[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
 THE ADMINISTRATION'S BET ON ABOUND SOLAR: ASSESSING THE COSTS TO THE 
                           AMERICAN TAXPAYERS

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON REGULATORY AFFAIRS,
               STIMULUS OVERSIGHT AND GOVERNMENT SPENDING

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 18, 2012

                               __________

                           Serial No. 112-167

                               __________

Printed for the use of the Committee on Oversight and Government Reform


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform




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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

 Subcommittee on Regulatory Affairs, Stimulus Oversight and Government 
                                Spending

                       JIM JORDAN, Ohio, Chairman
ANN MARIE BUERKLE, New York, Vice    DENNIS J. KUCINICH, Ohio, Ranking 
    Chairwoman                           Minority Member
CONNIE MACK, Florida                 JIM COOPER, Tennessee
RAUL R. LABRADOR, Idaho              JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          BRUCE L. BRALEY, Iowa
FRANK C. GUINTA, New Hampshire
MIKE KELLY, Pennsylvania
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 18, 2012....................................     1

                               WITNESSES

Mr. Craig Witsoe, Former Chief Executive Officer, Abound Solar, 
  Inc.
    Oral Statement...............................................    10
    Written Statement............................................    12
Mr. Tom Tiller, Former Chairman of the Board Abound Solar, Inc.
    Oral Statement...............................................    15
    Written Statement............................................    17
Mr. David Frantz, Acting Executive Director, Loan Programs 
  Office, U.S. Department of Energy
    Oral Statement...............................................    21
    Written Statement............................................    24
Mr. Jonathan Silver, Former Executive Director, Loan Program 
  Office, U.S. Department of Energy
    Oral Statement...............................................    29
    Written Statement............................................    32
Ms. Veronique De Rugy, Senior Research Fellow, Mercatus Center at 
  George Mason University
    Oral Statement...............................................    72
    Written Statement............................................    74
Mr. Gregory Kats, President, Capital E
    Oral Statement...............................................    85
    Written Statement............................................    87

                                APPENDIX

Continuation of this Committee's oversight of the Department of 
  Energy's effort to promote green energy........................   105


 THE ADMINISTRATION'S BET ON ABOUND SOLAR: ASSESSING THE COSTS TO THE 
                           AMERICAN TAXPAYERS

                              ----------                              


                       Wednesday, July 18, 2012,

                  House of Representatives,
      Subcommittee on Regulatory Affairs, Stimulus 
                Oversight, and Government Spending,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2154, Rayburn House Office Building, Hon. Jim Jordan 
[chairman of the subcommittee] presiding.
    Present: Representatives Jordan, Buerkle, Labrador, 
DesJarlais, Guinta, Kelly, Kucinich, and Welch.
    Also Present: Representatives Issa, Gowdy, and Cummings.
    Staff Present: Will L. Boyington, Majority Staff Assistant; 
Molly Boyl, Majority Parliamentarian; Lawrence J. Brady, 
Majority Staff Director; Drew Colliatie, Majority Staff 
Assistant; John Cuaderes, Majority Deputy Staff Director; Adam 
P. Fromm, Majority Director of Member Liaison and Committee 
Operations; Linda Good, Majority Chief Clerk; Tyler Grimm, 
Majority Professional Staff Member; Christopher Hixon, Majority 
Deputy Chief Counsel, Oversight; Mark D. Marin, Majority 
Director of Oversight; Laura L. Rush, Majority Deputy Chief 
Clerk; Jeff Solsby, Majority Senior Communications Advisor; 
Jaron Bourke, Minority Director of Administration; Ashley 
Etienne, Minority Director of Communications; Susanne Sachsman 
Grooms, Minority Chief Counsel; Jennifer Hoffman, Minority 
Press Secretary; Nicholas Kamau, Minority Counsel; Chris 
Knauer, Minority Senior Investigator; Adam Koshkin, Minority 
Staff Assistant; Brian Quinn, Minority Counsel; Dave Rapallo, 
Minority Staff Director; and Donald Sherman, Minority Counsel.
    Mr. Jordan. The hearing on the Administration's Bet on 
Abound Solar: Assessing the Cost to the American Taxpayers will 
come to order.
    You guys know the routine; we do our opening. You have to 
listen to us for a few minutes and then we will give you each 
five minutes for your testimony. I know we have several other 
members coming. We had conference meetings this morning, so 
they will be here shortly. But we will get started. I will do 
my opening statement, then we will turn to the gentleman from 
Ohio for his.
    Today's hearing continues this Committee's oversight of the 
Department of Energy's efforts to promote green energy. After 
Solyndra went bankrupt in August of last year, major questions 
arose about the nature of the decision-making process at the 
Department of Energy and how safe American taxpayers were in 
light of the risks associated with the decisions made by 
political appointees at the Department.
    It is becoming abundantly clear that billions of dollars of 
the public's money was put at undue risk. The Committee's 
investigation has revealed a pattern of incompetence, 
carelessness, and cronyism at President Obama's Department of 
Energy. The DOE Inspector General has testified that the money 
given to the Department via the stimulus was akin to attaching 
``a garden hose to a fire hydrant.'' DOE was flooded with cash 
and did not have the infrastructure to spend it in a sound 
fashion.
    Abound Solar received a $400 million loan guarantee from 
DOE and is the third major bankruptcy within the loan's 
portfolio. This decision to grant this company taxpayer support 
will end up costing taxpayers up to $70 million.
    Had it not been for the attention drawn to problems with 
the loan program, DOE officials could have continued running 
the office in a cavalier fashion and the losses may have been 
much greater.
    As defenders of the Administration's green energy agenda 
are likely to point out, letters were written by both Democrats 
and Republicans to the DOE supporting Abound. Ultimately, 
however, the decision to issue this loan guarantee, despite 
overwhelming evidence that the company was a bad bet, fell on 
the shoulders of the Department of Energy.
    To a large degree, this decision rested with the two 
individuals testifying here today, the former and current heads 
of DOE's loan program office, Mr. Silver and Mr. Frantz. These 
two political appointees at the front lines of the loan program 
were responsible for safeguarding taxpayers from undue risk, 
and they failed in that task. In the case of Mr. Silver, 
instead of protecting taxpayers, evidence has emerged that he 
actively aided companies in pushing through their loan 
guarantees, despite the risk to taxpayers.
    The close political and financial ties many of these 
companies had to the Obama Administration are remarkable. We 
have a trillion dollar deficit, sky-high unemployment, and 
instead of getting people back to work, taxdollars were 
directed to friends and political allies. Allowing the DOE to 
play venture capitalist gods with the people's money is a 
mistake we should never allow to happen again.
    For nearly two months, Chairman Issa and I have been 
requesting that Secretary Chu come back to testify before the 
Committee to explain developments uncovered in our 
investigation. So far, Secretary Chu has been unwilling to come 
and explain these developments. In fact, the Department of 
Energy has obstructed our efforts at every step of the way.
    Just this week the DOE actively interfered with our efforts 
to obtain documents from Mr. Silver prior to this hearing. Many 
people don't realize that the Obama Administration is not the 
first to experience the folly of loan guarantees. When 
President Carter authorized $20 billion for an alternative 
energy loan guarantee program, taxpayers lost a tremendous 
amount of money. Afterward, many agreed we should never issue 
loan guarantee for clean energy projects again. That debacle is 
detailed in the Committee's report released in March of this 
year.
    However, there are another three companies in bankruptcy 
and, unfortunately, it seems safe to say that Abound will not 
be the last to fail.
    I did not vote for the stimulus which provided these funds 
and, frankly, I find it absurd that the President is trying to 
force expensive so-called green energy down the throats of the 
American people. However, despite my disagreements on the 
policy, I think we can all agree that there is something 
fundamentally flawed about the implementation of this policy by 
the Department of Energy and its Loan Program Office, which has 
rewarded friends of the Administration at the expense of the 
American people.
    With that, I will yield to the gentleman from Ohio for his 
opening statement.
    Mr. Kucinich. Thank you very much, Mr. Chairman. I welcome 
the opportunity to hear from the witnesses today, and although 
I am sure that each of you will provide the Subcommittee with 
valuable testimony, I am concerned that my colleagues in the 
Majority have other interests.
    And even before we received a single document from the 
Department of Energy or one of the loan guarantee recipients, 
our Chairman called the 1705 program a broad scandal, 
characterized by allegations of pay-to-play relationships, and 
yet we found no evidence of such a scandal or cronyism. And I 
think it is really important for this Committee to proceed from 
facts. We may assume some things, but we shouldn't be making 
statements based on our assumptions; we should be making 
statements based on facts that the Committee process uncovers. 
I think that is a much more serious way to proceed with the 
work of this Committee.
    What this Committee has discovered is that Democrats and 
Republicans alike have consistently supported the loan 
guarantee program, whether here in Congress, in State Houses 
across this Country, or in the private investor community. 
Meanwhile, throughout this investigation, there is a real 
scandal that has been underneath it that we need to address, 
and that is the systematic, illegal dumping of subsidized 
Chinese solar panels in the U.S. So we are attacking our own 
business people here. Meanwhile, the Chinese are eating our 
lunch in this market while we are fighting with each other. It 
doesn't make any sense at all.
    In December 2011, the United States International Trade 
Commission found that the American solar industry ``materially 
injured by reason of imports from China.'' In May the 
Department of Commerce reached a preliminary determination that 
China was dumping solar panels in U.S. markets. Now, this is in 
violation of U.S. trade law. Now, there is an effort to level 
the playing field, so the Commerce Department proposed a 30 
percent tariff on Chinese solar panels.
    Today you will hear from the former heads of Abound Solar 
about how illegal Chinese dumping hurt its ability to compete 
and ultimately contributed to the company's bankruptcy. We will 
also hear again from Greg Kats, a venture capitalist with 
substantial experience in the renewable energy sector, who will 
tell us that China's aggressive actions threaten U.S. 
businesses and job creation, and we should be investing more, 
investing more, not less, in green technology to promote our 
economic and environmental future.
    I mean, think about it, Members. If we direct our attention 
to attacking each other and wipe out opportunities for American 
businesses to be able to grow in this sector, China then seizes 
the market and we basically open the door for it to happen 
while they are dumping. So we have anti-competitive conduct 
happening with one of our major trading partners, and instead 
of focusing on that, which they are still trying to do, and I 
would urge my colleagues on this Committee we should spend some 
time looking at this. This is something we should be able to 
work together on. And if we are able to do that, then we might 
look at the question of the U.S. solar industry in a different 
light.
    Do they have troubles? Yes. Is it our responsibility to 
look at those troubles? Absolutely. I have never said that this 
Committee doesn't have an obligation to look at the problems 
within the U.S. solar industry and the financing packages. We 
should do that. That is what we should do.
    But there is another issue going on here that needs to be 
addressed, because if we wreck the opportunity for 
entrepreneurs in the solar industry to be able to succeed, and 
ignore what China is doing with their dumping of subsidized 
solar panels in the U.S., we are going to wake up someday and 
ask, hey, what happened, how come America isn't in this solar 
panel business and China has the whole game?
    So just a few thoughts for my friends today before we start 
this hearing. Thank you.
    Mr. Jordan. I thank the gentleman.
    I will now yield to the gentleman of the full Committee, 
the gentleman from California, Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    My good friend from Ohio, Mr. Kucinich, points out that 
China cleaned our clock in the solar panel business. The 
question that this hearing is not on is why is anyone 
surprised. China wasn't a new competitor. China effectively 
dominates fabrication of chips and other affordable 
semiconductors. You don't get your toys or your clothing from 
Cleveland, my hometown, Mr. Kucinich's hometown.
    So we could have a discussion, as this Committee has, on 
how Secretary Chu's folly of believing that mandating a market 
and then funding a market of production in the U.S. somehow was 
going to stop the market forces that had done so well in so 
many other areas of the electronics industry from taking 
effect. We can have that discussion, but not as long as this 
Administration continues to have an attack on unsubsidized 
forms of energy, continues to attack every possible way in 
which we could compete against China with affordable energy.
    The fact is this hearing today is on freedom of 
information. This is on the Presidential Records Act. This is 
on every law that requires that the Executive Branch maintain 
records that are available to Congress, to the public, and to 
the Archives of the President.
    Jonathan Silver is not the first, nor is he likely to be 
the only, person that we will discover decided that Gmail or 
Hotmail was a convenient way to keep out of the limelight, if 
you will, and the accountability their communication. Certainly 
today, as we look at some of the loan-related emails, Jonathan 
Silver and others were scheming to ensure that the right people 
got their loan guarantees and, in fact, many of the emails are 
clearly outside the element of pure merit and public 
accountability.
    Mr. Chairman, this loan guarantee scandal will go on and we 
will discover, as we already have, that Secretary Chu, 
Secretary Bryson, and others actively created a market and 
falsely allowed it to appear as though it would succeed, 
ultimately leading to the inevitable bankruptcies.
    But today the most important, thing, Mr. Chairman, that I 
want you to get out of this hearing, and that we all need to 
get out of this hearing, is the idea that Gmail or Hotmail is a 
great way to circumvent laws that make your communications in 
the Executive Branch public record can be abrogated simply by 
opening a free account. That is what I am concerned about here 
today. That is ultimately a scandal that did not begin on the 
watch of this President.
    There is no question that with Chairman Waxman there were 
questions about emails. I remember some about emails to the 
Republican National Committee and the Chairman, when he sat in 
your chair, Mr. Jordan, in fact, Chairman Waxman issuing 
subpoenas.
    But in this case we are not looking for some backdoor 
communications on politics with a political entity; we are 
looking at the day-to-day business of political and career 
individuals at key cabinet positions, key administration 
positions routinely circumventing the very laws that are in 
place to create accountability.
    Mr. Chairman, I appreciate the work you did in getting the 
compliance for today's hearing.
    Quite frankly, Mr. Silver, I appreciate you and your 
attorney's willingness to quickly act and produce documents 
directly to us.
    I will, once again, look at the Ranking Member of the 
Subcommittee and say when are you going to say shame on your 
Administration for trying to block our legitimate discovery? 
The Secretary and the Department of Energy specifically tried 
to prevent us from getting these documents, asking Mr. Silver's 
attorney, ordering him, effectively, to deliver the documents 
to them so that they could limit and redact them, so they could 
decide what Congress was entitled to.
    The imperial presidency must end. The imperial presidency 
must end, and it will not end until my colleagues on the other 
side of the aisle recognize that it is not acceptable under 
this President, and if we don't stop it under this 
Administration, we can count on administrations to come of 
either party simply ignoring Congress and the oversight, and 
running by executive fiat a government.
    That is not the America I grew up in; Mr. Kucinich, it is 
not the America you grew up in; Mr. Cummings, it is not the 
America you grew up in; and I don't want it to be the one that 
our children grow up in.
    With that, I yield back.
    Mr. Kucinich. I ask unanimous consent to respond to my 
friend.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Ohio is recognized.
    Mr. Kucinich. I think most members here know that I am not 
someone who reflexively defends the Administration. I mean, you 
are looking at one of the few Democrats who actually took this 
Administration to court on a constitutional issue. And I defend 
the right of this Committee to get information. We are in a 
partisan climate here that makes it a little bit testy and I 
understand that.
    So I am here with the intention of saying, on the bigger 
issue, not the Chair's right to get information, not the 
Committee's right to inquire; on a larger issue here. We have 
China wiping us out on the solar industry and I am just 
concerned that we be sensitive to American business interests.
    And there is one other thing that my friend mentioned to 
me, Mr. Jordan, and ceertainly not the topic of this hearing, 
but look at how bad this is. I mean, when you have China even 
supplying the uniforms for the U.S. Olympic team, it shows you 
we are missing out something here. Why couldn't they have been 
made in America?
    So we want to make solar panels in America. How can we do 
it? I would say that given the business acumen of the Chair, 
and it is severely extraordinary, I am sure that you could 
provide some suggestions to the Administration on how they 
could run the program better. But as far as inquiring and 
providing documents, after a while I don't know where this 
goes, but I am glad to be here. We have the right to ask 
questions and I am hopeful we will pursue this question about 
China.
    Thanks.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Maryland, the Ranking Member of the full 
Committee, is recognized.
    Mr. Cummings. Thank you very much, Mr. Chairman. I thank 
you for calling this hearing and I am looking forward to the 
testimony of the witnesses. I have already heard the word 
falsely; I have heard the word scandal; even heard you, Mr. 
Chairman, say the President rewarded contracts to friends of 
the Administration at the expense of the American people. We 
have not heard one syllable yet from the witnesses, and I 
refuse to draw conclusions before I hear from them, and I think 
that is what this hearing is all about.
    I do say to all of the gentlemen who are seated that you 
have heard the words uttered here, and I hope that you will 
have a response to them.
    I want to emphasize one point, which is that one of the 
most significant struggles Abound faced involved the alleged 
dumping of Chinese solar panels into the market. While some may 
play that down, I think that is very significant.
    I want to highlight what this allegation actually means. It 
means that China is accused of selling solar panels into the 
United States at prices lower than their actual cost to make 
them. Why would they do that? They would do that to undermine 
United States businesses, you know, the job creators that we 
hear about so often.
    In my opinion, this is the main issue we should be focusing 
on today, instead of turning this into an election year 
campaign issue.
    One argument used to attack the Department's Loan Guarantee 
Program has been that it exposed taxpayers to excessive risk as 
a result of DOE's bias towards approving loans without regard 
to warning signs. These conclusions are contrary to the facts.
    Today we will hear from an industry expert who will explain 
why, despite the failure of some projects like Abound, the 
risks of the Department's Loan Guarantee Program are 
substantially lower than Congress expected when they created 
the program. Current and former employees will testify about 
the Department's effort to minimize these risks both in the 
overall portfolio and in the individual transactions.
    The Department structured its program to protect the 
taxpayers. For example, Abound's loan guarantee was structured 
to require the company to achieve certain milestones before it 
could draw down funds in allotted amounts. When it could not 
meet some of these milestones, it was prohibited from receiving 
additional payments. As a result, Abound's draws were limited 
to about $70 million on a loan guarantee of $400 million.
    As indicated in the chart behind me, the total value of the 
loan program Congress created was about $16 billion. 
Recognizing that there were risks involved in the program, 
Congress set aside about $2.5 billion to cover any potential 
losses in the portfolio. To date, however, losses have been 
only a small fraction of that amount. Certainly, we wish that 
there were no losses. There have been $648 million, or about 
one-quarter of the amount Congress anticipated.
    Contrary to the Majority's repeated claims, the Committee 
has identified no evidence of political cronyism within the 
Department's loan program. Abound's project received support 
from the entire, and let me repeat that, the entire Indiana 
congressional delegation, that is, Republicans and Democrats; 
and the Majority has not involved Indiana Governor Mitch 
Daniels to testify today regarding his personal, personal 
support for Abound, including his offer to provide tax credits 
so Abound would house the manufacturing plant in his State. So 
when I hear words like, rewarded, President Obama rewarded 
contracts to his friends at the expense of the American people, 
well, I guess Mitch Daniels must be one of those friends.
    The failure of Abound is a disappointing reality, but a 
close look at the program reveals that applicants received wide 
bipartisan support, that very little taxpayer money has been 
lost, and that the program has resulted in some of the largest 
renewable energy projects in the world.
    I go back to what Mr. Kucinich said a few minutes ago. You 
know, when we talk about taxing the rich, what we constantly 
hear is we have to protect the job creators. You hear that over 
and over and over again as talking points. Well, you know, 
these businesses are job creators, and some businesses do not 
do as well as others, but I want us to keep in mind this 
Chinese issue; it is significant and hopefully the testimony 
today will shed more light on this so that we will be able to 
draw some conclusions based on facts, and not allegations.
    Thank you very much.
    Mr. Jordan. I thank the gentleman. I would just say only in 
Washington would the loss of taxpayer money be viewed as a 
success when it wasn't quite as much as we thought it might 
have been.
    Mr. Cummings. Would the Chairman yield?
    Mr. Jordan. I would be happy to yield.
    Mr. Cummings. Mr. Chairman, nobody said that. I didn't say 
that.
    Mr. Jordan. You didn't say that, but that is what the chart 
said.
    Mr. Cummings. All right, fine.
    Mr. Jordan. Said we lost money----
    Mr. Cummings. Let me----
    Mr. Jordan. I would just make one point: the program isn't 
over yet. We just had the third--we may have a lot more coming, 
we don't know. That is what we are trying to get at.
    Mr. Cummings. Mr. Chairman, I understand that and I agree. 
The fact is what I was trying to say is that Congress 
apparently anticipated that there would be losses, and you are 
right, the program is not over. In business, and I have been in 
business, sometimes you do have to take risks; and 
unfortunately we had some factors in this situation that I 
think hurt this company. Certainly, all of us wish that there 
would be no losses, but in any business you are going to have 
some losses.
    If you are talking about a whole group of businesses you 
are going to have some losses at some point. I am not saying 
that it was great. Nobody wants to lose a dime. But Congress 
apparently anticipated losses, and all I am saying is that only 
a fraction of that has been used, that money set aside for the 
guarantee.
    Mr. Jordan. I think the gentleman underscores the 
fundamental point: in business, when there are losses, the 
people who suffer the losses are the people in the private 
sector, not the American taxpayer; and that is a key 
distinction between this program and what happens in the 
marketplace.
    The gentleman from Pennsylvania wishes to make an opening 
statement and is recognized.
    Mr. Kelly. Thank you, Mr. Chairman, and thank you for 
holding this. I think the key to this is we are talking about 
protecting job creators, but basically it is protecting the 
American taxpayers. That is who has underwritten all these 
different loans. So when we talk about that, I think it is 
fascinating, and we will get a chance, maybe, later on to look 
at what their status was as they were being considered for 
these loans. In the real world, no bank, no lender would have 
given these monies out.
    So how do you navigate that territory? I think it is going 
to be fascinating, but we will take a look at it and take a 
look at how ratings actually are reflected and what an A status 
means, what a B status means, as you go down the line and see 
the number of these companies that, really, in the real world 
would not have been able to receive funding.
    Mr. Chairman, I appreciate you holding the hearing and it 
is about protecting taxpayers' investments.
    Mr. Jordan. I thank the gentleman.
    The gentlelady from New York, the Vice Chairman of the 
Subcommittee is recognized, Ms. Buerkle.
    Ms. Buerkle. Thank you, Mr. Chairman.
    Good morning to our panelists this morning.
    Just a couple of brief opening remarks.
    I want to just respond to the gentleman from Ohio and his 
comments. We are not here attacking our own businesses. That is 
not what this hearing is about. This hearing is the legitimate 
role of the Oversight Committee, and what we are doing here 
this morning is protecting the American taxpayers. We are in a 
climate right now where there is so much discussion about 
raising taxes on the American people, and if anyone can justify 
raising taxes on the American people, when we are throwing, at 
this point, $70 million out the window, it is inexcusable. It 
is just, we cannot raise taxes on the American people when this 
kind of waste is going on and we are abusing and misusing the 
American taxpayers' dollars.
    I also want to make just one other comment, and that is why 
we want to emulate China. This is the United States of America. 
We believe in free enterprise. We believe that an individual 
can grow a dream and should be able to do that without the help 
of the Government, and it is that individual who will grow that 
dream. It is his hard work, it is his staying up at night, 
worrying about a bottom line. That is the essence of the United 
States of America.
    So it is not my desire to ever wish for, hope for, look at 
China and say that is what we want to look like. We are the 
United States of America, the greatest nation in the history of 
mankind.
    I yield back. Thank you, Mr. Chairman.
    Mr. Jordan. I thank the gentlelady.
    Any other member wish to make a statement?
    [No response.]
    Mr. Jordan. If not, we will get to our panel. Eight members 
of Congress, we got that done in half an hour. That is a pretty 
good clip, Mr. Ranking Member.
    We will start with Mr. Craig Witsoe is the former Chief 
Executive Officer of Abound Solar. We welcome you to the 
Committee today.
    Mr. Tom Tiller is former Chairman of the Board at Abound 
Solar. Thank you for being with us.
    Mr. Davis Frantz is the Acting Executive Director of the 
Loan Programs Office at the U.S. Department of Energy; and Mr. 
Jonathan Silver is the former Executive Director of the Loan 
Program at the Department of Energy.
    You guys know the deal. We have to swear you in per the 
rules of the Committee, so if you would please stand and raise 
your right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witnesses respond in the affirmative.]
    Mr. Jordan. Let the record show everyone answered in the 
affirmative.
    We will go down the line, starting with Mr. Witsoe. You 
guys know you get five minutes, more or less, but keep it at 
five if you can, and then we will get to the Committee's 
questions.
    So, Mr. Witsoe, you are recognized for your five minutes.

