The attorney and lobbyist Steve Farber, a major donor to the Democratic National Committee and cochair of the host committee for the 2008 convention in Denver, which nominated Obama for President, understood exactly how the system worked. He had raised $40 million for the inauguration, and now he could raise some cash for himself.10 Shortly after the federal government started writing Recovery Act grant checks, Farber boldly placed an ad in the Wall Street Journal touting the services and connections of his firm, Brownstein Hyatt Farber Schreck. "Expertise in sustainable energy law is worth nothing without connections," it read. "Learn how we've helped clients obtain funding from the Department of Energy through the American Recovery and Reinvestment Act."
Farber was blunt, but he spoke the truth in a way that only a lobbyist will sometimes do. He was right: when it came to getting access to tens of billions of dollars in taxpayer money, passed around as a stimulus for the economy, connections were the key.
Another Obama fundraiser, Steve Westly, echoed that sentiment. In addition to amassing more than $500,000 for Obama's election in 2008, Westly cochaired California's Obama for President campaign. Westly is a Silicon Valley venture capitalist who also advises high-tech start-ups on financial matters. And like Farber, he has not been subtle about advertising the Obama connection.
"We believe that with the Obama Administration, and other governments ... committing hundreds of billions of dollars to clean tech, there has never been a better time to launch clean tech companies," reads his company's website. "The Westly Group is uniquely positioned to take advantage of this surge of interest and growth."
In addition to regularly attending White House events and state dinners (he was on hand to greet the Chinese premier), Westly also serves on the advisory board of the Department of Energy. Four companies in which Westly had a major financial stake just happened to receive loans, grants, or stimulus money from the Obama Energy Department: Tesla, Recyclebank, Edeniq, and Amirys Biotechnologies. And at least two other companies that later joined his portfolio, Amonix and CalStar Products, received Department of Energy funding.
As a joint investigation of Westly by ABC News and the Center for Public Integrity makes clear, he confidently traded on his connection to Obama, mentioning it in e-mails to Department of Energy officials with whom he was discussing business.11 But Westly was only one player in a very large drama.
The first guaranteed loan provided by the Obama administration for alternative energy was massive: $573 million for a solar energy company called Solyndra. The company got a low interest rate and the knowledge that if it could not repay what it owed, the government would pick up the tab. In short, a very nice deal. President Obama paid two visits to Solyndra's California factory to tout the grant. As it turned out, 35% of the company was owned by an Oklahoma billionaire named George Kaiser, who was a bundler for the 2008 Obama presidential campaign. (Each Obama bundler raised a minimum of $100,000 for the election.)12 Nonetheless, since receiving the loan Solyndra has declared bankruptcy, laid off workers, and closed down its first factory.13 The economic reality is that Solyndra loses money on every solar panel it sells. The company has never been profitable. The plan was simple, and would become a pattern with other companies: secure government money, go public, and get out. As one investor in Solyndra told the Wall Street Journal: "There was a perceived halo around the loan. If we get the loan, then we can definitely go public and cash out."14 Based on the terms of the taxpayer-backed loan, Kaiser and other investors will be paid before the government.
That loan set the tone for a whole series of others, as well as for outright grants offered to a large collection of Obama financiers. One of the biggest apparent winners in the sweepstakes for taxpayer dollars was a company called Leucadia Energy. The company gained approval for a number of projects running into the billions of dollars. It received $260 million for an industrial carbon capture project in Lake Charles, Louisiana; approval for $1.6 billion in loan guarantees for a coal gasification project in Indiana; and another $1.6 billion for a synthetic gas project to be based in Chicago. (Some of these projects have faced local opposition because of concerns about pollution, and have not been completed.)15
So how on earth did Leucadia Energy manage to attract so much federal money? According to Manta.com, an aggregator of public information about small businesses, Leucadia at the time of the government's decision had one employee and $120,000 in annual revenue. The company is a subsidiary of Leucadia National, whose chairman and CEO is Ian Cumming. Cumming served as a member of President Obama's 2008 National Finance Committee and was on the 2008 Democratic National Convention Committee. Curiously, Ian Cumming wrote three rather large checks to Democratic Party committees just weeks before his funds were approved. He wrote a total of $69,900 in checks in April 2009.
The ostensible purpose of these massive stimulus loans to Leucadia was to create jobs. But according to a government audit, as of December 2010, eighteen months after the loans were made, the Leucadia projects had resulted in a grand total of three jobs.16
A total of $2.1 billion was offered to Solar Trust of America to build a solar facility. Both Citigroup Global Partners and Deutsche Bank have a lot of money at stake, $6 billion. The vice chairman of Citigroup Global Partners was, until recently, Louis Susman. And who is Susman? He sat on Obama's National Finance Committee and raised so much for the Obama campaign that he got the nickname "the Vacuum Cleaner." In appreciation, Obama made him ambassador to Great Britain. Deutsche Bank North America's CEO, Seth Waugh, was an Obama campain bundler. The project's partner is Chevron, which heavily favored Obama over McCain in 2008 campain contributions.17
A company called Solar Reserve received $737 million in loan guarantees. One of the largest investors in Solar Reserve is CitiAlternatives. The head of CitiAlternatives, before he joined the Obama administration, was Michael Froman. Obama and Froman first met at Harvard Law School, where they served on the Law Review together. When Obama ran for the U.S. Senate in 2004, Froman introduced him to major Democratic Party players like Robert Rubin, raised money for the campaign, and advised Obama on policy. When Obama ran for President, Froman helped raise large sums of money on Wall Street. After he secured election, Obama asked Froman to join him in the White House as deputy assistant to the President and deputy national security adviser.
