I found out following a quick check on OpenSecrets. 

Other Shenanigans:

The SunPower story doesn't quite stop there.  There is also a small matter of the Obama pal insiders getting rich overnight though the story involves the federal government only indirectly.  On April 12, 2010, the company, as well as the DOE, announced that it was seeking federal loan guarantees in the amount of $1.2 billion.  Two weeks later, France's Total Oil announced its friendly buy out of 60% of SunPower at $23.25 - coincidentally a 60% premium over SPWR's trading price on that day.  SunPower CEO Werner is typical of the insiders. On May 24 he exercised his right to purchase 428,343 shares at $3.30 per share, a $18 discount from the day’s trading range.   He sold 478,084 shares June 15, the day the Total Oil takeover closed, at $23.25 for proceeds of $11,115,453.

Remember, Total Oil was offering at $23.25 per share in what was in effect a private sale. The SPWR, Class A or B, shares have not traded above $23 since June 10, 2010.
Had the company not been privately assured of the federal loan guarantee, would the Total Oil take over materialize (which allowed insiders to cash in handsomely; effectively on the backs of the American taxpayer)?


SunPower case is even more troubling than Solyndra in that there are serious questions, any one of which should have disqualified the company from qualifying under the DOE program guidelines.  So, why did the Department of Energy agree to backing SunPower to the tune of $1.2 billion?  There are many yet unanswered questions.  To recap:

  • How could the Department of Energy give a loan to a company that was under a shareholder suit alleging securities fraud and misrepresentations?
  • The son of Rep. George Miller (D-CA) who was paid $178,000 to lobby on behalf of the company represented SunPower as a lobbyist. Why did Rep. George Miller tour the SunPower facility – which is outside his congressional district – and what other official action did Rep. Miller take on behalf of the company that is represented by his lobbyist son?
  • Did the company’s hefty political contributions to the Obama campaign and the DCCC play a role in the deal?
  • Did U.S. taxpayers help pay for the company to open a facility in Mexico after the announcement of the loan?  
  • Was the U.S. government aware that company executives were in the process of selling a portion of the company to a French company – an action that was undertaken two weeks after the loan was awarded? Did the loan allow insider’s to cash out leaving other investors holding on to the stock that has dropped by more than 60% since the loan was awarded?

 The term crony capitalism - the success of a business being dependent on the favoritism that is shown to it by the ruling government in various forms, instead of free markets and the rule of law - is tailor made for the relationship of this Administration with companies like Solyndra, Evergreen, SunPower, or any one of dozens of other companies, green or otherwise. In this symbiotic relationship (just like with labor unions or trial lawyers), tax dollars circulate between the administration and their crony benefactors in the form of campaign donations and stimuli of the day to enrich the very people who are eager to return the favor to their Democrat puppets in government.  There is only one clear loser and that is the American taxpayer.



Don't worry, they'll simply print more money if we need it!!!!

Common Snse said...

Am Pat,

I hope that they are all getting fitted for orange prison jump suits.