                       WITNESS STATEMENTS

                   STATEMENT OF CRAIG WITSOE

    Mr. Witsoe. Thank you, Mr. Chairman. As you said, my name 
is Craig Witsoe. I served as the CEO of Abound Solar for the 
eight months prior to July 2nd, when the company, 
unfortunately, suspended operations under the Chapter 7 
bankruptcy filing.
    First, I would like to say that we are very grateful for 
the dedication and the hard work of our talented employees; the 
support and the integrity of our investors and the board 
members; and, of course, for the support granted under the DOE 
Loan Guarantee Program. We do hope that today's discussions 
will be beneficial to better understand how the U.S. can best 
compete in this important, but also very challenging, global 
solar panel market.
    Abound was formed as a startup company in 2007 based on 
advanced research started in the late 1980s at Colorado State 
University, in collaboration with the National Science 
Foundation, as well as the National Renewable Energy Lab. We 
had research and development, along with advanced manufacturing 
in Colorado, and had planned an additional manufacturing 
expansion in Indiana.
    Abound produced thin-film Cadmium Telluride, or Cad-Tel, 
solar panels, and this was important because many agree that, 
if produced in large quantities, at large scale, Cad-Tel panels 
can be made in America at lower cost per watt than the 
traditional crystalline-silicon modules produced by many 
Chinese companies today.
    At the time our DOE loan was originated, Abound and First 
Solar were the two companies in the world with significant Cad-
Tel production experience. In October of 2011, General Electric 
also announced that they would build the Country's largest U.S. 
solar panel manufacturing plant, also based in Colorado, and 
that they would use Cad-Tel technology as well. In recent 
months, Abound was cooperating with the U.S. Photovoltaic 
Manufacturing Consortium and NREL to encourage industry 
collaboration which could further accelerate the U.S. 
advancement of Cad-Tel.
    Abound's funding came from more than $300 million in 
private investment and the $70 million that we have mentioned 
today from the potential $400 million authorized under the 1705 
DOE Loan Guarantee Program. Funds were used to complete and 
start up two production lines in Colorado, which enabled a 
nearly doubling of panel efficiency, from 45 watts per panel in 
2009 to 85 watts per panel in 2012.
    Abound's technology and business had made solid progress 
until about the second half of 2011, when the panel prices 
dropped by 50 percent in a year due to very aggressive price 
cutting from Chinese competitors using the older crystalline-
silicon technology. With a reported over $30 billion in 
government subsidies, Chinese panel makers were able to sell 
below cost and put Abound out of business before we were big 
enough to pose a real competitive threat to China's rapidly 
growing market share.
    Given these challenging market conditions, the DOE didn't 
release any further funds to Abound after August of 2011, 
including reimbursement for significant funds Abound had 
already spent to complete its second manufacturing line in 
Colorado. While we understood the increasing market risk 
driving this decision and understood the technical 
justifications in the loan documents, we also knew that it put 
enormous financial strain on our small company.
    In February of 2012, Abound made the very difficult 
decision to cease production of its first generation of panels, 
conserve our cash, and focus our resources on accelerating 
development of a higher efficiency, next-generation module. 
This module had already been verified by NREL to produce a very 
competitive 85 watts per panel.
    We believed that this next-generation product, along with 
further private financing, could keep the company competitive 
and enable a restart of production in Colorado. Abound hired a 
reputable outside firm to lead a process of soliciting the 
needed private financing and, from a large pool of identified 
potential investors, made final management presentations and 
facility tours to interested parties in mid-May, as well as 
late June of this year.
    Unfortunately, in the end, the involved parties were unable 
to agree upon terms and negotiations were ended, and on June 
28th we announced to our employees that Abound would have to 
suspend all operations.
    This very fast and severe decline in the market conditions 
for solar panels has affected many U.S. companies, ranging from 
startups like Abound to even the largest U.S. corporations. The 
same week that Abound announced its closure, GE, also citing 
market price declines due to Chinese competition, unfortunately 
announced that it would delay its own Cad-Tel solar panel 
production plans by at least 18 months while it worked on a 
next-generation, higher efficiency module.
    Around the world there are similar accounts of the impact 
of aggressive actions by China. While Abound was in agreement 
with the recent Commerce Department decisions to place U.S. 
import tariffs on Chinese modules, these actions were simply 
too late for our company.
    This isn't the way that any of us wanted Abound's story to 
end, certainly, but we hope that the technology we have 
developed can still, in some form, help the U.S. to better 
compete in the next generations of solar panel manufacturing. 
We are very appreciative of the investments of our investors, 
as well as the DOE.
    Our former employees should be proud of their technical 
innovations and their personal courage to pursue new technology 
for American manufacturing and not give up until all reasonable 
paths were exhausted. Abound believes that competitive solar 
energy can be important to the U.S. energy security and job 
creation, and that the longer-term consistent renewable energy 
policy can encourage further private investment.
    I hope that today's discussion will be constructive and 
helpful to our common goal that the U.S. regain competitiveness 
in this sector and prevent the loss of technology leadership.
    Thank you.
    [Prepared statement of Mr. Witsoe follows:]

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    Mr. Jordan. Thank you.
    Mr. Tiller?

                    STATEMENT OF TOM TILLER

    Mr. Tiller. Good morning, Mr. Chairman, Ranking Member 
Kucinich, and members of the Committee. My name is Tom Tiller. 
From January 2010 until June 2012 I worked for Abound Solar, 
first as Chief Executive Officer and then as Chairman of the 
Board.
    Abound, as you know, filed for bankruptcy on July 2nd, 
2012. On June 28th, 2012, when we suspended operations, I also 
resigned as Chairman. Declaring bankruptcy was extremely 
disappointing for all of us who cared deeply about Abound and 
who had invested our own time, our own money, and our own 
effort in trying to make this company a success. The Department 
of Energy was our partner in that effort, and I am personally 
disappointed that the company was not able to provide the DOE 
and the American taxpayers with a positive return on its 
investment. I appreciate the opportunity to appear this morning 
and speak to you about my time at Abound.
    I came to Abound after spending nearly 10 years as CEO of 
Polaris Industries, a $2.4 billion global leader in the power 
sports industry. During my time at Polaris, we successfully 
introduced more than 150 new products and tripled the value of 
the company. Prior to Polaris, I had worked at GE in a variety 
of engineering and senior leadership positions. All together, I 
have spent nearly 30 years running and supporting American 
manufacturing operations of technology-based companies.
    The opportunity to join Abound was unique and exciting. The 
company was involved in the cutting edge of solar energy 
innovation and had a proprietary manufacturing technology that 
has the potential to significantly reduce the cost of solar 
power. The culture of the company was also infectious. People 
were excited to do something that mattered for the Country. I 
believed in the technology and, more importantly, the 
outstanding people that the Company had at all levels, enough 
to make a professional commitment and a personal financial 
investment in the business.
    It is my view that for any company to be successful in the 
solar industry, it needs two things: winning technology and the 
scale necessary to drive down cost. At Abound, that meant the 
company needed to develop and execute an aggressive growth plan 
that would enable it to quickly develop its products at large 
scale.
    Most of the capital that Abound raised to fund this plan 
was equity financing raised from professional investors. 
Indeed, in addition to obtaining a loan from DOE, we raised 
approximately $300 million of equity. I can assure you that 
with every round of equity financing, informed outsiders 
conducted their own independent analysis of the current state 
of the company in an effort to ensure they would receive a good 
return on their investment. Many times teams of investors and 
engineers met Abound's people and went through the plant, the 
patents, the manufacturing process, and the financial plans. 
Ultimately, these seasonal professionals made the decision that 
investing in this company was a good bet.
    The DOE's review of the Abound loan application was well 
underway when I joined the company in January of 2010. During 
my time with the company, there were many inquiries, visits, 
data requests, and technical and financial evaluations from 
DOE. The company prepared and revised detailed financial models 
and answered hundreds of questions.
    In the end, it took nearly two years to complete the 
application and approval process for the Abound DOE loan, which 
closed in December 2010. Although the total DOE loan amount was 
for $400 million, Abound only drew down about $70 million, 
which was used for the construction of manufacturing lines in 
Colorado. The company stopped drawing down DOE funds entirely 
in the third quarter of 2011.
    Any investment in a new business carries risk. Some may ask 
why Abound ultimately succumbed to that risk, even with 
approximately $300 million in private investment and $70 
million from the DOE. In my view, the single most important 
reason was that there was an abrupt and major change in the 
market for solar panels which reduced the selling price of 
Abound's products and made it extremely difficult for an early 
stage company like Abound to scale in these changed market 
conditions.
    Over the past 25 years or so, the solar market has grown 
rapidly and consistently, with a considerable acceleration in 
2009 and 2010. Things changed when the Chinese government 
reportedly provided approximately $35 billion in subsidies to 
the major Chinese solar producers. These investments resulted 
in substantially more production capacity than could possibly 
be absorbed by the market, so the price of solar panels fell 
dramatically, by more than 50 percent in just one year. Such a 
severe market change made it difficult for Abound and others to 
survive.
    No one is more disappointed than I am that Abound was not 
successful. I am saddened by this result for the nearly 400 
employees who made such a tremendous contribution to the 
company, the investors who invested hundreds of millions of 
dollars, the communities that supported and believed in 
Abound's vision, the suppliers who partnered with the company 
at every stage, and the customers who trusted the company to 
provide a long-term energy solution.
    I appreciate the chance that the private investors and DOE 
took when they chose to support the company and its role in the 
future of American renewable energy technology. Unfortunately, 
we were not able to succeed.
    With that overview, I am happy to answer any questions that 
the members of the Subcommittee may have.
    [Prepared statement of Mr. Tiller follows:]
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    Mr. Jordan. Thank you.
    Mr. Frantz?

                   STATEMENT OF DAVID FRANTZ

    Mr. Frantz. Chairman Jordan, Ranking Member Kucinich, and 
members of the Committee, thank you very much for the 
opportunity to testify before you today. My name is David 
Frantz and I am the Acting Executive Director of the Department 
of Energy's Loan Programs Office, the LPO. In the way of an 
introduction, I would emphasize the point that I am a career 
member of the Senior Executive Service of the U.S. Government; 
I am not a political appointee.
    I was the first employee of the LPO. Prior to joining the 
Department to stand up the program, I previously served over 10 
years with the Overseas Private Investment Corporation as 
Senior Management Project Finance Position, underwriting and 
structuring major energy infrastructure projects around the 
world. Prior to this government service, my 40-year career has 
been entirely devoted to project finance in the private sector. 
Previously, I served as a U.S. Naval officer and I am a Vietnam 
combat veteran.
    Before highlighting the progress we have made over the past 
five years, I would also like to acknowledge and commend the 
LPO staff for their unswerving commitment and diligent work 
associated with accomplishments of the program. The staff is 
one of the finest project finance teams assembled in the world 
today, and its record over the past years unprecedented by 
world standards.
    I would hasten to add that the GAO, in its recent audit of 
the DOE Loan Guarantee, has acknowledged that commercial 
lenders interviewed by GAO stated that LPO's underwriting and 
due diligence standards are as rigorous as or more rigorous 
than those in the private sector.
    As of today, the LPO has committed or closed $35 billion in 
direct loans or loan guarantees, which finance nearly three 
dozen projects, with total project costs greater than $55 
billion. When the Section 1705 program ended, on September 
30th, 2011, it included a portfolio of over $16 billion and 28 
renewable projects. Collectively, the LPO projects are expected 
to support approximately 60,000 jobs.
    Earlier this year, an independent consultant, Herb Allison, 
evaluated both the monitoring efforts of the Loan Programs 
Office and its portfolio. Mr. Allison's report concluded that 
the estimated long-term cost of outstanding portfolio is $2.7 
billion, roughly $200 million lower than the Department's most 
recent estimate.
    As the global energy opportunity grows, so does the 
competition. Countries throughout Europe, Asia, and the Western 
Hemisphere have decided that energy technologies are critical 
to their national economic security in the 21st century. Many 
countries have established supportive policies and are making 
major investments in everything from renewables to electric 
vehicles to smart grids and the next generation of biofuels. In 
2010 alone, China provided more than $30 billion in credit to 
the country's largest solar manufacturing through the 
government controlled China Development Bank.
    Through the Loan Program, the Department is working to 
answer the challenge from China and other countries by 
supporting a large number of solar projects.
    With respect to the Abound transaction specifically, in 
December 2010, as you have heard, the Department issued a loan 
guarantee to Abound Solar Manufacturing to manufacture the 
next-generation solar panels. It was intended to partially 
finance construction of two solar panel production lines in the 
existing facility in Colorado and the acquisition and buildout 
of a second facility in Tipton, Indiana.
    Abound developed and demonstrated a process for producing 
thin-film solar panels at a cost that was expected to be 
substantially less than the traditional solar panels. When the 
cost of polysilicon was high, Abound's technology offered the 
promise of a lower cost alternative that would be built here in 
the United States. As of December 2011, Abound had raised more 
than $300 million, as the officers have indicated, in private 
equity from large and established investors and venture capital 
firms.
    By the time DOE offered Abound a conditional commitment in 
the summer of 2010, the price of polysilicon had begun to fall. 
However, prior to financial close, the Department's independent 
market consultant for the transaction believed, as did the 
Department, that the price of polysilicon would continue to 
drop, but only by approximately 2 percent a year over the next 
10 years.
    Instead, prices continued to fall much more than projected, 
including a 47 percent decline in 2011. So while the market 
experts concluded that the average selling price for PV cells 
would decrease approximately 20 percent, they actually 
decreased 47 percent last year alone.
    As Mr. Allison's report noted, DOE has the ability to 
reduce or mitigate risk in a portfolio over time and has robust 
tools for protecting itself from elective risk. One of those 
tools is financial and technical milestones that must be met 
before additional funds are disbursed. When the price of the 
solar panels dropped, Abound's product was no longer cost-
competitive and the company was unable to meet some of those 
financial milestones.
    Accordingly, in August 2011, the Department halted 
disbursement on the loan and of the $400 million loan Abound 
was originally approved for, the Department disbursed 
approximately $68 million. Because of the strong protections 
DOE put in place, the Department has already protected more 
than 80 percent of the original loan and expects to recover a 
portion of outstanding loan through the course of bankruptcy 
proceedings.
    Securing America's economic leadership in the future 
requires that we support innovation and deployment today. The 
troubles of some segments in the solar manufacturing market 
should not overshadow the great work the Department's loan 
programs have done to date, or the need to continue to find 
ways to support clean energy development in this Country.
    That said, developing a robust clean energy manufacturing 
sector in the United States is crucial to our long-term 
national interests and would help enable American companies 
work to attain tools needed to succeed in this competitive 
space. And one of the most important tools, as our global 
competitors have learned, is financing on reasonable terms, 
wisely targeted and responsibly deployed.
    The question is whether we will take advantage of this or 
whether we will simply cede leadership in clean energy to other 
nations and watch as tens of thousands of jobs are created 
overseas. We were once the leaders in this field and we can be 
again, all the while with the interest of the U.S. taxpayer as 
its foremost concern.
    Thank you, Mr. Chairman, and I look forward to your 
questions.
    [Prepared statement of Mr. Frantz follows:]
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    Mr. Jordan. Thank you.
    Mr. Silver.

