The former Treasury Department official who oversaw a review of the Obama administration’s energy loan program on Tuesday defended the decision not to review bankrupt Solyndra LLC as part of his audit.
Herbert Allison, former assistant secretary at the Treasury Department, issued a report earlier this year saying taxpayers could lose nearly $3 billion through the Department of Energy loan program, though his review did not include the collapses of two high-profile recipients, Solyndra LLC and Beacon Power.
Sen. Rand Paul, Kentucky Republican, questioned Mr. Allison sharply on why the two bankrupt companies weren’t included in the report. The exchange came during a hearing before the Senate Committee on Energy and Natural Resources.
“I find that very, very curious,” said Mr. Paul, who noted the involvement of a fundraiser for Mr. Obama’s 2008 campaign in Solyndra. He was referring to Oklahoma businessman George Kaiser. The investment arm of Mr. Kaiser’s foundation was a major investor in Solyndra, which received more than a half-billion dollars through the loan program but went bankrupt last fall.
Mr. Allison said he didn’t include Solyndra because there were already so many investigations into the company, adding that would make it harder to get documents and information without subpoena power. A House committee has been investigating the Solyndra loan for about a year, and the U.S. attorney’s office in San Francisco has a grand jury looking into the company, according to court records.
Scrutiny on Beacon and Solyndra has intensified in recent weeks amid reports that both companies had awarded big bonuses to executives before going bankrupt.
Mr. Allison said a compensation review program within the Energy Department is something “that might be considered” in light of public consternation about the executive compensation. But he disagreed when Sen. John Barrasso, Wyoming Republican, suggested the idea of legislation that would prohibit private investors from getting paid back before the government if a company collapsed.
That’s what happened with Solyndra. The company and Energy Department officials agreed to let private investors who extended a $75 million lifeline to Solyndra to be paid back first if the company collapsed. Officials have said they agreed to the restructuring because it gave Solyndra the best chance of surviving.
While Republicans said the so-called subordination broke the law, Mr. Allison said the Energy Department should have the flexibility to restructure loans if that’s what it takes to keep a company afloat and protect the government’s investment.
However, he also said Energy officials could cut off funding under loans if a company isn’t meeting specific contractual milestones.
In separate testimony, also before the Senate Committee on Energy and Natural Resources, Energy Secretary Steven Chu said his department has put in place “rigorous internal and external reviews to hold the loan program’s office accountable.”