DEPARTMENT OF ENERGY GRANT AND LOAN RECIPIENTS FROM THE OBAMA CAMPAIGN'S NATIONAL FINANCE COMMITTEE
INVESTING IN POLITICIANS CAN BE HIGHLY PROFITABLE
A company called Brightsource received $1.4 billion in loan guarantees to build the Ivanpah Solar Electrical System on federal land in California. Who owns Brightsource? By far the single largest shareholder (25%) is Mr. Wagle's VantagePoint Partners. One of only four partners at the firm is Robert Kennedy Jr., from that famous political family. Although he initially supported Hillary Clinton, Kennedy came around to supporting Obama, comparing him to his father and his uncle. He declared during the election that Obama was a "transformational figure in American history who's been able to excite the same intensity and feeling amoung Americans as I saw during my father's 1968 campaign and my uncle John F. Kennedy's 1960 campaign." Now an environmentalist and an investor in green technologies, Kennedy wrote an article for CNN.com in the summer of 2008 with the apt title "Obama's Energy Plan Would Create a Green Gold Rush." And now Kennedy was in a good position to cash in.
Brightsource badly needed this infusion of taxpayer cash. It had been losing lots of money. It had debt obligations of $1.8 billion and in 2010 lost $71.6 million on revenue of just $13.5 million. The company was blunt in its filings with the Securities and Exchange Commission: "Our future success depends on our ability to construct Ivanpah, our first utility-scale solar thermal power project, in a cost-effective and timely manner." And there were no guarantees: "Our ability to complete Ivanpah and the planning, development and construction of all three phases are subject to significant risk and uncertainty."18
A billion dollars in taxpayer
money being sent to wealthy investors to bail them out of risky investments—does this sound familiar to anyone?
Another alternative energy company, Abound Solar, cashed in $400 million in grants to increase its production of solar panels. One of the first and largest investors in Abound was billionaire heiress Pat Stryker, who invested through her company, Bohemian. An early financial supporter of the Obama campaign, Stryker has given hundreds of thousands of dollars to Democrats, $87,000 to Obama's Inauguration Committee, and $500,000 to the Coalition for Progress.19
A company mentioned earlier, First Solar, received a whopping $4.7 billion in loan guarantees for three solar projects. And who is behind First Solar? The biggest investors include billionaire Ted Turner, a big financial backer of Obama's in 2008, and Goldman Sachs. The financial giant's employees gave Obama more than $1 million in campaign contributions in 2008, making it one of his largest contributors.20 And two Goldman executives sat on Obama's 2008 National Finance Committee. As a bonus, perhaps, billionaire investor Paul Tudor Jones, another Obama bundler, also owns a stake in First Solar, whose CEO, Michael Ahearn, gives generously (and exclusively) to Democrats.
When news of the loans to First Solar became public, the company's stock jumped more than 6%.21 For Goldman, it was just one Obama-era payoff. It also raked in another $90 million commitment for a solar site in Colorado, which was being developed by Cogentrix, a wholly owned subsidiary of Goldman Sachs. And U.S. Geothermal, in which Goldman was the second-largest shareholder, was given a $96.8 million guaranteed loan. It was the first geothermal project to complete a loan guarantee from the Department of Energy.22
The DOE handed over $102 million in loan guarantees to Record Hill Wind to build a wind farm in Maine. And who heads up Record Hill? Former Governor Angus King, along with Robert Gardiner, the former head of the Maine Public Broadcasting System. Neither has a background in energy. King, however, endorsed Obama in 2008 and campaigned for him.
The other top recipients pulled down various amounts, and in almost every case the numbers and the cronyism were notable. In some instances these projects have been delayed because of local politics, but the federal money has been approved:
The U.S. Treasury Department gave a $200 million grant to Peco Energy for a smart-grid network—that is, software and equipment designed to help utilities better monitor energy distribution and use. The company is owned by Exelon. Exelon executive Frank M. Clark (who is CEO of the company's ComEd unit) and board member John Rogers Jr. were both members of the Obama campaign's National Finance Committee. White House adviser David Axelrod was a longtime consultant for Exelon. For that $200 million, according to the same federal government audit, Peco (and Exelon) created a total of 102 jobs by December 2010.23
On July 1, 2009, the DOE awarded $100 million to the Basin Electric Power Cooperative in tiny Beulah, North Dakota. The money was for a grant to install "smart meters" to monitor energy consumption. The co-op's partner, which is actually overseeing the work, is Powerspan, a small alternative energy company whose largest investors include Daniel Weiss and Zeb Rice of the Angeleno Group. As with Exelon, both of these executives served on President Obama's National Finance Committee. The other major Powerspan investor is billionaire financier George Soros, who was also an early Obama supporter. The timing of their investment and the government grant is interesting. On April 23, 2009, Powerspan revealed that the Angeleno Group and Soros were new investors. Less than two months later, Department of Energy Secretary Steve Chu announced the $100 million grant. It was a big deal for Powerspan, which had raised only half that amount in private capital up to that point. As of December 2010, a year and a half after Chu's announcement, a government audit revealed that this project had created eight jobs.