                  STATEMENT OF JONATHAN SILVER

    Mr. Silver. Chairman Jordan, Ranking Member Kucinich, and 
members of the Subcommittee, my name is Jonathan Silver. I am 
the former Executive Director of the Loan Programs Office at 
the Department of Energy. Currently, I am a senior visiting 
fellow at Third Way, a centrist think tank where I work on 
energy policy and energy finance. I am also a senior advisor on 
energy investments for a leading private equity firm and sit on 
the board of several energy companies.
    My work on the Loan Program was based on more than 25 years 
of business experience as a management consultant at McKinsey & 
Company, an executive with experience in managing complex 
organizations, a managing director of one of the Country's 
largest and most successful hedge funds, and as the cofounder 
of a successful venture capital firm. In addition, I have 
served in government before, as a senior policy advisor to both 
the Secretaries of Commerce and Interior, and have testified a 
number of times before Congress.
    Although I have not been with the program for close to a 
year, it is my privilege today to join Mr. Frantz in 
representing the efforts of the nearly 200 program 
professionals and the many private sector advisors who worked 
day and night over the past few years to successfully implement 
this congressionally mandated program. I remind the members 
that the Loan Program Office is an implementing agency, not a 
policy making group. Its work is driven by congressional 
legislation.
    We are proud of the program and, on the whole, the Loan 
Program has been a success. While acknowledging the inevitable 
and expected losses, we should remember that this program also 
provided financing for such projects as the world's largest 
wind farm, the world's largest PV solar plant, the world's 
largest concentrated solar power facility, a new generation of 
electric vehicles, and the first nuclear power plant to be 
built in the U.S. in the last 30 years. These projects will 
generate enough clean energy to power millions of homes and 
businesses, save hundreds of millions of gallons of gas a year, 
and generate tens of thousands of jobs.
    Even more important, the portfolio is actually in good 
shape. Nine solar projects and several wind farms are already 
generating power. To date, total losses on the portfolio are 
under 3 percent. This compares favorably to loss ratios in the 
private sector for far less innovative energy projects. The 
loss on the Abound project represents a fraction of 1 percent 
of the total 1705 financings. No losses are desirable, but the 
dialogue around the early outcomes is out of proportion to the 
actual results.
    Because I am no longer at the Department, I do not have 
access to the analysis done for the Abound project. As a 
result, I cannot comment in detail about the transaction. What 
I can do, however, is give you a flavor for what we tried to do 
on this and every project.
    Abound had a unique manufacturing process which, at scale, 
would significantly lower the cost of producing thin-film 
panels. The technology was analyzed multiple times, including 
by the Bush Administration, which thought highly enough of it 
to award the company millions of dollars for development. The 
Abound loan team would have included finance, technical, 
scientific, legal, and environmental career professionals, 
supplemented by independent engineering, legal, financial, and 
accounting firms.
    The loan would have gone through multiple reviews 
independent of the Loan Programs Office, including detailed 
reviews by career credit professionals at DOE and career staff 
at OMB, Treasury, and the National Economic Council. The 
transaction structure, known as production line financing, was 
created to manage the risk in this transaction.
    Among many other requirements, applicants had to 
demonstrate sufficient financial backing from the private 
sector. Abound raised over $300 million in private equity 
before the Government issued its loan. The loan was designed 
with significant technical and financial milestones. When 
dramatic changes in the solar panel market made it impossible 
for the company to meet some of those, the remainder of the 
loan was frozen.
    Congress clearly understood that these projects would 
entail risk. That is why it initially set aside $10 billion to 
cover potential losses before a single loan was ever made. 
Three independent analyses of the portfolio have now been done, 
including reviews by the Congressional Research Service, 
Bloomberg Energy, and a comprehensive review of the portfolio 
by Herb Allison, a former Bush Administration Treasury 
official. All of them concluded that the transactions were well 
structured and that potential losses were likely to be 
meaningfully below the loss reserve established by Congress.
    Even though Congress planned for losses, losses hurt. These 
are taxpayer dollars and we worked hard to ensure that they 
were protected to the fullest extent possible. Applicants will 
tell you that our term sheets were tough and were designed to 
protect our Government.
    When a loan fails, we can, and should, seek to understand 
what happened, and oversight is an important tool in doing 
this. We should start with the facts. Industry dynamics change; 
other countries compete with us, sometimes unfairly; new 
technologies and new business models emerge.
    This loan, like all the loans underwritten by career 
professionals supported by us as specialists. It was reviewed 
by career professionals from multiple Executive Branch offices. 
It was not rushed; the review took place over several years. It 
was not given to friends.
    Indeed, no one in the loan program had any idea what 
individuals were involved in this or any other transaction, nor 
did we care. And, as has been reported, there were a large 
number of Democratic and Republican investors in these deals, 
which ultimately is not surprising. Investors care about 
returns, not politics, and after they did their own independent 
analyses, they committed billions of equity dollars to these 
projects. Our work followed and built on theirs.
    Investors care about profits, but all Americans care about 
ensuring that the Country remains strong and competitive in the 
21st century. The next decade is about energy competition, and 
clean and renewable energy is the global market battleground. 
Other countries understand this. China, Korea, Japan, India, 
the UK, Germany, Italy, and a host of others are moving rapidly 
to seek a piece of this vast new market. The winners will enjoy 
more and better jobs, lower energy prices, greater energy 
security, and better health and environmental outcomes.
    If the United States is to compete successfully in next-
generation energy, we need to support it, just as we have 
traditional sources of energy in the past. Thank you.
    [Prepared statement of Mr. Silver follows:]
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    Mr. Jordan. Thank you, Mr. Silver. Mr. Silver, let me start 
with you. We are going to start with when you first got the job 
at the Department of Energy.
    If I could have the staff put up the first email.
    [Slide.]
    Mr. Jordan. It may be tough to see, but we can bring you a 
copy if we need to. This is the interview schedule, it says 
Interview Schedule for Jonathan Silver. This is back in 2009. 
You were going to interview on a Tuesday with Mr. Steve 
Isakowitz; Wednesday you had a couple interviews with Dan 
Poneman, Rod O'Connor; and then Friday with Matt Rogers. So 
this was when you were applying for the job, you were going to 
interview with these important folks at the Department of 
Energy.
    Let's go next to the second email.
    [Slide.]
    Mr. Jordan. So that was an email on Monday, September 28th. 
The next one is one that you sent to Mr. Isakowitz, where you 
say, at the risk of seeming presumptuous, I want to mention 
that my wife and I are holding a small event for Al Gore at our 
home this coming Thursday evening, October 1st. So you are 
applying for the job and yet you are inviting the very folks 
who are going to be interviewing you for the job to come to a 
party you are hosting with the former Vice President. Is that 
kind of a normal practice or do you think maybe someone might 
think that is a little unusual?
    Mr. Silver. Congressman, I can't answer the question as to 
whether or not it is unusual or not for others; it would be 
typical for my wife and I to host events and to invite people 
to them.
    Mr. Jordan. But the people who are going to decide whether 
you get the job or not, or they already told you you had the 
job?
    Mr. Silver. Well, I don't know the date of this and I don't 
know exactly when I was----
    Mr. Jordan. I will tell you the date. I will tell you the 
date. It is the day before you got the interview schedule. So 
you probably knew that you were applying for the job. This was 
September 27th you sent these guys who were going to be 
interviewing you. In fact, Mr. Isakowitz was going to be 
interviewing you two days later, and you sent him an email 
saying, hey, come on over to a party we are having, Mr. Gore is 
going to be there.
    Mr. Silver. Just to clarify, obviously, I was talking to 
them about the job, but I didn't actually apply for the job; 
they reached out to me. Having said that----
    Mr. Jordan. Wait, wait, wait. You wanted the job. You had 
an interview schedule that comes out two days after you were 
inviting them to a party.
    Mr. Silver. Right.
    Mr. Jordan. So obviously you knew Mr. Isakowitz for a time 
before this? Was he a friend of yours?
    Mr. Silver. No, I had not--his name is Isakowitz.
    Mr. Jordan. So he wasn't even a friend. So that is why you 
said this seems presumptuous, because you didn't know him.
    Mr. Silver. Right.
    Mr. Jordan. But you invited him to a big party you were 
having?
    Mr. Frantz, when you applied for the job, did you invite 
the folks who were going to hire you? Did you have a party at 
your place and, I don't know, did you have Derek Jeter or 
some----
    Mr. Frantz. Mr. Chairman, the Department reached out to me 
based on my background already in government service with the 
Overseas Private Investment Corporation.
    Mr. Jordan. Okay. And when they reached out to you, did you 
say, well, the guys who are reaching out to me, was there an 
interview process?
    Mr. Frantz. There certainly was, yes.
    Mr. Jordan. Did you invite the folks who were interviewing 
you and decide whether you would get the job, did you invite 
them to a party before you got the job?
    Mr. Frantz. I did not.
    Mr. Jordan. Okay. Okay.
    I want to follow up. Let's go to the next one, where Mr. 
Isakowitz says thanks for the invite, but I need more details. 
In fact, our general counsel--which is good--would need to look 
at this before we decide to do this. And then you send him back 
a more lengthy email, you said it is a reception, not a fund-
raiser. And then you say, in the second paragraph of the email 
you sent back to him on this correspondence, I expect there 
will be about 40 people or so, generally folks we know who are 
interested in this issue and have the capacity to write 
significant checks.
    So who were some of those folks at this party, if you don't 
mind me asking? Was Mr. Tiller there?
    Mr. Silver. No, Mr. Tiller wasn't there.
    Mr. Jordan. Was Mr. Witsoe there?
    Mr. Silver. No, Mr. Witsoe wasn't there either. To be 
candid, I don't remember who was at this party.
    Mr. Jordan. What about Ms. Pat Stryker, was she there?
    Mr. Silver. I doubt it. I don't know Pat Stryker.
    Mr. Jordan. The head of Bohemian Industries, biggest 
investor in Abound Solar, bundler----
    Mr. Silver. We didn't----
    Mr. Jordan. She was not there?
    Mr. Silver. We didn't actually create the invitation list. 
This was not a fund-raiser, and what I was trying to do with 
this email, as I recall, was to give Mr. Isakowitz some 
background information----
    Mr. Jordan. Was Joe Zimlich there, the CEO of Bohemian 
Industries? Was he at the party?
    Mr. Silver. I don't think so, but I don't know him either.
    Mr. Jordan. Okay. Okay. So the fact that Pat Stryker, who 
is the founder of this Bohemian Companies and a major donor and 
bundler for the Obama campaign, over $100,000, that did not 
influence your decision to give the loan to Abound Solar?
    Mr. Silver. Not at all. I did not know who those people 
were then and I do not know who they are now; I have never met 
them.
    Mr. Jordan. Did anyone at this party that you invited folks 
at the Department of Energy to while you were trying to get the 
job, did any of those folks lobby you, talk to you about the 
Abound Solar project?
    Mr. Silver. No, sir. I knew nothing about the Abound Solar 
project.
    Mr. Jordan. Okay. Okay. Let me ask you this. While you were 
head of the loan program, how many times did you visit the 
White House?
    Mr. Silver. I don't know. I certainly went over on numerous 
occasion to attend staff meetings of various kinds with the 
staff at OMB and other agencies.
    Mr. Jordan. And at any of these meetings at the White 
House, were you there when either Pat Stryker or Joe Zimlich, 
big investors in Abound Solar project, while they were at the 
White House?
    Mr. Silver. Not to my knowledge. I don't know those people, 
sir.
    Mr. Jordan. Okay. I see I am out of time. I have a lot 
more, but I will yield to the--okay, let me do this. I will go 
to the gentleman and we will come back for the second round. I 
yield now to the gentleman from Ohio.
    Mr. Kucinich. Thank you, Mr. Chairman. I think you 
established that Mr. Silver wanted the job. The real question 
here is whether he was qualified.
    So, Mr. Silver, it has been suggested that you were 
appointed to lead this DOE Loan Program solely as a result of 
political connections. The fact is that Mr. Silver had a wealth 
of experience that made him uniquely qualified for the role. 
Now, you were cofounder and managing director of Core Capital 
Partners, a successful early stage investor in alternative 
energy technologies, is that correct?
    Mr. Silver. Yes, sir.
    Mr. Kucinich. And you graduated from Harvard University 
with honors and did post-grad work in Paris and Geneva, as well 
as receiving both a Fulbright and Rotary Graduate Fellowships, 
is that right?
    Mr. Silver. Yes, sir.
    Mr. Kucinich. Did you have any leadership experience in 
large organizations?
    Mr. Silver. Yes, sir. I was either the chief operating 
officer or the senior executive vice president, which is 
essentially the same job, two different companies with complex 
production operations.
    Mr. Kucinich. You were with Tiger Management, is that 
right?
    Mr. Silver. Yes, sir.
    Mr. Kucinich. One of the Country's largest and most 
successful hedge funds. And is it true that, while at Tiger, 
the assets grew from $400 million to over $8 billion, is that 
correct?
    Mr. Silver. Yes, sir.
    Mr. Kucinich. And you served as a policy advisor to several 
U.S. cabinet secretaries, is that correct?
    Mr. Silver. Yes, sir.
    Mr. Kucinich. And isn't it true that, while at the Commerce 
Department, you helped negotiate the first clean car agreement 
with the Nation's auto manufacturers?
    Mr. Silver. Yes, sir.
    Mr. Kucinich. Now, look, in this era of Citizens United, 
you know, and pay-to-play, what really is extraordinary is that 
we brought somebody in front of this Committee who is actually 
qualified for the job that he did. That is a story. Hold the 
presses.
    Now, Mr. Silver, you were a highly successful investor and 
financier in the private sector before you started at the 
Department of Energy. You put those business skills to work in 
government to build up the renewable energy technology industry 
in the U.S., as Congress intended. Why do you believe 
government has a role to play in developing renewable energies 
like solar? And how important is that role in helping America 
gain energy independence?
    Mr. Silver. The U.S. Government has a long and storied 
history of backing critical technologies of all kinds, 
including energy technologies, for hundreds of years; it has 
been instrumental in developing these industries. We have 
backed oil, gas, coal, and other kinds of industries for 
decades in order to bring them forward because they are so 
essential to the underlying economy. I don't believe that clean 
and renewable energy is any different.
    Mr. Kucinich. Well, here is my concern. I go back to what I 
was saying at the beginning. You know, we want trade with 
China, but we better look at the rules here. According to 
Brooking's study, China now leads the world in clean energy 
investment, and in 2010, when DOE awarded a loan guarantee to 
Abound, China put into place a staggering $54.4 billion in 
clean energy investments.
    In the first quarter of 2011, Chinese investments in clean 
energy were $10.9 billion, as compared to just $2 billion in 
the United States. Wake up. We are losing market share here 
from people who are subsidizing their exports and crushing our 
industries.
    Now, Mr. Silver, what impact will this investment disparity 
have on American industry and job growth if it continues?
    Mr. Silver. Well, let me give you just one concrete 
example, Congressman. We invented the solar panel in the United 
States, we invented it here. Today, eight of the ten largest 
solar panel manufacturers in the United States are 
headquartered outside the United States.
    Mr. Kucinich. So look at what we have here. China not only 
leads the U.S. in investment, but also has a policy of 
illegally dumping below-cost solar panels in the U.S., and the 
ITC found, in a preliminary decision, ``reasonable indication'' 
that the U.S. solar industry was materially injured by reason 
of imports from China that allegedly subsidized and sold in the 
United States at less than fair value. This is about fairness. 
Our solar industry is getting decimated.
    Now, Mr. Frantz, what impact are illegally dumped Chinese 
solar panels having on the U.S. solar manufacturing industry?
    Mr. Frantz. I can only further elaborate on Mr. Silver's 
comment and add to the point which has not yet come before the 
Committee, that we just have learned that General Electric, one 
of the largest corporations in the United States, is in the 
process now of delaying their new production facility in 
Colorado as well. So this is epidemic, certainly, and it is 
having profound and lasting effects across the whole United 
States manufacturing capability.
    Mr. Kucinich. Listen. Listen to this, members. You have a 
businessman here. You have somebody who understands the 
industry and he is telling us it is in trouble.
    Now, Mr. Witsoe, your company was impacted by those 
subsidized and illegally dumped Chinese imports, was it not?
    Mr. Witsoe. Yes.
    Mr. Kucinich. And you state in your testimony, ``Abound's 
technology in business made solid progress until the second 
half of 2011, when solar prices dropped by 50 percent in a year 
due to aggressive price-cutting from Chinese competitors using 
older crystalline-silicon technology.'' Is that true?
    Mr. Witsoe. That is correct.
    Mr. Kucinich. And can you tell the Committee what role 
these events played in your company's eventually bankruptcy?
    If he can answer, I would appreciate it.
    Mr. Witsoe. I think those were the key drivers of----
    Mr. Kucinich. What does that mean?
    Mr. Witsoe. Well, simply, they had dropped prices so far 
below----
    Mr. Kucinich. Who? Who is they?
    Mr. Witsoe. China had dropped prices below even their own 
cost that we were unable to compete in that environment, and we 
certainly never expected prices to fall that fast and that far.
    Mr. Kucinich. Thank you, Mr. Chairman.
    Mr. Jordan. I thank the gentleman.
    I just request from Mr. Silver if you are the smartest, 
most qualified guy, as Mr. Kucinich alleges, then why did you 
approve the loan guarantee? Why did the Department of Energy 
approve this loan guarantee to Abound Solar when Fitch's two 
reports, which were both very negative? Fitch's first report 
set a dismal B credit rating and warned the Department of 
Energy that the product had only a 45 percent chance of 
recovery.
    So Fitch, even before, you can talk about what happened in 
China, I get that, but Fitch told you guys, hey, this has got a 
less than 50 percent chance of making it, this is a bad risk. 
But you guys said, oh, it's all right, we are using taxpayer 
money, we can do that.
    Mr. Silver. Thank you for the question, Congressman, 
because I think it is an important one and it gets to the 
essence of what we are doing here today. I am going to give you 
my best recollections because, as you know, not being at the 
Department, I don't have access to the underlying data, but 
what I can tell you----
    Mr. Jordan. No, no, no, no, no, this is when you were 
there. This is when you made the----
    Mr. Silver. But I don't have access to it to refresh my 
memory. What I can say is that the program itself was intended 
to support clean energy technologies at commercial scale, and 
Abound fit that model. It was a major opportunity to reduce 
costs in solar manufacturing. The application met the program 
criteria and goals, and, as I recall the structuring, it was 
very aggressive in protecting the U.S. taxpayer.
    The solar panel prices at the time had fallen, but even 
then the project worked. It is the second year when the 
project----
    Mr. Jordan. No, no, no, no. Fitch gave you another report.
    Mr. Silver. Right.
    Mr. Jordan. The second report said Fitch stated that the 
cost of the project for taxpayers had become significantly more 
expensive, and yet the estimated efficiency of the panels--some 
of the first panels you put in didn't even work. The estimated 
efficiency of the panels has decreased significantly. So the 
cost went up, the quality went down in the second report, and 
you still said let's give them taxpayer money.
    And here is the interesting thing: everything Fitch said 
came true. So if you are going to have a credit report come to 
you--we just heard that you are the smartest guy in the world 
in this area, so what I want to know is, if you are the 
smartest guy in the world, why didn't you listen to Fitch, two 
reports, what they said, which absolutely beared out, became 
the fact; and you add in Beacon Power and Solyndra, which have 
both gone bankrupt, and my guess is there are more coming.
    What figures? You don't pay attention to Fitch? We always 
come back to this point in these hearings. Did you give the 
loan guarantee because political connections persuaded you to 
do it, or did you give it based on the merit? And that is 
certainly not there. So it is either you did it for your 
buddies or you were incompetent and said we are not going to 
pay attention to what Fitch says, even though it all came true, 
and we are just going to give the money anyway? It has to be 
one or the other because there is no other conclusion you can 
reach.
    Mr. Silver. Well, Congressman, I am not the smartest guy in 
the room, but I am also not incompetent, so I guess I will 
answer the question by saying that we did market analyses, we 
did financial analyses, we did technical analyses, we did legal 
analyses, we did regulatory analyses----
    Mr. Jordan. And Fitch didn't do that?
    Mr. Silver. Well, actually, we have more resources on this 
project, to be candid, than Fitch does, but nonetheless----
    Mr. Jordan. You have more resources, and they were right 
and you were wrong?
    Mr. Silver. There is no right and wrong in an assessment of 
what out-year production prices for solar panels are going to 
look like. We worked with the data from----
    Mr. Jordan. When Fitch says costs are going up--I mean, 
this is before you give the final guarantee.
    Mr. Silver. And it is also----
    Mr. Jordan. Costs were going up and the quality is going 
down. The first report we were skeptical; now we are telling 
you, hey, it is going to cost more and this is not as good as 
we thought, you might want to think about this. And you guys 
said, no, $400 guaranteed, $70 million out the door, loss to 
the taxpayers.
    Mr. Silver. We obviously incorporated the data from Fitch 
into the analysis. I don't have it in front of me and haven't 
had a chance to review it, but----
    Mr. Kucinich. Would my friend yield?
    Mr. Jordan. I would be happy to yield to the gentleman.
    Mr. Kucinich. I think this is easily explained, because 
Fitch couldn't predict China's illegal dumping and the impact 
that it has.
    Mr. Jordan. This report came out before all that was taking 
place, that is the point.
    Mr. Kucinich. But it is a practice that is in process, and 
it is the aggregate effect of it. It is not just that it is 
happening one day; it is an aggregate effect that at some point 
makes it impossible for a business to go forward. Look, we 
knew, when these loan guarantees were passed, Congress built in 
a factor that some of them were going to be in trouble, some of 
these businesses were going to have trouble surviving. But if 
you know that when there is a level playing field, imagine how 
difficult it is when somebody is essentially trying to break 
your legs when you are running in a track meet.
    Mr. Jordan. I want to yield to Ms. Buerkle, but I would 
just say this. Fitch understood there was a level playing field 
and they still said this is a bad bet.
    Mr. Silver. If I may----
    Mr. Jordan. I have to go to the gentlelady from New York, 
then the gentleman can respond if he would like.
    Ms. Buerkle. Thank you, Mr. Chairman. Just a couple of 
issues.
    Mr. Silver, you mentioned that your role was to implement, 
not to establish policy, and we get that. But when you tell me 
that so many of these companies are now overseas and their 
corporate, I think that that is an opportunity for this 
Administration to understand the policies of this Country with 
regards to our corporate tax rate, the cost of regulations. 
There is a reason why companies go overseas; not because they 
don't want to do business here, but because this Administration 
and its policies have created such a hostile environment for a 
company to do well.
    So I think that that is something we all need to 
understand, and this Committee has looked at, especially this 
Subcommittee, the regulatory scheme coming out of this 
Administration is stifling our businesses. The uncertainty, the 
