Officials at failed solar-panel maker Solyndra LLC refused to discuss the company’s contracts at a private meeting last month with a bankruptcy analyst for the Justice Department, fueling the push to have a trustee take over the failed company during its bankruptcy, records show.
Bankruptcy analyst Jeffrey Heck of the U.S. Office of the Trustee, an arm of the Justice Department that oversees bankruptcy cases, said that during a routine interview not long after Solyndra filed for bankruptcy last month, Solyndra officials suggested he “move on” when he asked about its contracts, according to an affidavit filed Friday by Mr. Heck in U.S. Bankruptcy Court in Delaware.
U.S. taxpayers stand to lose out on more than a half-billion dollars in government loans issued to Solyndra before it went bankrupt.
The Office of the Trustee wants a trustee appointed to oversee the company during its bankruptcy. Such appointments are rare and often occur when there is evidence of fraud or mismanagement. A judge will hear both sides on the motion Monday, but it’s unclear whether a decision will immediately follow.
In the case of Solyndra, the Office of the Trustee has not accused the company of any criminal behavior or mismanagement, but it has pointed out that a raid on its headquarters by the FBI last month and ongoing investigations by Congress and others could prove too much of a distraction for Solyndra executives.
In seeking the appointment, the Office of the Trustee cited Mr. Heck’s affidavit describing his inability to obtain information from Solyndra about company contracts. In a meeting with company officials, Mr. Heck said, he asked specifically about pending contracts and cited an Oct. 2, 2008, news release from Solyndra.
The news release, still posted on the company’s website, states that “Solyndra is currently shipping its systems, comprised of panels and mounting hardware, to fulfill more than $1.2 billion of multiyear contracts with customers in Europe and the United States.”
During the meeting with Mr. Heck, an attorney for Solyndra commented “that this was a topic that may be subject to litigation and investigation and suggested I move on to another topic,” Mr. Heck said in the affidavit. He said no further information was offered about the contracts.
At the meeting, Mr. Heck said, Solyndra’s vice president and deputy general counsel, Ben Schwartz, “did not answer any questions relating to the contracts.”
“He did not offer to provide any information at a future date, as he had previously on other topics,” Mr. Heck said in the affidavit.
In court filings, Solyndra attorneys said they have offered to answer all questions about contracts and say there’s no need for a trustee. They’re asking for a chief restructuring officer to run the company instead.
Indeed, Solyndra “maintained a high level of transparency with its sophisticated creditors making full financial disclosures and opening itself to close scrutiny,” Solyndra attorneys argued in court papers.
The Department of Energy, which awarded Solyndra more than a half-billion dollars in federal loan guarantees in 2009, was “intimately familiar” with the company’s business affairs and event sent representatives to board meetings since February 2001, Solyndra said.
“At no time since the DOE loan guarantee was approved did the DOE raise any concerns about improprieties,” the company said in recent court filings, adding that “DOE had inside access to financial information and management plans and was fully aware of the impending bankruptcy.”
Solyndra attorney Bruce Grohsgal, of the Pachulski Stang Ziehl & Jones law firm, said Mr. Heck’s questioning at the initial interview “ranged far afield of the customary scope of questioning,” asking about statements in a news story on the federal raid and about the customer contracts.
Mr. Grohsgal said the company’s representative at the meeting was uncomfortable discussing the subject a week after the FBI raid, but later told the U.S. Office of the Trustee that officials would answer questions about the customer contracts.
When the Office of the Trustee asked for copies of certain customer contracts after the meeting, the company provided them that same day, according to Mr. Grohsgal’s motion.
When the issue of the contracts surfaced in court filings filed by the Office of the Trustee, the company wrote to say they would respond to those questions at a meeting of creditors but also could do so in advance. On Oct. 7, the Office of the Trustee responded, according to Mr. Grohsgal’s filing, and “indicated a preference to ask the questions orally where their answers could be more fully explored.”
Mr. Grohsgal said the company and its attorneys aren’t aware of any outstanding information requests from the Office of the Trustee.
In addition, Mr. Grohsgal said, appointing a trustee would “devastate” the prospects of a sale of the company and would trigger a default under a financing agreement.
The most likely result of a trustee appointment would be “that any prospects of maximizing value will be lost, jobs will not be reinstated, the debtors assets will be dismantled and sold piecemeal and the federal government will receive little or no recovery on account of its claims,” Mr. Grohsgal wrote.
Meanwhile, the top Republican and Democratic members of a House subcommittee investigating Solyndra agreed Friday to seek the testimony of Energy Secretary Steven Chu.