question about what our tax rates are going to be in the 
corporate tax structure, that is why our companies are going 
overseas.
    I also want to just mention, because I have so many nuclear 
power plants in my district, that is a clean, safe energy 
source, and you mentioned it in your opening remarks. Has in 
fact that program, has that money been given to and the plan 
been implemented to that nuclear power plant that you 
mentioned?
    Mr. Silver. Let me address those questions in order, and 
with your permission, Congresswoman, let me defer the answer to 
that to my colleague, Mr. Frantz, because I am no longer at the 
program and haven't been there for close to a year.
    Ms. Buerkle. Okay.
    Mr. Silver. First, with respect to your comment, Mr. 
Chairman, about Fitch ratings, I just did want to take a moment 
to----
    Ms. Buerkle. I apologize, Mr. Silver, because I only have 
five minutes, and I am sure----
    Mr. Silver. Then let me say I certainly share, 
Congresswoman, your concern that we ensure that we have the 
most efficient and effective regulations possible to support 
business. The entire goal and intent of the loan program is to 
support American business. I would just point out what I said 
in my opening remarks, which is that the Loan Programs Office 
is not a policy-making shop; it is an implementing agency.
    Ms. Buerkle. I understand that. Thank you. We have such a 
short period of time, I need to get on with my questions.
    The next series of questions is for Mr. Frantz. If I could 
ask the Committee to play a short video clip, please.
    [Video played.]
    Ms. Buerkle. Mr. Frantz, this is a re-election ad that the 
President played and has used. It uses a map from the 
Department of Energy's Loan Program Office. Would you comment 
whether or not this map is disingenuous with regards to the 
jobs that were created from those energy initiatives?
    Mr. Frantz. Well, I can comment on precisely what we have 
done, and I did so in my oral testimony, Congresswoman. We have 
created over 60,000 jobs. The interesting thing is that, on the 
positive side of the ledger, all of our projects represent new 
construction, and that is a huge multiplier, a huge dynamic in 
the job creation picture.
    Ms. Buerkle. Okay. Now that you brought that up, let's just 
pull up the first slide here.
    [Slide.]
    Ms. Buerkle. All of the dots in red on this map, Mr. 
Frantz, represent Project AMP project sites. Now, Prologis 
hasn't drawn down on its loan and no construction has occurred 
at any of these sites. So there is a map out there and it is to 
show all the jobs it has created, but in fact, where you see 
the red dots, there is no construction going on, no jobs have 
been created yet, whether it is in the construction business, 
as your are mentioning, or with regards to the solar panels.
    Mr. Frantz. To the best of my knowledge, Congresswoman, the 
contrary is in fact true, and that is that Prologis has spent 
millions of dollars in what they call roof preparations, and 
that is legitimate commencement of construction under our 
program; and they are working based on equity, not our debt. We 
have not disbursed, you are correct in that.
    Ms. Buerkle. Now, the DOE, they gave the money or where did 
that money came from?
    Mr. Frantz. No, it came from equity.
    Ms. Buerkle. Okay. And are you confident in saying that 
every one of those red dots that the project has started and we 
have put people back to work?
    Mr. Frantz. I would have to look at the specific sites by 
specific address, but I can assure you that Prologis is working 
on roof preparations on a number of projects in the millions of 
dollar range.
    Ms. Buerkle. I think the important point in showing the 
President's ad and then we show this ad is that no DOE money 
has been given for these projects. So when DOE talks about we 
are creating jobs--and that map that the President used came 
off the DOE website, so it is disingenuous, because if that 
money didn't come from DOE, then I don't know how he can tout 
those job creations.
    Mr. Frantz. Well, I think, with all due respect to the 
Committee, often the equity is employed once a loan guarantee 
has been given; there is a quid pro quo. So I can't comment; 
the senior management is not here, I have not talked with them, 
but clearly an incentive for them to begin construction on roof 
preparation was the fact that they were holding a loan 
guarantee.
    Ms. Buerkle. But wouldn't you agree it is a little 
disingenuous that the President is taking credit for that?
    Mr. Frantz. I wouldn't comment; I don't think it would be 
appropriate for me to do so.
    Ms. Buerkle. I yield back, Mr. Chairman.
    Mr. Jordan. I thank the gentlelady.
    I recognize the Chairman of the full Committee, Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Silver, as I said in my opening----
    Mr. Jordan. Mr. Chairman, I am sorry. I have to go to the 
minority.
    Mr. Issa. Oh, Mr. Cummings, certainly.
    Mr. Jordan. I apologize.
    We will go the Ranking Member, and then we will go to the 
full Chairman.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Witsoe, is there anything Republican or Democratic 
about the solar energy industry?
    Mr. Witsoe. No.
    Mr. Cummings. And you had some $300 million invested in 
this project, is that right?
    Mr. Witsoe. That is correct.
    Mr. Cummings. By private industry.
    Mr. Witsoe. That is correct.
    Mr. Cummings. So the private folks must have seen something 
in it. In other words, they invested $300 million; they saw 
something there. Earlier it was stated that perhaps you all 
should have foreseen this China situation. I take it that you 
did not foresee this, is that right?
    Mr. Witsoe. No, certainly not.
    Mr. Cummings. You know, in my city there is a cleaners a 
few years ago that started charging $1 per garment, and they 
charged $1 per garment and got all this business; people were 
lined up. You go somewhere else, a pair of pants cost you $6. 
Here they were charging $1. And then, after a while, they upped 
the price, upped the price to what everybody else had been 
charging, but then they had all the business. Is that sort of 
what China is trying to do here, do you think?
    Mr. Witsoe. It feels like a similar strategy.
    Mr. Cummings. Yes.
    So, Mr. Tiller, in 2007, during the Bush Administration, 
your company, Abound, which was then known as AVA Solar, 
received DOE funding for a different solar project, is that 
correct?
    Mr. Tiller. Yes, sir.
    Mr. Cummings. Isn't it a fact that many prominent investors 
in solar energy, even in your own company, were prominent 
funders of Republican candidates, is that correct?
    Mr. Tiller. I believe that is correct, sir.
    Mr. Cummings. Investors in solar energy are Republicans and 
Democrats. It turns out members of Congress who supported these 
projects were also both Republicans and Democrats. In 2009, 
members of Congress from Indiana wrote a letter of support for 
the Abound project, touting the project's important economic 
benefits to Tipton County, the State of Indiana, and, indeed, 
the Nation at this critical juncture.
    Mr. Witsoe, can you tell us, were those Indiana members of 
Congress who supported your DOE application, were they just 
Democrats or were they also Republicans?
    Mr. Witsoe. I wasn't with the company at the time, but I 
believe they were also Republicans.
    Mr. Cummings. And, Mr. Silver, when you were at the Loan 
Programs Office at DOE, did you hear from both Republicans and 
Democrats in support of project applications?
    Mr. Silver. Constantly.
    Mr. Cummings. So it was not unusual to have bipartisan 
efforts in an effort to help these job creators, is that right?
    Mr. Silver. It wasn't unusual to have bipartisan support 
for them and it wasn't unusual for individual Democrats and 
Republicans, members of Congress and State legislators, to call 
on individual projects.
    Mr. Cummings. Now, did you meet with any members of 
Congress about DOE projects?
    Mr. Silver. Yes, sir.
    Mr. Cummings. Both parties?
    Mr. Silver. Yes, regularly.
    Mr. Cummings. So that was nothing unusual?
    Mr. Silver. Not at all.
    Mr. Cummings. Were the Republicans, as well as Democrats 
you met, what kind of conversations would you have with them? 
They just kind of let you know they were interested in the 
project? Was there any pressure or what?
    Mr. Silver. Well, they were interested in knowing about the 
project; they were interested in updates; they were interested 
in letting us know that they were interested in the projects. 
These would be typical and regular interactions.
    Mr. Cummings. Now, we have identified nearly 500 letters 
sent by both Republican and Democratic members, including our 
Chairman, Chairman Issa, seeking funds for clean energy 
projects in their districts. I am not saying there is anything 
wrong with that, but more recently Chairman Issa has been 
calling the Department of Energy's entire Loan Guarantee 
Program a ``broad scandal'' that has been driven by political 
favoritism and accusations of pay-to-play relationships.
    Did you see any evidence of that during your tenure?
    Mr. Silver. None whatsoever, sir. As I say, almost nobody, 
and certainly nobody that I am aware of in the loan program, 
even knew who the individuals were who had invested, either 
directly or indirectly, into these companies.
    Mr. Cummings. Now, could you have predicted the extent of 
this China factor here? Is that the main issue, do you think, 
with regard to the problems that this company experienced?
    Mr. Silver. It is certainly a key driver. China has devoted 
billions and billions and billions of dollars in not just 
solar, but every clean and renewable energy space to build out 
those industries. But it is also true that that work is 
continuing and growing aggressively all over the world.
    Mr. Cummings. But you never anticipated it would be to this 
degree, where they were actually putting product out there and 
charging less than the product cost to produce the product?
    Mr. Silver. No. One couldn't, one would not imagine that 
because fundamentally what you are describing, Congressman, is 
predatory pricing.
    Mr. Cummings. And that is illegal, is that correct?
    Mr. Silver. I am not qualified to comment on that.
    Mr. Cummings. Very well. Thank you very much.
    Mr. Jordan. I thank the gentleman.
    We now recognize the Chairman of the full Committee.
    Mr. Issa. Thank you very much. This is in fact a vast 
scandal, Mr. Ranking Member. I don't run away from those 
statements. The American people know it. I would hope that you 
would soon join us and realize that the amount of dollars lost, 
you cannot blame it all on China and you certainly cannot stand 
here, sit here and blame China as though you didn't know that 
they would be a fierce competitor.
    I, for one, spent over 20 years in the electronics 
business. I think it was pretty well known by the time I came 
to Congress 12 years ago, that China would compete and would 
compete fiercely for this kind of business.
    Mr. Silver, when you were at a Department of Energy 
employee, did you have a BlackBerry?
    Mr. Silver. Yes, sir.
    Mr. Issa. Did you have a Government-issued BlackBerry?
    Mr. Silver. Yes, sir.
    Mr. Issa. Did you also have a private phone of your own 
expense?
    Mr. Silver. Yes, sir.
    Mr. Issa. Did you have a Government-paid for computer at 
your office?
    Mr. Silver. Yes, sir.
    Mr. Issa. Did you have a computer at home, either permanent 
or a laptop that was paid for by the Government?
    Mr. Silver. No, sir.
    Mr. Issa. Did you have any secure ID capability of logging 
in?
    Mr. Silver. Yes, but the system is so antiquated and the 
technology, which you will appreciate given your background, 
sir, is so cumbersome that it is virtually impossible to work 
with documents and long form pieces in that fashion.
    Mr. Issa. Okay. But they did give you a fob and tell you 
how you could get into the system remotely and securely, right?
    Mr. Silver. Well, they didn't give me a fob, but there is a 
mechanism for----
    Mr. Issa. Okay. Did you use it on occasions?
    Mr. Silver. The fob----
    Mr. Issa. The mechanism.
    Mr. Silver. Very rarely.
    Mr. Issa. Okay. Did you receive training as to the Federal 
Records Act and your responsibility in communications?
    Mr. Silver. I honestly don't recall. If it is part of the 
normal protocol, then I would have, but I just don't remember.
    Mr. Issa. Okay. Now, you have kindly provided us with over 
2,000 records from your Gmail account, and I want to thank you. 
My question to you is, why is it clear from these emails that 
you were communicating often with other, to be honest, other 
employees? In other words, it was DOE employee to DOE employee 
regularly through Gmail; both of you were using Gmail rather 
than your official mail.
    Mr. Silver. Well, I want to try to put this in context. We 
were working 16-hour days, 7 days a week against the sunset 
dated legislation in order to move these projects through.
    Mr. Issa. Okay. I understand that was part of it. But did 
you ever send a Gmail or did you ever access your Gmail account 
while you were at your desk at your office?
    Mr. Silver. On occasion I would try, particularly because I 
was traveling as much as I was, I would prepare to take things 
I needed, and that was from time to time a mechanism. As you 
mentioned in the provision of the documents, the vast majority 
of the material that I delivered, as you can see, are industry 
reports, they are white papers on technologies, they are draft 
presentations for the loan program and the like.
    Mr. Issa. Well, I don't want to characterize them wrongly, 
but I am seeing things like a discussion between you about 
BrightSource concerning a PPT outlining consequences of sending 
a memo to the White House. Now, to me, this is something that 
should have been made available, clearly should have been--this 
is the March 8th. This is a government document that is 
concerned, concerned about the politics and the policy of it. 
Was this retained or delivered upon your termination, or prior 
to your termination, into the Government's hands?
    Mr. Silver. First of all, I apologize, Congressman, I can't 
actually read that, so I can't comment on what it says, but----
    Mr. Issa. Well, let me rephrase it. Did you deliver your 
Gmail account back and forth for ones like the one I just 
characterized, did you deliver them to the Department of Energy 
before departure?
    Mr. Silver. We delivered--everything that has been 
requested----
    Mr. Issa. The reason I am asking and I think it is an 
important question is these were government documents. They 
were not produced in duplicate on your official side. You 
departed DOE. In realtime or at any time prior to your leaving 
DOE, did you deliver these for archival purposes to the 
Department of Energy?
    Mr. Silver. I am not sure that I was aware that I needed to 
do that. But as soon as we received a request from the 
Department of Energy we complied.
    Mr. Issa. And isn't it true that request came only after we 
asked for those documents? They didn't ask for them until we 
were already seeking them, is that correct?
    Mr. Silver. I don't know the timing of that, sir.
    Mr. Issa. When did they ask for them?
    Mr. Silver. In the fall. I am told it was in the November, 
December time frame.
    Mr. Issa. Okay. Last quick question just for the record. 
You had a BlackBerry. Couldn't you have BlackBerried official 
to official in the case of most of these? In other words----
    Mr. Silver. As I said to you, sir, the vast majority of 
that material are documents, so there is no easy way, when you 
are trying to work with documents in a short time frame, to 
make that happen.
    Mr. Issa. Let me just make something for the record.
    Mr. Silver. Yes. But let met just say----
    Mr. Issa. Sure. Of course. Ask unanimous consent I be 
granted an additional minute. Thank you.
    Mr. Silver. I certainly wish, in retrospect, that I had 
handled these documents somewhat differently, but there was 
certainly no--the documents that I have actually already exist, 
by and large, on the Government--because they are these 
reports.
    Mr. Issa. Right. And to be honest, we are not terribly 
concerned about documents attached; we are looking mostly at 
the content of the email.
    Mr. Silver. No, I understand.
    Mr. Issa. But isn't it true that you could have sent to 
Gmail these things before leaving your office and, in fact, 
using your BlackBerry, you could have simply, if you had the 
ability to Gmail, you could have Gmailed it, you could have 
still sent them from your government account? In other words, 
you chose, out of apparently convenience, as did your 
colleagues, to use Gmail and had no knowledge, no training that 
you remember that would have caused you to know that these not 
being maintained, at a minimum, violated the intent of the 
Federal Records Act, which is that these be retained by the 
agencies and available to the American people.
    Mr. Silver. Well, first, I apologize, I don't actually have 
a Gmail account. That is not what--but in any event----
    Mr. Issa. Oh, no, you actually have a special account. But 
everyone you communicated with were Gmail.
    Mr. Silver. Right. But we certainly have made available all 
of----
    Mr. Issa. And I apologize. We blacked out deliberately so 
that what you do have in the way of a personal url is yours to 
deal with.
    Mr. Silver. Thank you.
    Mr. Issa. I want to thank the Chairman for his indulgence. 
Yield back.
    Mr. Jordan. I thank the Chairman.
    Now recognize the gentleman from South Carolina, Mr. Gowdy.
    Mr. Gowdy. Thank you, Mr. Chairman.
    Mr. Silver, the email account that ends in .net, is that 
your personal email account?
    Mr. Silver. I'm sorry, which?
    Mr. Gowdy. I am happy to give it. I thought we were making 
some concerted effort not to share with the rest----
    Mr. Issa. Please do not give it.
    Mr. Gowdy. Is it safe to say it ends in .net?
    Mr. Silver. Yes.
    Mr. Gowdy. All right. Now, you just testified, I think this 
is a direct quote, you wish you had handled the documents 
somewhat differently. I would argue to you you did handle it 
somewhat differently. The fact that you forwarded what I am 
sure you will concede is a decidedly work-related email to your 
personal email account does strike some of us that are familiar 
with the Federal Records Act as being somewhat different.
    So you get an email at 2:50 a.m. in the morning on a 
Monday; you respond to that email from your personal email 
account at noon. Were you at home when you responded to it; 
were you at work when you responded to it?
    Mr. Silver. The answer is I don't know, Congressman, 
because I don't have access to my records from being----
    Mr. Gowdy. But you would have had to have forwarded that 
email from your work account to be able to respond to it on 
your personal account.
    Mr. Silver. That is true. What I don't know is what I was 
doing that day and where I was headed. As I said, as a matter 
of preparation for trips----
    Mr. Gowdy. Well, let me ask you. Help me with this. Why did 
you feel the need to respond to it from your personal account?
    Mr. Silver. Well, that answer is easy, and that is because 
any document over the size of a short email is very hard to 
read and manipulate, as you well know, I am sure, in classic 
library fashion.
    Mr. Gowdy. Well, we are going to get to whether or not you 
used this practice with other emails. This one had no 
attachments, it was just an email.
    Mr. Silver. Right. But it was requesting that I review it 
and look at it and comment on it.
    Mr. Gowdy. Did you make a practice of forwarding all emails 
that had attachments to your personal email account?
    Mr. Silver. No, just ones that were long and complex.
    Mr. Gowdy. And how many would that be?
    Mr. Silver. I don't know. But as I said, we turned over 
virtually everything that we have available, and the vast 
majority of it are these documents.
    Mr. Gowdy. Would you have deleted any emails before you 
turned them over?
    Mr. Silver. Certainly not intentionally, no.
    Mr. Gowdy. I am not asking. If you had done it 
intentionally, this would be a conversation you would be having 
with another member of the Federal Government; it would be with 
the U.S. Attorney's Office, not with a congressman.
    Mr. Silver. Right. But the reason I said that is I can't 
answer that question because, as it turns out, I have no backup 
mechanism on this.
    Mr. Gowdy. How pervasive was this practice of forwarding 
emails to your home email account?
    Mr. Silver. Not terribly.
    Mr. Gowdy. What does not terribly mean?
    Mr. Silver. I don't know how to quantify that.
    Mr. Gowdy. More than 100; less than 100?
    Mr. Silver. Well, I received tens of thousands of emails 
while I was with the program.
    Mr. Gowdy. Then what percentage would you have forwarded to 
your personal email account to then answer from your personal 
email account?
    Mr. Silver. I don't know the answer to that, Congressman. 
Not an enormous number, but any that would require me, while I 
was traveling or working, to review documents and comment on 
them.
    Mr. Gowdy. Is it your testimony that you were traveling 
when you received this email from Mr. Willard?
    Mr. Silver. I don't remember if I was or not.
    Mr. Gowdy. If you were not traveling, what would be the 
other explanation for why you would have forwarded it to your 
personal email account?
    Mr. Silver. Well, I might well have been out of the office, 
but not traveling.
    Mr. Gowdy. What is the purpose of the Federal Records Act?
    Mr. Silver. I am not qualified to--obviously, to retain 
records, but I am not qualified to give you----
    Mr. Gowdy. And why would it be important to retain records?
    Mr. Silver. It is certainly important to retain records for 
the purpose of ensuring that there is an archive of what 
happened, and the records, just to be clear, Congressman, if I 
forwarded something from my Department of Energy computer, it 
is on the Department of Energy computer database.
    Mr. Gowdy. Is your response on it?
    Mr. Silver. It depends who it goes to. In many cases it is.
    Mr. Gowdy. Well, if your response was from your personal 
email account to someone who doesn't work for government, then 
how are we ever going to get that, unless you give it to us?
    Mr. Silver. Which is exactly what we----
    Mr. Gowdy. That is wonderful, Mr. Silver. We are so 
grateful that you evidenced that civic duty of turning it over. 
What do we do with people who don't evidence that? That is the 
reason we have a federal set of rules and regulations, agreed?
    Mr. Silver. I am sure that is correct.
    Mr. Gowdy. Well, of course it is. I mean, it is for people 
who might have more nefarious motives than yours, because it 
strikes me that just like convenience may be an explanation for 
why people answer things on their personal account instead of 
their work account, would you also agree with me that 
concealment might also be a motive for folks who want to use 
their personal account and not their official account?
    Mr. Silver. Well, it certainly was not my motive, sir.
    Mr. Gowdy. I wasn't asking about you, Mr. Silver. I am 
asking in general. If everyone adopted this somewhat different 
process that you adopted, it would thwart both the letter and 
the spirit of the Federal Records Act, agreed?
    Mr. Silver. I am not qualified to comment on that, 
Congressman.
    Mr. Gowdy. What qualification do you need to answer that 
question? If everyone used their personal email account, we 
wouldn't be able to do our jobs in Congress because we wouldn't 
know what documents we didn't have. Agreed?
    Mr. Silver. I would think it would make sense to keep as 
many documents as possible, yes, I agree.
    Mr. Gowdy. All of them.
    Mr. Silver. All of them.
    Mr. Gowdy. I yield back to the Chairman.
    Mr. Jordan. I thank the gentleman.
    We now recognize the gentleman from Pennsylvania.
    Mr. Kelly. I thank the Chairman.
    If we could, I would like to put up the slide that Ms. 
Buerkle had talked about. Mr. Silver and Mr. Frantz, you, of 
course, will recognize this. And, again, it is the President. 
And while we say we are trying to make this political, this is 
what the President is using in his re-election campaign, and I 
think we would look at that and would agree there is a lot of 
jobs being created. Look all over the map, look at all those 
dots. Now, a lot of them are Prologis and I know that some of 
that is happening and some of it is not happening.
    I want to show you another slide, that maybe you are not 
familiar with, that also shows you where jobs are being 
created. Now, this is actually China. So we went from shovel-
ready to Shanghai. I think it is kind of neat that we show one 
map that shows how good this policy is working, but we do leave 
out a very important part of job creation. I think it is just 
kind of fascinating to see that, so we will leave that up for a 
little bit.
    Mr. Frantz, Mr. Silver, the Department of Energy gave 
Sempra, which has a BB+, which is a high-risk rating, a $337 
million loan guarantee for its Mesquite Solar Project, which is 
also a high-risk project, to build a solar plant in the Arizona 
desert. The plant uses solar panels manufactured by Suntech, a 
Chinese solar panel company. How many jobs do you think this 
loan guarantee created in China? Any idea? I mean, I know we 
say we created 60,000 in the States. How many do you think we 
created in China using taxpayer money?
    Mr. Frantz. Congressman, I don't have information relative 
to the chain and supply chains.
    Mr. Kelly. Okay. Well, how about Suntech? How about 
Suntech? We are using their panels, right? That is whose panels 
we are using for this project?
    Mr. Frantz. I would have to take the question for the 
record, and I will certainly respond in the details of the 
supply chain to the specific project. I don't have that right 
at the moment.
    Mr. Kelly. Well, because we have been talking about 
creating American jobs, we have been talking about made in 
America, and we have been talking about everything that we are 
going to invest money in should be invested here, so all those 
dollars that, by the way, came from taxpayers or are backed by 
taxpayers should be used the right way, and I think we would 
all agree with that.
    Mr. Silver. Congressman, the only thing I would add to your 
earlier slide is that the initial map of the United States 
probably does not show other cites that it might show, for 
example, the supply chains that provided materials, for 
example, to Abound and others.
    Mr. Kelly. And I understand that.
    Mr. Silver. And it also does not----
    Mr. Kelly. Okay, reclaiming my time. Reclaiming my time. 
The Arizona facility that we are talking about, they don't 
manufacture those panels here, do they, their assembly? Because 
what they are doing is they get stuff shipped in from China and 
they assemble them in the United States, so we kind of do an 
end run and we say, wait a minute, no, no, this is working in 
Arizona.
    So I just think we need to be completely honest with what 
is going on here, because the theme of this hearing today is 
about where are we investing taxpayer dollars for a great ROI. 
And I understand that private investors would have looked at 
this and said, you know what, that is a risk I will take, 
especially if it is backed by DOE loans. I don't know the 
timing of when they invested, but I would say that probably had 
something to do with it also.
    Let's talk about Shepherds Flat, a $1.3 billion investment. 
American? It is a wind farm. Are you familiar with it?
    Mr. Silver. Yes.
    Mr. Kelly. Either of you, Mr. Frantz or Mr. Silver.
    Mr. Silver. It is the largest, it was at the time and it 
may still be the world's largest wind farm. It is in Oregon.
    Mr. Kelly. And it is an American project.
    Mr. Silver. Well, it has American investors, American 
components, American labor, American----
    Mr. Kelly. The towers that the wind mills are put on? They 
come from China. They come from China. So we are talking about 
investing billions and billions of dollars, and yet we find out 
that the money we are investing isn't really creating American 
jobs, it is creating jobs in China.
    We have them shipped here and we manufacturing them here 
and we say--and I understand renewables, I really do. I get 
that.
    Let's just put up one last slide, if we could, on Project 
AMP, if we have it available, the list of the suppliers that 
are approved. Do we have that? The list of suppliers, the 
approved suppliers for Prologis.
    Okay, all right. Well, I think you will find out that quite 
a few of the suppliers are Chinese.
    Mr. Silver. Again, Congressman, please, with your 
permission, I am no longer close enough to the details, but I 
can say this, and perhaps Mr. Frantz can respond for the record 
at a later date, there are undoubtedly Chinese suppliers on 
there, because most suppliers are Chinese. However, if you 
actually go into the terms of that particular transaction, you 
will find that we required them to preference American panel 
manufacturers deliberately as part of the negotiation.
    Mr. Kelly. And I understand that. I understand that. But I 
think it is a little bit disingenuous to say that the whole 
process, because this initiative was about creating American 
jobs, looking at green energy and being able to go to 
renewables, and then we make it impossible for the fossils to 
stay in business; we regulate them out of business and we say, 
well, by mandate, the electric has to be supplied from 
renewables. So I understand all that.
    The Department of Commerce right now is imposing tariffs, 
are they not, on the Chinese?
    Mr. Silver. Yes, sir.
    Mr. Kelly. Okay. Don't you think it is a little bit 
disingenuous for the Department of Commerce to go ahead now and 
impose tariffs on the same people that the Department of Energy 
is subsidizing to make these, and then turn around and say, 
well, this is the way we are going to handle it? It makes no 
sense to me. I am so tired of hearing about these pesky Chinese 
that buy a lot of our debt, that also profit from taxpayer 
dollars, U.S. taxpayer dollars, and then turning around, trying 
to make it something else than what it is.
    It really comes down to when we spend American dollars, 
these are hard-earned American taxpayer dollars, and we find 
out that a lot of these things are going overseas--listen, I 
would like to have seen this money, instead of going to 
Shanghai, go to the Shenango Valley, when Tubiz, a company that 
is in the district that I represent. They are doing an awful 
lot. They have a lot of people working. And I am talking about 
red, white, and blue jobs right now in western Pennsylvania 
that are being held up and not being looked at the same way as 
some of these other projects.
    So I thank you all for appearing here today. I know 
sometimes it gets a little laborious for you, but at the end of 
the day, at the end of the day we have to make sure that every 
single taxpayer dollar that we spend is going for the right 
reasons and we are getting a good ROI on it.
    Mr. Chairman, I thank you. I yield back.
    Mr. Jordan. I thank the gentleman.
    Before we get to Mr. DesJarlais, the Ranking Member is 
recognized.
    Mr. Kucinich. I want to thank the gentleman for his 
indulgence.
    At what point do we get to the deliverables and a big 
scandal here? I mean, I don't see it yet. I respect members on 
the other side; many of them are good friends of mine, but when 
we get to the point of where we are talking about a big scandal 
and we are down to talking about whether somebody used Gmail or 
a government account, come on. I mean, really. And bottom line, 
Mr. Silver turned over his Gmail accounts to the Committee, so 
we have that. So there is no concealment here.
    Now, again, we have identified about 500 letters from both 
Democrat and Republican members that are seeking funds for 
clean energy projects in their districts, which is what we 
should be doing. That is what we are supposed to do. But when 
we want to say, well, the Department of Energy's entire loans 
program is a broad scandal, political favoritism, pay-to-play. 
We have our friends in the Majority party, many of them 
supported these projects before they opposed them, so what 
changed?
    The evidence hasn't changed. I haven't seen substantiation 
in evidence of the accusations that have been made. And I 
really think that this Committee, which is so important to the 
people of the United States, always functions best when we 
gather the information first, and then make the assessment, 
instead of making the assessment before we gather the 
information.
    So what has changed? Well, we are in an election year. And 
I understand that. Because at the beginning of this 
Administration, when the election was three years and more 
away, we had my friends in the Majority, many were supporting 
the solar industry. Election gets closer, we have something 
else happening.
    So stop the presses again; we have politics that are 
entering into this. That isn't meant to demean the Committee's 
responsibility to ask questions, because every one of these 
witnesses, and I also want to say including the Secretary--we 
have a right to ask questions. But we should have to know what 
we--the idea is that before you ask the question, when you are 
sitting on this side of the table, you already are supposed to 
know the answer. We are not operating in that way in this case.
    So I am not sure what this so-called investigation amounts 
to, and it is true, it is true that China is using illegal 
trade practices to cripple American businesses. Instead of 
investigating potential solutions to the problems, we are 
attacking the companies that have been undermined by this. 
Doesn't make any sense. If I know anything about the 
Republicans, Republicans are pro-business.
    How did you end up being switched here, where I am the one 
arguing in favor of a major industry and my friends on the 
other side of the aisle have basically taken the position that 
has been imputed to me in the past; how did this happen?
    So I thought I would clarify that, Mr. Chairman. 
Unfortunately, I have a meeting over at the Republican Club 
right now.
    Mr. Jordan. Well, I thank the gentleman. I would just point 
out this before yielding to the gentleman from Tennessee. We 
have established today that Mr. Silver, when he first got the 
job, in the process of interviewing for the job, in that same 
time frame, has a party at his house where he invites the very 
people who are going to decide whether he gets the job to come 
to the party. He says in his email I expect there will be about 
40 people, folks we know are interested in this issue and the 
capacity to write significant checks.
    We have a $16 billion program; 26 companies got tax 
dollars, 22 of those companies had a credit rating from Fitch 
of BB-, junk status, three of them went bankrupt: Solyndra, 
Beacon Power, Abound Solar. Abound Solar, the one we are 
focused on today, had a B rating, even worse. We have two 
reports from Fitch which say this is a bad bet; second report 
went from a bad bet to even a worse bet. The quality went down, 
the cost went up. We have the guy who has run the program who 
consistently moves communication from his government account to 
his personal account, doesn't turn over the emails until we 
respectfully ask for them.
    So I think it is entirely appropriate, as the gentleman 
said, that we ask questions about this, and, frankly, it is 
important that we get the Secretary back in front of this 
Committee, because there are certainly things that he said in 
March that we want to ask him about now that we have had 
several hearings on that I think are real important. So that is 
why we are doing this. And we are certainly all pro-business; 
we are just pro-business in the traditional sense of the word, 
not taking taxpayer money and giving it to people who have 
close connections with the White House.
    Mr. Kucinich. If I may, Mr. Chairman, and I beg the 
indulgence of the Chair. I do have to leave, but I just want to 
comment. We absolutely have a right to ask questions, including 
of the Secretary. I support this Committee's right to ask him 
questions and to get the answers. I just don't see the scandal 
yet. And if I did, look, whether it is a Democrat or a 
Republican administration makes no difference to me. If there 
is something there, I am ready to go after it. I don't see it 
yet.
    Thanks, Mr. Chairman.
    Mr. Jordan. I thank the gentleman.
    Recognize the gentleman from Tennessee and appreciate the 
gentleman's patience.
    Mr. DesJarlais. Yes, sir, Mr. Chairman. Thank you.
    And thank you all for attending today.
    We have, unfortunately, lost the confidence of the American 
people as a Congress. It doesn't matter whether they are 
Republicans or they are Democrats. Only 7 percent approve of 
the job we are doing. So we have an Oversight Committee to look 
at where we have succeeded and where we have failed, and I 
think that is why we are here today, is to reflect back on 
maybe what we could do better and what we can do better moving 
forward.
    Right now we are debating whether or not to raise taxes on 
all Americans, and if you are the taxpayer sitting out there, 
which we all are, you want to know whether or not we are making 
wise investments. So rather than blame people, let's learn from 
our mistakes. And I think clearly there were some mistakes made 
on this program.
    So, Mr. Frantz, could you talk a little bit about the 
purpose and nature of the Portfolio Management Division's watch 
list?
    Mr. Frantz. I would be happy to comment, Congressman. We 
were blessed, when we stood up this program, to obtain the 
director for the Portfolio Management Division from many years 
of experience with the EXIM Bank. She brought with her a wealth 
of experience and knowledge. The Division now is wholly stood 
up. She imported with her an electronic management system 
called Quick Silver, which is assisting what we call constant 
monitoring, very proactive monitoring.
    The monitoring on all these projects is done on an hourly, 
daily, weekly, monthly basis with full reporting and 
accountability and transparency. It involves our legal 
division, our technical or engineering division in constant 
consultation with her very senior investment officers who are 
staffing that Division.
    And I think I would commend to you, and I presume you have 
seen or are aware of the Allison report. Mr. Allison went to 
great lengths. In fact, the focus of that independent 
investigation was largely focused on our portfolio management 
division, and he gave many specifics as an independent 
assessment of how we stood that program up and how it is 
performing.
    Mr. DesJarlais. Okay, being as we are talking about Abound 
Solar, was it put on the Portfolio Management's watch list? And 
if so, when?
    Mr. Frantz. I think I would prefer to call it an early 
warning system. We don't really refer to a list, a specific 
list as a watch list, it is a document, it is a working 
document, but it is part of the early warning system.
    Mr. DesJarlais. When did you realize----
    Mr. Frantz. Yes, Abound was, of course, brought to the 
attention----
    Mr. DesJarlais. When did you realize that it was in 
trouble?
    Mr. Frantz. My recollection would be that it was in the, I 
guess, summer of last year when we--we had had discussions with 
them about the current marketing situation and we were in 
constant conversations with them on a weekly, daily basis, so I 
don't have a precise date right at my fingertips.
    Mr. DesJarlais. Okay. Could you pledge to share with the 
Committee the list of companies that are on the DOE's watch 
list?
    Mr. Frantz. I will take that for the record and will 
respond to you, sir.
    Mr. DesJarlais. All right.
    Mr. Silver, you seem to think that Solar is a good 
investment.
    Mr. Silver. Well, not per se. Individual transactions 
maybe.
    Mr. DesJarlais. Okay. If you were investing, would you 
invest in some of what you are selling here today?
    Mr. Silver. I am not selling anything today, Congressman.
    Mr. DesJarlais. Well, I mean, you are selling a concept.
    Mr. Silver. I do believe that the solar industry will be an 
important economic engine for future growth, yes.
    Mr. DesJarlais. Do you think it is worth gambling taxpayer 
money on?
    Mr. Silver. I don't think it is worth gambling on anything; 
I am not a gambler.
    Mr. DesJarlais. We gave money to a company that, as the 
Chairman noted, had a Fitch rating of abysmal, so to me that 
would be somewhat of a gamble. If it was my money, I would 
probably be very leery, but you did not seem to be reserved 
about spending all these folks' money.
    Mr. Silver. Well, sir, let me answer two ways. First of 
all, the Fitch rating is actually physically incorporated into 
the credit analysis that the loan program undertakes, so it is 
baked into the results.
    Mr. DesJarlais. Weren't 22 of the 26 companies that were 
loaned money for solar rated as junk?
    Mr. Silver. I don't know the answer, but I will answer 
directly what I think you are asking, which is these are 
innovative companies by definition. In fact, the mandate is to 
ensure that companies with important potentially transformative 
technologies that cannot easily find financing in the private 
sector can be facilitated in doing that.
    And I would just leave you with one thought, which is that 
these are not grants, sir; these are loans. They are intended 
to be repaid. Unfortunately, and no one regrets it more than 
me, they cannot always happen. But they are structured as 
underwritings; they are loans intended to be repaid, by the 
way, with interest.
    Mr. DesJarlais. Okay, so you would agree, then, that this 
maybe is what the President was talking about this Saturday 
when he was saying companies and businesses don't get there on 
their own; they need government to help them. Would this be a 
good example of government's help?
    Mr. Silver. I didn't see the President's comment, sir, I 
don't know.
    Mr. DesJarlais. Okay. I am out of time.
    Thank you.
    Mr. Jordan. I thank the gentleman.
    Mr. Frantz, when did you learn that Abound Solar was 
totally done, they were going to go bankrupt?
    Mr. Frantz. I can't give you, Mr. Chairman, the precise 
date, but, as I mentioned, we had been in conversations, close 
conversations and discussions with them.
    Mr. Jordan. When did you know it was over, they were going 
to close up the doors, they were going to lay off the people?
    Mr. Frantz. We had established, in fact, written a 
forbearance agreement that was crystallized, keeping us posted 
on precise developments, which included----
    Mr. Jordan. What date was that?
    Mr. Frantz. I can't give you a precise date, but we know 
that the determination was made just before their public 
announcement. So that was a decision that was taken with----
    Mr. Jordan. They announced on the 28th. How much lead time 
did you have before the 28th?
    Mr. Frantz. A matter of days, because we were aware that 
they were in discussions with a prospective investor for the 
transaction, so I can't give you a precise date, but I was not 
involved in those discussions, so I can't give you the precise 
date when it broke off and----
    Mr. Jordan. Who was involved?
    Mr. Frantz. Members of the staff, my staff.
    Mr. Jordan. Okay. But you definitely knew before the 28th.
    Mr. Frantz. I think----
    Mr. Jordan. And how long did you know this company was in 
serious trouble?
    Mr. Frantz. We had been----
    Mr. Jordan. Here is the point. Mr. Witsoe was in front of 
this Committee just two months ago, and he didn't tell us 
things were going south in a big way then, but did you know two 
months ago that things were in big trouble?
    Mr. Frantz. I didn't personally----
    Mr. Jordan. No, no, no, did the Department of Energy?
    Mr. Frantz. We were monitoring it, as I say, Mr. Chairman, 
very, very closely on practically a daily to weekly basis, so I 
couldn't----
    Mr. Jordan. Did you guys----
    Well, Mr. Witsoe, why did you pick June 28th to announce 
that you guys were done?
    Mr. Witsoe. Because the day prior to that, the 27th, is 
when we got notice from that final prospective investor that 
they would not----
    Mr. Jordan. Was there any coordination with you and the 
Department of Energy when and how this announcement would be 
made?
    Mr. Witsoe. No. No. We showed them the press release just 
before it went out.
    Mr. Jordan. So it is completely coincidental that this just 
happened to be the day of maybe the biggest news on Capitol 
Hill in the last year, when the Supreme Court announced its 
ObamaCare or the Affordable Care Act decision, when the House 
of Representatives was voting on a contempt resolution of the 
attorney general? No coincidence, it just happened that day?
    Mr. Witsoe. It is completely coincidental.
    Mr. Jordan. Wow. Wow. This is amazing. Just amazing.
    Mr. Witsoe. As I said, we learned from the investor the 
prior day.
    Mr. Jordan. Well, why didn't you tell us anything about 
this two months ago when you were in front of us?
    Mr. Witsoe. Well, two months ago we discussed that the 
company, even with better technology, had severe risk in the 
market, and we had just, unfortunately, had to have a number of 
layoffs a couple months prior. So I think that we did inform 
that. We thought at the time we certainly hoped that these 
financing efforts would be successful.
    Mr. Jordan. Okay. All right. Appreciate it.
    Let's put up this one email.
    [Slide.]
    Mr. Jordan. We have had a lot of discussion about this 
email between you and Mr. Woolard. This deals with the 
BrightSource issue, which I just found this email to be 
unbelievable.
    Actually, I think we want the other one, guys, the one 
where you are asked to edit a letter that is going to be sent 
from the then chairman of the board of BrightSource, Mr. 
Bryson.
    [Slide.]
    Mr. Jordan. So this is the March 7th, 2011, email from John 
Woolard to Jonathan Silver. So you were asked to edit a letter 
that Mr. Bryson, who was chairman of the board of BrightSource, 
was going to send to then White House Chief of Staff Bill 
Daley. Whatever happened to that, did you do the edits?
    Mr. Silver. What happened to it, Congressman, is that that 
letter was never sent, is my understanding.
    Mr. Jordan. But that was not my question. Did you edit, did 
you make additions, corrections, say it this way, don't do 
that?
    Mr. Silver. I did respond, in fact. If I may, with your 
permission, here are my first sentences. It says, Jon, as 
drafted, I must be honest and say I think it is off target. The 
ongoing work does not speak to a lack of urgency; it speaks to 
a need to ensure that there is limited risk to taxpayer 
exposure. Those are the very first sentences in that memo, sir.
    Mr. Jordan. But my question was did you edit it and make 
corrections and suggestions, and did you send that back to him?
    Mr. Silver. I did make some minor things. He had misspelled 
White House, as an example. I don't remember, a couple of other 
things.
    Mr. Jordan. Okay.
    Mr. Silver. But they were actually relatively modest----
    Mr. Jordan. Did you send that to him from your government 
account or from your private account?
    Mr. Silver. No, I am told now that it came from my private 
account, and that is why the question I can't answer as to 
where I was, because I don't know the details.
    Mr. Jordan. Okay. But it turned out--who made the decision 
that--so you counseled them not to send the letter?
    Mr. Silver. Well, I didn't counsel to send or not to send; 
what I said was I think it--as I said, as drafted, I must be 
honest and say I think it is off target. I even went on to say, 
sir, that that said, there are two lawsuits, and while one does 
seem to be a nuisance suit, the other may or may not be. The 
project is tight enough that if a stay was issues, there could 
be issues around the covenants. The General Counsel's Office in 
DOE is drafting a memo on this issue and OMB needs this input 
before determining an appropriate final credit subsidy score.
    Mr. Jordan. Do you think it--is it unusual that--I guess I 
shouldn't be surprised, knowing that you were inviting folks to 
a party who were going to decide whether you get the job prior 
to--let me just ask this. Do you think it is appropriate for 
this kind of relationship to exist? Now it is the other way; 
you are the one in government, someone is trying to get 
approval of--$400 million tax and this BrightSource I think was 
over $1 billion--several million dollars of taxpayer money, and 
they are suggesting to you, hey, edit this letter that our 
chairman of the board, soon to be Commerce secretary, is going 
to send to the White House chief of staff? Do you think that is 
unusual?
    I have not been in the Federal Government that long, in my 
third term, but I have not seen this before.
    Mr. Silver. Two quick things. First, I do want to respond 
to your question about the invitation to our home by pointing 
out that Steve Isakowitz, who I acknowledge I did not know 
before, was actually a Bush Administration appointee.
    Mr. Jordan. That is not the point. The point was he was 
going to decide whether you got the job or not and you were 
inviting him to your house.
    Mr. Silver. No, he was not the decision-maker, sir. But, in 
any event----
    Mr. Jordan. Well, why was he interviewing you, then?
    Mr. Silver. I was interviewed by a dozen or so individuals 
at the Department of Energy.
    Mr. Jordan. So you went to an interview with a guy who had 
no bearing on whether you get the job or not? That doesn't make 
any sense.
    Mr. Silver. The decision-maker, I assume, sir, although I 
don't know definitively, would have been the Secretary of 
Energy, and he was not invited.
    Mr. Jordan. But that is the point. Four people were 
interviewing you and they were going to talk to the secretary, 
and what they say is going to determine whether you were going 
to get the job or not, and you think it is appropriate, in the 
course of that process, to invite them to your home to hang out 
with Al Gore and other celebrities in this industry.
    Mr. Silver. Let me respond, Congressman, if I may, to your 
question about----
    Mr. Jordan. No, no, no. That is what took place. You are 
the one who brought this up. You said you wanted to clarify 
what took place there.
    Mr. Silver. Well, actually, because they appropriately went 
to clear it with general counsel, who said that was not 
something they could do, they didn't come.
    Mr. Jordan. Okay, back to the BrightSource.
    Mr. Silver. I believe, Congressman, that the BrightSource 
story on this has been completely misunderstood. It is very 
important to understand that there is a two-part process in the 
loan guarantee program. The first is the issuance of what is 
called, I don't mean to be technical, but a conditional 
commitment. That is an intent to give the loan, to close the 
loan, subject to whatever conditions may emerge. The final is 
the closing of the loan.
    When Mr. Woolard sent me this email, he already had a 
conditional commitment, which means that the terms had already 
been set and had been reviewed----
    Mr. Jordan. I understand.
    Mr. Silver.--and approved by multiple different agencies 
and the career professionals.
    Mr. Jordan. Yes, it is just not moving as fast as they want 
and they want you to speed it up. That is why they are asking 
will the White House quarterback this, will the White House do 
this, can you edit the letter; we want to do this. John Bryson, 
who is going to be Commerce secretary in just a few short time, 
we have the White House log, is at the White House the very 
next day.
    Mr. Silver. I will say that I do think it is in the purview 
of the Loan Programs Office, once a loan has been conditionally 
committed and reviewed objectively, to assist the applicant to 
move it expeditiously as possible. What was remaining was the 
final credit subsidy score. And the reason this mattered to 
me----
    Mr. Jordan. Wait, wait, wait a minute. So what you are 
saying is that it was a formality at that point?
    Mr. Silver. It is not a formality, but as long as the----
    Mr. Jordan. So there was still a chance you could say no.
    Mr. Silver. Of course. You don't say yes until the close. 
But one of the things that BrightSource needed to do, and I 
know this sounds potentially amusing, is they actually had to 
move some tortoises on this particular site, and there is--I am 
no expert on this--there is a window in which you can move 
tortoises during the hatching season, and if you miss that 
window and it pushes it out six months, the project is at risk.
    Mr. Jordan. Let me ask you this. So the letter wasn't sent. 
Did you call the White House and talk to anyone in the White 
House about the BrightSource, the final loan guarantee?
    Mr. Silver. I have no recollection whether I did or not, 
but----
    Mr. Jordan. I think I asked you this. How many times did 
you visit the White House?
    Mr. Silver. Numerous times.
    Mr. Jordan. What we have is, I think the White House log, 
we have around 70 times you visited the White House. At any of 
those meetings did you talk to Bill Daley, chief of staff, 
about the BrightSource project?
    Mr. Silver. To the best of my knowledge, I did not, and I 
certainly----
    Mr. Jordan. Well, let me ask you this. Was Bill Daley in 
any of those meetings you had at the White House?
    Mr. Silver. I don't recall, but certainly----
    Mr. Jordan. Who did you meet with in the 70 times you went 
there?
    Mr. Silver. The vast majority of those meetings, and they 
were regular and frequent, almost weekly meetings, were with 
the career staff at OMB, NEC, and Treasury; and they were to 
update those individuals and those agencies on where we were 
with these projects because there was an independent review 
process that they went through.
    Mr. Jordan. So in those updating and review processes that 
you were doing at the White House 70 different times, did you 
say, you know what, we have already given the conditional loan 
approval to BrightSource. In the back of your mind you are 
thinking they decided not to send this letter that I edited for 
them. Did you bring up BrightSource and say, you know what, we 
need to push this through and get this done?
    Mr. Silver. Again, Congressman, I don't recall, but if all 
the conditions of the----
    Mr. Jordan. You don't recall whether you ever talked about 
BrightSource----
    Mr. Silver. I am not sure.
    Mr. Jordan.--with the future Commerce secretary as the 
chairman of the board? You don't recall if you ever talked 
about BrightSource at the White House?
    Mr. Silver. Well, I know I didn't talk about BrightSource 
with the future Commerce secretary.
    Mr. Jordan. I am not saying that. I am putting it in 
context. Here is the guy who was--you just edited a letter that 
he was going to send to the White House chief of staff. It is 
common knowledge a month later he becomes Commerce secretary, 
and you did not ever bring up BrightSource in these 70 
different meetings you had at the White House?
    Mr. Silver. Again, I don't know. Undoubtedly, BrightSource 
was brought up at meetings by staff. My 70 meetings were 
supplemented by hundreds and hundreds and hundreds of meetings 
by staff, all of whom were updating individuals at the Office 
of Management and Budget.
    Mr. Jordan. At any of these meetings you were at the White 
House, was the secretary there with you, Secretary Chu?
    Mr. Silver. From time to time, yes.
    Mr. Jordan. And was he in any meetings with you and the 
White House Chief of Staff, Bill Daley?
    Mr. Silver. There may have been a meeting in which we 
discussed some logistics. We were trying--this was a program 
that we were standing up from a standing start----
    Mr. Jordan. So there were meetings where you and Secretary 
Chu were talking with the White House chief of staff about the 
1705 Loan Guarantee Program?
    Mr. Silver. There were meetings where we were trying to 
ensure--there were a couple where we were trying to ensure that 
the logistics of managing the review process was as streamlined 
as possible, but there were not meetings where we were talking 
about BrightSource, the deal; BrightSource, the terms of the 
deal; BrightSource--any other configuration than that.
    Mr. Jordan. But certainly meetings where you discussed with 
the White House chief of staff the 1705 Loan Guarantee Program.
    Mr. Silver. I have updated senior people in the 
Administration on the 1705 Program occasionally
    Mr. Jordan. No, I want to be specific.
    Mr. Silver. Congressman, I just don't have my--I don't know 
who was in these meetings or not. I don't remember.
    Mr. Jordan. I am asking you this question: Were there 
meetings at the White House where you and Secretary Chu talked 
to the White House Chief of Staff, Bill Daley, about the 1705 
Program?
    Mr. Silver. There were meetings at the White House where we 
tried to ensure, to make sure, to figure out the mechanisms by 
which the interagency process----
    Mr. Jordan. Okay, let me ask this. Were there meetings, 
whatever you----
    Mr. Silver. I just don't remember who were in the meetings, 
sir. I just don't.
    Mr. Jordan. You don't remember if the White House chief of 
staff and the Secretary of the Department of Energy, who was 
your boss, you don't remember if there were meetings where the 
three of you were in the same meeting?
    Mr. Silver. I honestly don't remember who was----
    Mr. Jordan. Really?
    Mr. Silver. I really don't. I cannot recall. Most of these 
meetings took place with, as I say again, and I don't mean to 
be redundant, staff from the National Economic Council, the 
Office of Management and Budget, and the Treasury Department 
about these transactions, about the economics and the terms of 
the transactions, about the analysis of the transactions, and 
significantly about the logistics for managing those analyses.
    Mr. Jordan. I want to get one thing. I just want to make 
sure. Earlier you said there were meetings at the White House, 
you went 70 different times, there were meetings at the White 
House where you and the secretary were at those meetings. Then 
you seemed to indicate there were meetings where the White 
House chief of staff was also present.
    Were there any meetings where you, Secretary Chu, and Bill 
Daley, White House Chief of Staff, that took place at the White 
House, took place anywhere, were there any meetings where the 
three of you were in the same meeting?
    Mr. Silver. I am sure there was a meeting where the three 
of us were in the same room.
    Mr. Jordan. And in your role, obviously, is the 1705 
Program, so if the three of you were in a meeting, obviously 
you were going to be talking about the 1705 Program.
    Mr. Silver. I am saying to you that we were talking about 
the logistics and processes by which we would get these 
transactions accomplished. There were an enormous number of 
moving parts to get----
    Mr. Jordan. Well, here is why it is important, because when 
I questioned the secretary a couple months back, he said--let 
me just read this. I think this is important for Mr. Cummings 
and the Committee to know. Did the White House ever call you, 
every talk to you about any of these? Did you get someone from 
the White House Chief of Staff, someone from the White House to 
talk to you about their respective companies involving these 
individuals, involving the 17--and context earlier was 
involving the 1705 Program, and Mr. Chu said, no, we didn't.
    Mr. Silver. That----
    Mr. Jordan. Now you are telling me----
    Mr. Silver. No, Congressman, I am telling you exactly the 
same thing. We did not have these conversations about deals or 
deal terms; we had these conversations about logistics because 
it was so difficult to get these projects moved.
    Mr. Jordan. So, again, so your testimony is you edited a 
letter that the chairman of the board from BrightSource was 
going to send to the White House chief of staff, but in 
subsequent visits to the White House you don't even bring that 
up. It was important enough for you to edit; they had already 
gotten the conditional loan guarantee; they are in the process 
of getting the final approval; and you don't bring that up when 
you are in a letter, even though you edited a letter that was 
going to be sent from the chairman of the board to the very 
individual you were talking to?
    Mr. Silver. I am not saying, to the best of my 
recollection, there were no meetings at all that I participated 
in around BrightSource inside the White House except at the 
staff level to talk about the transactions.
    Mr. Jordan. You were at----
    Mr. Silver. I don't----
    Mr. Jordan. No, no. You were at the White House 70 times.
    Mr. Silver. Right.
    Mr. Jordan. You have told me you were in meetings where the 
secretary, you, and the chief of staff were there. You edited 
an email, and yet you don't even bring--maybe you were there to 
talk about the general context of this program, I get that, but 
you don't bring it up?
    Mr. Silver. Correct.
    Mr. Jordan. Okay. I just wanted to be clear.
    I would be happy to--I guess is just down to the two of us. 
If the gentleman has a further round, he is welcome to take as 
much time as he would like.
    Mr. Cummings. Thank you very much.
    I have sat here. I had not intended to attend this hearing; 
I was going to attend another hearing, but I am glad I did. 
This seems to be an alleged conspiracy in search of the facts, 
and I say that with great sadness. We have China dumping panels 
illegally, illegally in our market and basically destroying a 
company, one of the job creators that we always hear about, and 
here we are today not dealing with China and what they are 
doing to destroy our job creators, everybody wants jobs, but we 
are here talking about emails and who used the BlackBerry. It 
is interesting. People in my district, they want us to create 
jobs.
    And then we seem to be trying to say that this is some 
political, some favoritism has been going on here, and I just 
don't believe it.
    Mr. Witsoe, the Republicans have mentioned several of 
Abound's investors, and they are clearly trying to paint this 
project as politically motivated, so I would like to ask you 
about Abound's biggest investor. The project's single largest 
outside investor was an entity called Invus Group, is that 
right?
    Mr. Witsoe. That is correct.
    Mr. Cummings. In fact, the Invus Group put in more than 
$100 million in financing, is that right?
    Mr. Witsoe. That is correct.
    Mr. Cummings. The CEO of Invus Group is Raymond Debbane, is 
that----
    Mr. Witsoe. I didn't--I never met him.
    Mr. Cummings. Okay, you don't know him?
    Mr. Witsoe. No.
    Mr. Cummings. Boy, he put a lot of money in your company 
for you not to know who he is. According to documents from, 
well, I am telling you he is the CEO
    Mr. Witsoe. I know him; I haven't met him.
    Mr. Cummings. Oh, I see. According to documents from the 
Federal Election Commission, Mr. Debbane has contributed tens 
of thousands of dollars to Republican candidates and pacts over 
the past two years. There is nothing wrong with that.
    Were you aware of that, Mr. Witsoe?
    Mr. Witsoe. No, I was not.
    Mr. Cummings. Were you aware that he made donations to 
presidential candidate Mitt Romney? Were you aware of that?
    Mr. Witsoe. No.
    Mr. Cummings. Were you aware that he made campaign 
donations to our own Chairman Issa? Were you aware of that?
    Mr. Witsoe. No, I am not aware of anything from our 
investors.
    Mr. Cummings. All right.
    Now, Mr. Frantz, I understand that the entire Indiana 
congressional delegation, including Democrats and Republicans 
alike, supported the Abound project, is that right?
    Mr. Frantz. That is my understanding.
    Mr. Cummings. Yet, today my colleagues in the Majority seem 
to be saying that all of those Indiana Republicans were wrong; 
that the Department should have rejected the Abound project.
    Mr. Frantz, I want to ask you this question because I have 
sat on this Committee for 16 years and I have seen people come 
before the Committee and so often they leave with their 
reputations not intact. It pains me because we only have one 
life to live. This is no dress rehearsal; this is the life. And 
our reputations are so very, very important.
    And I know that you know that you are under oath, but, Mr. 
Frantz, let me ask you this question. To your knowledge, did 
any political considerations on either side, on either side, 
Democrat or Republican, govern the Department's decision to 
approve a loan guarantee to Abound?
    Mr. Frantz. Congressman, I can assert to the very best of 
my knowledge, and as I indicated in my prepared remarks, I have 
been with the program from its inception to today, that not a 
single project has been brought forward, gone through the due 
diligence process, closed, and been awarded a loan guarantee 
with other than the pure merits of the project itself. There 
has been no, to the best of my knowledge, political coercion on 
any one of the single projects.
    Mr. Cummings. Mr. Silver, we on the Hill, we may not be 
subject to the same rules about BlackBerries and official 
records and all that, but we have a little problem here. We can 
only use a certain BlackBerry for campaign stuff and a certain 
BlackBerry for congressional stuff. A lot of us carry around 
two BlackBerries.
    So when you were being asked all these questions about your 
personal account, your BlackBerry, whether you were traveling 
and all this kind of stuff, the bottom line is were you in any 
way, and I remind you that you are under oath. The media is 
gathered here today, they are ready for the headline. Usually 
the headline, by the way, comes out before the hearing. It is a 
little different today; I don't know what happened.
    But were you in any way trying to hide information or 
trying to hold back information by using one instrument as 
opposed to another, or one account as opposed to the other? 
Because I think, I think this is what this was supposed to be 
getting to. I notice the New York Times over there and all 
those other papers. I guess that is what they are trying to 
write about. So I am curious myself. Were you trying to do any 
of that kind of stuff?
    Mr. Silver. No, unequivocally not, Congressman, and it is 
the reason I was able to and in a position to turn over several 
thousand pages of documents in one day, as we did yesterday. I 
had just come back in the Country from a business trip and we 
pulled this together as quickly as we absolutely could. So, no. 
I would even go further and say, in an effort to ensure that 
there were no issues to this regard, after I left the Loan 
Programs Office, I gave my computer to my attorney and have not 
had access to it since.
    Mr. Cummings. Now, you know, Mr. Witsoe, Chairman Issa said 
something that I just found so interesting, when he was talking 
about, he still said that we should have anticipated, that we 
should know that China was going to do these kinds of things, 
and I am just wondering if you had known that China was going 
to illegally, and I emphasize that, illegally violate U.S. 
trade law by putting these panels on the market below what it 
cost them to produce, do you feel bad that you didn't 
anticipate this like Chairman Issa is implying that you should 
have anticipated it?
    Mr. Witsoe. No. I have been part of many very competitive 
industries that have competed with China and I have never seen 
anything like this before.
    Mr. Cummings. You just said something that I just want to 
get into a little bit. You said you have never seen anything 
like this before?
    Mr. Witsoe. I have never seen price competition happen this 
fast and this deep, even in very competitive industries that I 
have been part, electronics and others.
    Mr. Cummings. So when you went into this, first of all, you 
have been in business for a while, is that right?
    Mr. Witsoe. No, eight months.
    Mr. Cummings. You have only been in business eight months?
    Mr. Witsoe. I have only been in the business for eight 
months.
    Mr. Cummings. Oh, okay. But I assume that when you go into 
a venture like this you don't go into it to lose money, do you?
    Mr. Witsoe. No, certainly not.
    Mr. Cummings. And you make assertions to your potential 
investors that this is a good deal for them to invest in, or 
they would not have put in the kind of money that they did, is 
that correct?
    Mr. Witsoe. That is correct. They put in $300 million.
    Mr. Cummings. And someone on the Committee, I forget who 
said it, implied that all of this money, or a substantial 
amount of it, came after you got the DOE guarantee. I assume 
that some of it may have come before and some may have come 
after, is that a safe statement?
    Mr. Witsoe. I don't have the exact numbers, but I believe 
about half of it came prior to.
    Mr. Cummings. So you would guesstimate that before you got 
the DOE guarantee, about half of the $300 million they had 
invested, is that what you are saying?
    Mr. Witsoe. Approximately.
    Mr. Cummings. But when you went into it, you anticipated 
some shenanigans by China, did you not?
    Mr. Witsoe. No, we always would anticipate competition by 
China, but certainly not them selling below their own cost, in 
which they would be losing money.
    Mr. Cummings. So you expected them to, you must have had 
some kind of calculation. You must have said, well, we are 
going to sell, hypothetically, we are going to sell this panel 
for $1,000. We know that China, it is costing them, say, 
whatever, $800 to produce them, and we anticipate that they 
will sell them for a certain amount.
    So can you help me with that? Because I don't want the 
public walking away from here thinking that some folks acted 
irresponsibly. I am talking about the job creators acted 
irresponsibly going into a deal like this. It makes no sense.
    Mr. Witsoe. No. There was a lot of analysis done on what 
our costs would be, where the market costs would be, and that 
is why Abound was interesting, because we had a technology that 
we felt could get to the lowest possible cost.
    Mr. Cummings. So, Mr. Frantz, much has been made of the 
Fitch report. You were aware of that report, were you not?
    Mr. Frantz. Yes, sir. The Fitch report and the other rating 
agencies are just one tool that we use, it is not the only 
component that we use in our evaluations. And, as a matter of 
fact, in the course of our identification of risks and risk 
mitigants that we employ, we even do a more extensive, it was 
alluded to earlier, even a more extensive ultimate evaluation 
than the individual rating agencies do.
    We have the expertise of the entire Department of Energy at 
our disposal, and we use them. And in this particular instance, 
as a matter of fact, we had a number of different parties, both 
within our expertise in the Department of Energy, as well as 
outside independent consultants, who corroborated the fact that 
Abound was exhibiting a technology that could withstand 
enormous price compression in the marketplace and was clearly 
prospectively a technology that would be a lowest cost producer 
here in the United States, and that is precisely why we 
supported it.
    Mr. Cummings. Now, you heard my analogy about the cleaners 
in my district, did you not?
    Mr. Frantz. Yes, sir.
    Mr. Cummings. How they charged $1 per garment, get all the 
business, and then up the price, but then they got all the 
clients, the customers. You talked about price compression and 
everything that was calculated. I am trying to figure out is 
China just going off the cliff with this kind of deal? In other 
words, Mr. Witsoe made it sound as if they didn't anticipate 
it. You, being an expert in this area, apparently you had all 
of this data and the data didn't pan out.
    Tell me, looking at it in retrospect, and I know it is easy 
for people to be the Monday morning quarterback to look at a 
deal like this, but the question becomes if we were to do this 
deal again, try to do a deal like this again, what lessons have 
we learned from this and what would we do differently than what 
we did? It sounds like you had all the resources for data.
    I am sure you had the best minds, the best analysis and all 
that, but apparently China has done something that threw the 
whole damned thing, all the measurements for probability of 
success, by what they are doing, they have thrown all that out 
the window. Unless they are doing something that you all have 
not mentioned to us so far.
    Mr. Frantz. No. Congressman, I can say this about that in 
terms of your assertions. As I mentioned in my prepared 
testimony, I have literally worked all over the world and, in 
fact, I have worked in China on projects, and I can tell you 
that from years of experience doing that, that there is no way 
you can ultimately predict the behavior of a specific 
government anyplace.
    In this case, with respect to China, it is clear that China 
has made a decision and has enormously, very heavily subsidized 
this specific industry way below the cost of the manufacturing 
of their projects, and I mentioned that in my testimony as 
well. Also, as you indicate, hindsight is always worth much 
more than foresight. As hard as we work to try to predict the 
future, we are not perfectly clairvoyant at all, and this, as 
Mr. Witsoe just indicated, was a phenomena that none of us, 
nobody, including our internationally oriented consultants, 
predicted. It has been a precipitous price compression that the 
experts, not only here in the United States, but all over the 
world, could not have foreseen.
    Mr. Cummings. This is my last question. So do we then say 
that we are not going to get into this area? I mean, do we just 
say, all right, we invented it. Someone on the other side 
implied that, well, since China is doing what they are doing, 
let them have it. I take it that you don't agree with that.
    Mr. Frantz. Well, I think, as all four of us have indicated 
to you this morning, and all four of us, in our own individual, 
respective ways, are deeply committed, profoundly committed 
professionally to see the success of this program, the program 
was, of course, a bipartisan way established here in the U.S. 
Congress to fulfill a need for support of our industries in a 
very high-risk segment. That is deployment of new and 
innovative and transformative technologies in which the private 
sector and private markets, by the way, even today will not 
readily support.
    That is precisely why we are here and why, certainly, as 
the officers from Abound have attested, that they made a 
calculated investment, a calculated risk to bring a new and 
transformative technology to the marketplace, which I have just 
indicated would be, if not the only, one of the lowest cost 
producers in the world. That is precisely the value of this 
program, it is precisely the value of public support in this 
domain, and it is why we all are deeply and profoundly 
committed to assist the private markets, which are still, even 
to this day, not totally responsive to these types of 
investments.
    Mr. Cummings. Thank you, Mr. Chairman.
    Mr. Jordan. I told you guys we would get out of here by 
about 12:30, so I am going to be close to that.
    One last thing. Mr. Silver, back to this email from Mr. 
Woolard to you regarding BrightSource and editing the letter, 
it was clear from emails and basically what you said earlier, 
that you both wanted this to go through. You wanted 
BrightSource, that had already gotten the conditional 
guarantee, you wanted this to happen.
    You switched to your personal account. You tell him, I will 
make the edits, but I advise you probably not to send this 
letter.
    What took place between there, to your knowledge? Did 
anyone from the White House call you guys? Did anyone from the 
Department of Energy contact the White House? What took place 
in the time, because a this is a March 7th email exchange, 
2011, and then on April 11th, so just a little more than a 
month later BrightSource got the thumbs up and got the final 
loan guarantee approval. So what took place in that month? Did 
anything happen?
    Mr. Silver. Well, a number of things probably happened. 
Again, I will have to go from recollection. But principally 
what happens in that last month is the legal documentation 
around the previously agreed upon terms for the loan, in 
addition to the Office of Management and Budget assigning a 
final credit subsidy score for the project. Those would be the 
two sort of major milestones or things that would have to 
happen.
    Mr. Jordan. In this month-long time, did you personally 
have any contact with Mr. Bryson?
    Mr. Silver. With Mr. Bryson? No.
    Mr. Jordan. April 11th is the day it was approved, the same 
day, obviously, Mr. Bryson was going to the White House some 
because he was looking to be Commerce secretary, I understand 
that, but the very day he visits the White House, April 11th, 
is the very day the loan gets approved. Do you think there is 
any connection to that?
    Mr. Silver. None. But I do want to say for the record that 
I have known John Bryson for many years; there is no secret 
about that.
    Mr. Jordan. Okay, so you have known him for a long time?
    Mr. Silver. I have.
    Mr. Jordan. And you had no communication with him in this 
one-month interval that was a critical time for the company 
that he was chairman of the board of?
    Mr. Silver. No.
    Mr. Jordan. No contact? No email, personal or government?
    Mr. Silver. Not to the best of my recollection.
    Mr. Jordan. No phone calls?
    Mr. Silver. Not to the best of my recollection, no.
    Mr. Jordan. When he was at the White House, you didn't 
visit with him?
    Mr. Silver. The only time I----
    Mr. Jordan. None of his visits corresponded with any of 
your 70 visits?
    Mr. Silver. I was at the White House for his swearing in.
    Mr. Jordan. Okay. Okay.
    I want to thank you all for being here today. I know it was 
long. Mr. Tiller, you got to really participate, didn't you?
    [Laughter.]
    Mr. Jordan. We thank you for being here nonetheless. This 
first panel is dismissed. We will get ready for our second 
panel.
    [Recess.]
    Mr. Jordan. The Committee will be back in order.
    You know how we have to do it, we have to swear you in. Mr. 
Kats, we are getting your nameplate. So if you guys would 
please stand up, we will do that. Again, I apologize. I knew 
the first panel was going to take a while.
    Do you solemnly swear to tell the truth, the whole truth, 
and nothing but the truth?
    [Witnesses respond in the affirmative.]
    Mr. Jordan. Let the record show that both witnesses 
answered in the affirmative.
    We still start with Doctor, it is good to have you with us 
again. You have been in front of this Committee and several 
committees. We appreciate your expertise.
    And you as well, Mr. Kats.
    So you are just stuck with me, I apologize. But, Doctor, 
you are recognized.

                       WITNESS STATEMENTS

                 STATEMENT OF VERONIQUE DE RUGY

    Ms. de Rugy. Chairman Jordan, it is an honor to appear 
before you today to talk about the Department of Energy Loan 
Guarantee. My name is Veronique de Rugy. I am a Senior Research 
Fellow at the Mercatus Center at George Mason University, where 
I study tax and budget issues.
    Advocates for renewable energy are right to be outraged by 
subsidies going to fossil fuels. Yet, they are wrong to think 
that in order to address subsidies they don't like, they should 
demand large amount of subsidies for energy they like.
    The Department of Energy's 1705 Loan Guarantee Program is a 
cornerstone of the U.S. renewable energy policy. The policy is 
often justified on two grounds: first, advocates argue that 
renewable energy companies do not have access to sufficient 
credit to support new projects. In addition, the DOE argues 
that encouraging investment in green energy would create up to 
5 million jobs. So now let's look at how these claims stand up 
to scrutiny.
    So looking at the flow of 1705 loans, we find that, first, 
some of the loans have gone to companies that would have not 
been able to get funded in the open market without the loan 
guarantees because they were deemed too risky. Not all of them 
were horrible bests, but many of them were. So far three 
companies have gone under, and at great cost to taxpayers. So 
let's take the Abound company that this hearing is about. In 
the end, after the company has sold its assets, the price tag 
for taxpayers will be roughly $50 million to $60 million, paid 
by the American people at a time when they are hurting a lot.
    It is possible that many of these companies that went under 
may not necessarily be representative of the entire portfolio, 
and that is another problem. That is my second point. Nearly 90 
percent of the 1705 loan went to subsidized projects backed by 
large companies that very likely would have had access to 
capital if their project was indeed viable.
    Third, under the 1705 loan program, 16 million loans were 
guaranteed and, according to DOE, 2,388 permanent jobs were 
created, and that means that taxpayer exposure for each alleged 
permanent job created is 6.7 million jobs. So it speaks very 
poorly to the quality of this loan program as a jobs program. 
But understand that this is actually not even really 
representative of what has happened because when the company 
goes under, you have that exposure and you are left with zero 
jobs.
    So the data speaks for itself, but the real problem is 
actually way worse than this. In fact, failures like Solyndra, 
Abound, BeaconPower are only symptoms of problems much more 
fundamental with loan guarantee programs, and in particular 
this program, so they suffer from three particular failure 
problems. Every loan guarantee transfers risk from lender to 
taxpayer, which creates a moral hazard. Because the loan amount 
is guaranteed, banks don't really have an incentive to do 
proper scrutiny and proper diligence. What these loans do is 
they privatize gains and they socialize risk. In other words, 
the taxpayers bear the risk, but the profits, if there are 
profits, are borne by the product company and the banks that 
lent the money.
    Second, every loan guarantee gives an incentive to lenders 
to shift to subsidized projects and away from non-subsidized 
ones independently of the merits of the project, and this has a 
cascading effect. For instance, when the government subsidizes 
a project, it is perceived as safe. That means that venture 
capitalists, who are actually in the business of providing 
money to high-risk customers, actually will leave that market.
    But another thing happens which is much more 
counterintuitive: other private investors will actually divert 
resources from other non-subsidized projects towards subsidized 
projects, again, independently of their merits. So, for 
instance, in the previous panel we heard that Abound Solar got 
some $150 million, I guess, after getting that guarantee. Some 
of this may have come independently, but it is very likely, in 
this example, that some of that money came only because of the 
government guarantee, and that meant basically taking money 
away from other maybe green companies that would have actually 
succeeded.
    Third, at their worst, every loan guarantee introduces 
political incentives into business decisions, creating the 
condition for businesses to seek financial reward by pleasing 
political interests rather than customers. This is called 
cronyism and it is a bipartisan problem and it entails real 
economic costs.
    So whatever the intention that motivated the program, the 
evidence is clear; it just doesn't work. The 1705 loan program 
does expose taxpayers to Solyndra, Abound, Beacon Power-like 
waste, but more of a concern are the systematic distortions it 
introduces into the market and the unintended consequences 
those can have.
    Thank you.
    [Prepared statement of Ms. de Rugy follows:]
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    Mr. Jordan. Thank you, Doctor. Appreciate your testimony.
    Mr. Kats, you are recognized.

                   STATEMENT OF GREGORY KATS

    Mr. Kats. Thank you. Thanks for the opportunity to speak 
with you today. I serve on the board of directors of four U.S. 
clean energy companies and just served on the board of the 
National Academy of Sciences study recommending to Congress 
ways to strengthen U.S. competitiveness.
    Abound Solar attracted broad support, including from 
Indiana Republican Governor Mitch Daniels, for its $400 million 
loan guarantee. Abound raised about $300 million from private 
investors, including from British Petroleum. The DOE structured 
its loan guarantees to Abound in tranches in order to reduce 
its risk, so only $70 million of the $400 million is at risk, 
and as noted by the Wall Street Journal, DOE could receive 
about $30 million of that back, leaving a Federal loss of about 
$40 million, or one-tenth of the loan loss guarantee. This 
reflects prudent DOE lending risk management practices.
    Overall, the DOE Loan Guarantee Program has had a 4 percent 
default rate, which is just one-fourth of the losses projected 
for and budgeted for. A 4 percent default rate means a 96 
percent rate. In the real world, where facts matter, a 96 
percent success rates get you an A.
    The loan program has done exactly what it was intended to 
do, help create over $35 billion in investments in renewable 
energy, where the private sector lending was not available. 
Congress set aside a credit subsidy because it knew there would 
be job losses because the program supports innovation, and 
these losses are proving far less than projected for and 
budgeted for. In the real world, where U.S. companies are 
invested in to build jobs and strengthen America's competitive 
position in global markets, the DOE Loan Guarantee Program is a 
big success.
    U.S. success in clean energy matters a lot to the U.S. 
military. Department of Defense is the largest energy consumer 
in the world. Secretary of the Navy, Ray Mabus, put it this 
way: Why the interest in alternative energy? The answer is 
pretty straightforward: we buy too much fossil fuel from 
potentially or actually volatile places on earth. Every time 
the cost of a barrel of oil goes up $1, it costs the United 
States Navy $31 million in extra fuel costs.
    But it is costly in more ways than just money. For every 50 
convoys of gasoline we bring in, we lose a Marine, we lose a 
Marine killed or wounded. That is too high a price to pay for 
fuel.
    In the words of then Chairman of the U.S. Joint Chiefs of 
Staff, Admiral Mullen, energy is about not just defense, but 
security; not just survival, but prosperity. Our national 
defense infrastructure and systems hold the potential to help 
stem the tide of strategic security issues related to climate 
change.
    The U.S. military, U.S. scientists, and the National 
Academy of Sciences are unambiguous in their acceptance of the 
reality and threat of climate change. So why is this Congress 
undermining U.S. clean energy industry solutions to climate 
change? Our major competitors, including China and Germany, 
have invested heavily in expanding their domestic wind and PV 
corporations.
    Today, of the top 10 global wind and PV manufacturers, only 
one of each is located in the United States. We should be 
deeply concerned about the security implications of the U.S. 
losing its global competitive leadership position in these 
critical industries, that were largely invented here in the 
United States in a multi-decade collaboration between U.S. 
corporations, U.S. DOE, the U.S. military, and U.S. 
universities.
    Abdication of U.S. congressional support for U.S. renewable 
energy industries that were largely created here in America is 
a disaster for U.S. companies, for U.S. competitiveness, and 
for U.S. security, but it is a big win for China.
    Other governments support, rather than undermine, their 
domestic clean energy industries. So why are members of this 
Congress distorting and denying what is clearly a successful 
American program? If the U.S. military is forced to import the 
technology it needs to achieve its mission of shifting to clean 
energy, U.S. security will be weakened. For financial 
employment and security reasons, the U.S. DOE should use the 
unused loan guarantee funds to support another $30 billion to 
$40 billion in U.S. clean energy companies and programs.
    If this Congress is willing to support America's innovative 
corporations, the U.S. can regain its global leadership in 
clean energy and address climate change in a way that builds on 
U.S. ingenuity and creates American, rather than Chinese, jobs.
    Most Americans know that climate change is happening. Most 
Americans are in favor of renewable energy because it is clean, 
U.S. grown, and getting cheaper. Most Americans understand that 
the Government gives even larger subsidies to other forms of 
energy. Most Americans understand that in supporting innovative 
things, you are not going to bat 100 percent, but that 96 
percent is obviously a success. And most Americans want this 
Congress to use its common sense.
    Thank you.
    [Prepared statement of Mr. Kats follows:]
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    Mr. Jordan. If this was so good, Mr. Kats, why do you need 
the taxpayer dollars? You talk about a 96 percent success rate. 
Why do you need taxpayer money put at risk? Dr. de Rugy talked 
about how most of these companies got private investment 
dollars. If it was such a great thing, if it is so wonderful, 
why do we need the taxpayers to put up millions of dollars and, 
as we unfortunately know, lose several hundred millions of 
dollars, as three of these companies went bankrupt?
    Mr. Kats. The reason the U.S. provides subsidies for energy 
across the board, and has done so for five or six decades, is 
to promote American production of energy. A relatively small 
proportion of that support has gone to renewables. The reason 
it has gone to renewables: it is U.S. produced, it is cleaner, 
it makes the U.S. competitiveness stronger, it creates 
employment. The success of the program is illustrated by the 96 
percent success rate. That is a terrific success.
    Mr. Jordan. How much of that 96 percent--I think it is 
actually less than that. Out of 26 companies, three of them 
went bankrupt. But of that 96 percent, how many do you think 
would have made it on their own?
    Mr. Kats. So the 96 percent represents 96 percent of the 
dollars that were spent are coming back. So from an investment 
perspective it is a 4 percent default rate or less. That is a 
big success.
    Mr. Jordan. It would have been lower than that. I think the 
last time you were here, a couple months ago, you stated that 
the LPO needed to move faster and be more aggressive. You said 
this while sitting next to Mr. Witsoe, with Abound Solar, whose 
company has since gone bankrupt. So, obviously, if we had moved 
faster relative to Abound, the taxpayers would have lost a lot 
more money, maybe all of that $400 million.
    Mr. Kats. A 96 percent success rate is really terrific by 
any measure. It is much more successful than other programs 
supporting energy. Sir, you asked a question about employment 
impact, and I want to speak to that.
    Mr. Jordan. Go ahead.
    Mr. Kats. The U.S. nonpartisan Congressional Budget Office, 
in its May 2011 report entitled Estimated Impact of American 
Recovery and Reinvestment Act on Employment and Economics 
Output found that these investments, including the DOE 
guarantee program, raised gross domestic product between 1.1 
and 3.1 percent, and increased the number of full-time jobs 
between $1.6 million and $4.6 million with what would have 
happened otherwise. Again, that is the U.S. Congressional 
Budget Office.
    So the job creation impact has been large, and if this 
Congress supports----
    Mr. Jordan. But the question always remains, as Dr. de Rugy 
pointed out, would it have happened anyway? How much can be 
directly attributable to the fact that the taxpayers put up 
money? And the only thing we know for certain--you can talk 
about the success rate, but we know for--success rate would 
mean for the taxpayers that every dollar that went out came 
back. That is success. Right now we know that is not the case. 
Three companies went bankrupt and we have lost hundreds of 
millions of dollars of taxpayer money.
    So how much of that would have happened anyway?
    Mr. Kats. So----
    Mr. Jordan. The point is you don't know, and no one knows.
    Mr. Kats. The answer is----
    Mr. Jordan. And how many companies that maybe were better 
than these bigger companies, as Dr. de Rugy pointed out, who 
got taxpayer dollars, how many of those companies out there 
would have probably gotten investment from private equity, 
private dollars, but for the fact they said, you know, what we 
are going to put the money where it is a little safer, where 
the Government has backed it up?
    There is a company out there, I would bet, and no one can 
prove, but you just know there is a company out there that may 
have some technology that really could help our Country; really 
could help Admiral Mabus, as you referenced; really could help 
our national security; really could be beneficial. But they are 
not getting financing because of this program.
    Mr. Kats. That is not true--capital investor. And when we 
look at companies, we look at their ability to scale and 
compete internationally. I was actually on the board of a 
couple companies that applied for funding. The process to get 
federal funding is very rigorous. They would not have received 
private funding had they not received it. Again, the three 
companies that have had financial problems, there is only 
partial exposure. We are talking today about Abound. Of that 
$400 million loan, only $40 million will end up not being 
repaid back. Overall, in this program----
    Mr. Jordan. Only $40 million.
    Mr. Kats.--there is a 96 percent----
    Mr. Jordan. It is easy say, Mr. Kats, when it is not your 
money. You said you were on the board of four different 
companies. Any of those four companies, did they apply for 
dollars in the 1705 program?
    Mr. Kats. None of them did.
    Mr. Jordan. Your company is Capital E, right?
    Mr. Kats. Correct.
    Mr. Jordan. I am looking at one of the things from your 
company, marketing enabling measures. I assume this is from 
your or something that is put out by your company. You talk 
about government or private parties can provide full or partial 
loan guarantees under default. You talk about things that you 
do. So have you ever worked on behalf of any of the companies 
that received taxpayer dollars?
    Mr. Kats. I served on the board of a company that applied 
for a DOE loan guarantee. After two years it ended up not 
getting it. That company was then purchased by Saint-Gobain 
France. It illustrates why, if all the other--their companies, 
the United States needs----
    Mr. Jordan. Have you ever consulted----
    Mr. Kats. We should not cede the race on clean energy.
    Mr. Jordan. Have you ever consulted, done consulting work 
for companies who have applied for an received taxpayer dollars 
in the 1705 program?
    Mr. Kats. No, sir, I have not.
    Mr. Jordan. Okay.
    Dr. de Rugy, I want your thoughts on this idea that this is 
a 96 percent success.
    Ms. de Rugy. Well, first, we are just at the beginning. 
Let's see where it ends.
    Mr. Jordan. But are you like me? I don't accept that as the 
definition of success.
    Ms. de Rugy. No. I don't----
    Mr. Jordan. Taxpayers only lost hundreds of millions, they 
didn't lose billions, so that is a successful program.
    Ms. de Rugy. I agree. And, by the way, some of that cost is 
totally underestimated. Certainly, that is the cost for this 
given program, but let's not forget that this loan guarantee 
opens the door to a lot of other government subsidies. So, for 
instance, NRG, who got $3.8 billion in subsidies over several 
projects, is also eligible for a $430 million grant from 
Treasury.
    Mr. Jordan. And some of these were eligible for export-
import dollars too.
    Ms. de Rugy. Exactly. And there is a gigantic amount of 
double-dipping. The Export-Import Bank then goes and subsidizes 
foreign companies in order to--and then local and State 
governments that give taxpayers--so, I mean, I think the cost 
to taxpayers is actually way bigger than what it looks. And we 
don't know how big the failure will be in the end but, more 
importantly, so many of these companies are actually backed by 
very large companies that would have had access to capital, 
very likely, maybe not at the price that they would have liked.
    More importantly, I actually think is this process actually 
tends to do a lot of the things that got us in the financial 
mess, which is the private sector usually requires some 40 
percent of equity for 60 percent debt, and because of the loan 
guarantee, then companies now can get 80 percent debt and only 
20 percent in equity, and I think this is fairly irresponsible.
    Mr. Jordan. I just want to point out that we are going to 
have a hearing in a couple weeks on the Export-Import Bank and 
its relationship to this as well, so you made me think of that 
in your answer.
    One last question for both of you. I will start with Mr. 
Kats. Do you think Dr. de Rugy made this point in her opening 
statement, that there is the potential for political influence, 
cronyism, whatever term you want to use. There is the potential 
for that when you have this amount of money being available for 
private companies to get hold of. You have sat through some of 
these hearings, Mr. Kats. You have been here. I don't know if 
you were here for the first couple hours of this hearing, but 
do you think there is any political connections, cronyism had 
anything to do with this program?
    Mr. Kats. You know, there are hundreds of billions of 
dollars and subsidies have gone to energy, fossil fuels, 
nuclear----
    Mr. Jordan. I am talking specifically about 1705.
    Mr. Kats. Yes, 1705 is a relatively small amount compared 
to that. I think there is potential. My impression is DOE has 
done a very rigorous job in making sure that doesn't happen. I 
know that the screening and due diligence process is extremely 
rigorous; arguably too rigorous and arguably too slow.
    Mr. Jordan. Doctor?
    Ms. de Rugy. There is political connection. The existence 
of government itself, I mean, the availability of government 
money, whether it is in the form of a grant, means that 
actually these companies are going to be seeking this 
government's favor.
    Mr. Jordan. In both your experience in watching government 
and seeing this kind of stuff, these kind of programs, have you 
ever seen what we have talked about this hearing, ever seen 
where an email comes from the company who is trying to get the 
loan, asking the person who is going to decide whether they get 
the loan to edit a letter that is going to be sent to the White 
House chief of staff? Have you ever seen that kind of stuff? 
You referenced other forms of energy that get some kind of 
help. Have you ever seen that take place with those other 
forms?
    Mr. Kats. I don't think that letter was actually sent.
    Mr. Jordan. That isn't my point. Have you ever seen that 
kind of coziness between the private sector and the person who 
is deciding whether they get taxpayer money?
    Mr. Kats. Yes. I think both Republicans and Democrat 
congressmen weigh in----
    Mr. Jordan. Specifically have you ever seen that? That is 
the question.
    Mr. Kats. Have I ever seen direct----
    Mr. Jordan. That kind of coziness, where the person 
deciding whether they are going to get billions of dollars in 
the BrightSource example, where they are asked to edit a 
letter, they actually do edit the letter that is going to be 
sent to the White House chief of staff when they are trying to 
get $1 billion in taxpayer dollars? Have you ever seen that in 
any other energy area?
    Mr. Kats. I don't think that letter was sent, sir.
    Mr. Jordan. That is not the question. Have you ever seen 
the person who is deciding whether the loan guarantee is going 
to get approved, have you ever seen them actually edit a letter 
that the company is looking to send to the White House chief of 
staff? Have you ever seen them edit a letter? Have you ever 
seen that kind of behavior in any other area other than this 
1705 program?
    Mr. Kats. I don't think it was appropriate. I haven't seen 
a letter like that that was actually ever sent.
    Mr. Jordan. Have you ever seen that before?
    Ms. de Rugy. I haven't, but obviously I am not an expert. I 
can just say that this is not, for instance, Mercatus does 
fund-raising and we don't do this, we don't ask the people we 
are asking for money, hey, can you please edit this.
    Mr. Jordan. In your view, fine, because that is the public 
sector. But this is the private sector asking the government, 
trying to get taxpayer money. Seems kind of unusual?
    Ms. de Rugy. It seems unusual.
    Mr. Jordan. Very unusual?
    Ms. de Rugy. But, I mean, the economic literature is 
actually full of evidence that this is what you get when you 
have the government doling out money.
    Mr. Jordan. You have just not seen it up close. Mr. Kats 
hasn't seen it before.
    Mr. Kats. I actually worked at DOE on the level of 
engagement on both sides of the aisle, and from CEOs, who I 
assume were both Republican and Democrat; we never asked. In 
terms of trying to find out information, make the case for the 
plant being built in their district, that happens all the time; 
it is standard business.
    Mr. Jordan. It is standard business for the government 
employee to tell the private sector, hey, if you are going to 
send a letter to the White House, here I show you should write 
it? That is standard business?
    Mr. Kats. Again, I don't think that letter was sent, so you 
are asking a hypothetical. I am just saying----
    Mr. Jordan. No, I am not.
    Mr. Kats. I am just saying that what happens----
    Mr. Jordan. The letter was edited; it was going to be sent 
to the White House. They chose not to after the fact. What I am 
asking is--you are saying this is common practice. I am saying, 
really, you have seen this before?
    Mr. Kats. I have never seen a letter that was actually sent 
that was--actually, I was unable to read the text; I don't know 
what the letter said, but I would say it is very normal----
    Mr. Jordan. Forget about what the letter said. Let's ask 
this point. Have you ever, in your experience at the Department 
of Energy, when you were there, did you know of anyone at the 
Department of Energy who, when they were approving some kind of 
loan for a private company and they are asked to edit something 
that is going to be sent to the White House, have you ever seen 
them actually edit that and advise them how to do it?
    Mr. Kats. The level of involvement in the form of letters, 
visits, and emails from corporate CEOs, from governors, both 
Republican and Democrat, and from members on projects in which 
businesses in their jurisdiction were being considered for 
funding, that is a constant and unending stream; it takes up an 
enormous amount of time at DOE to deal with that. That is 
standard practice, yes.
    Mr. Jordan. Okay.
    Doctor, I will give you the last word, if you want. Where 
does this all end, Doctor? Where are we headed if we keep going 
down this road?
    Ms. de Rugy. Well, I mean, it is hard to know where it is 
ending, but I guess there are going to be more government 
guarantees, probably some failures, more subsidies down the 
road. But, more importantly, with respect to the--I actually 
think that the fact that private industry needs the support of 
the government is never a good sign.
    And then where does it end? I mean, then you have 
competition from abroad. Then what do we do? I mean, if price 
falls, what is the next step the industry--what is the next 
demand from the industry? Are they going to demand that the 
government guarantee certain level of prices? It is likely 
where we are heading, and we know what was done in other 
industries such, as sugar and steel, and this is not good for 
the American people.
    Mr. Jordan. Well, thank both of you for taking the time 
out. I apologize for your having to wait, but I appreciate your 
patience and your expert testimony. Take care.
    Mr. Kats. Thank you.
    Ms. de Rugy. Thank you.
    Mr. Jordan. We are adjourned.
    [Whereupon, at 1:03 p.m., the subcommittee was adjourned.]
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