$200 million went to Duke Energy for a smart-grid project. It also received $90.4 million for its Notress Windpower project in Texas, for which it had already started construction, in May 2008, and which would be finished in April 2009, just two months after the stimulus bill became law.24 That $90 million was delivered in September 2009, after construction was completed.25 For good measure, the Energy Department also granted environmental waivers for both projects.26 Duke Energy CEO Jim Rogers is a major DNC contributor and had reportedly been on President Obama's shortlist for energy secretary in December 2008. In March 2011, as reported by National Public Radio, Rogers took the "unusual step" of committing corporate assets to obtain a $10 million line of credit for the National Democratic Convention in 2012.27
A commitment of $308 million was made to Hydrogen Energy California, LLC, a joint venture between energy giant BP and the mining company Rio Tinto. BP appears to be the only major oil company that managed to receive substantial government support. According to the Center for Responsive Politics, BP gave more to Obama's political campaigns than to any other candidate over the past twenty years. In 2008, candidate Obama received $71,000 from the company. The project has created a whopping 23 jobs.28
$115 million in taxpayer money was committed to a company called First Wind, for wind energy projects in Utah and New York. Both projects were already under way when the funds were awarded. The New York project had been started in 2007.29 The largest equity stakeholder in the company is D. E. Shaw, a hedge fund that is one of the top three contributors to Democrats.30 The founder of the fund, David Shaw, was an Obama bundler, raising more than $500,000 for the 2008 presidential run. (And like many of the others mentioned here, he is at work on the 2012 election.) D. E. Shaw also employed Larry Summers, who served as the head of President Obama's National Economic Council. Another 42% of First Wind is owned by Madison Dearborn Partners, an investment firm with close ties to then—White House Chief of Staff Rahm Emanuel. The founder of the firm, David Canning, had been a bundler for George W. Bush. But he switched sides in 2008 and gave heavily to Obama. Madison Dearborn gave more to Emanuel's congressional campaigns than did any other business. "They've been not only supporters of mine, they're friends of mine," Emanuel explained on one occasion.31 In July 2010, First Wind also secured $117 million for a project in Hawaii called Kahuku Wind. It created 125 jobs. The plan was to secure taxpayer money and then go public. But in October 2010 First Wind had to delay its IPO because of weak demand.
$135 million went to Sapphire Energy for an algae biorefinery, which would create "super algae" that could be converted into energy. ARCH Venture Partners is a major investor in Sapphire. Bob Nelsen, the founding partner, served on Obama's National Finance Committee during the 2008 campaign. Before 2007, Nelsen considered himself a Republican, but he switched sides. He was apparently the only Republican on Obama's finance committee.32
The Treasury Department sent a $60 million stimulus to Vantage Wind Energy, LLC, which is a wholly owned subsidiary of Invenergy, LLC, a Chicago-based company headed by CEO Michael Polsky. Polsky is a major Obama donor and a financial supporter of the DNC who gave more than $30,000 to the 2008 Obama campaign and another $50,000 for the Obama inauguration. Invenergy also pulled in another $68 million in taxpayer money for the Beech Ridge Energy Wind Farm on September 22, 2010.33
$1.5 billion was approved for Summit Texas Clean Energy, LLC. The company is a subsidiary of Summit Energy, located on Bainbridge Island, Washington. The company's CEO is an attorney named Eric Redman, who is a former staffer for a Democratic senator and a major DNC donor. Like the others mentioned here, his campaign giving appears to be entirely to one party. The project manager for Summit Texas Clean Energy is former Dallas Mayor Laura Miller, a Democrat. A former newspaper reporter and environmental activist, she is perhaps best known as the daughter of the former head of Neiman Marcus. She has never worked in the energy industry. As of this writing, Summit had created 8 jobs.
$465 million in government loans went to Tesla Motors to build an electric car. Steve Westly, the venture capitalist, sat on the board of Tesla at the time, and his firm owned more than 2.5 million shares in the company. (He also personally owns an undisclosed number of shares.) Tesla foun
der Elon Musk was a major DNC contributor and in 2011 donated $35,800 to the Obama Victory Fund. (Steve Spinner was an adviser to Tesla before he joined the Obama campaign.) Tesla received its taxpayer loan in 2009 and went public in 2010. The IPO, made possible because of taxpayer money, made the initial investors even richer: the stock price surged 40%. Steve Westly made $1.2 million, and Musk $15 million. Since the IPO, Tesla's stock price has dropped and the company continues to lose money. Tesla's other major investors include Nicholas Pritzker, brother of Penny Pritzker, who was the Obama campaign's finance committee chair, and Sergei Brin and Larry Page, the founders of Google. The company's CEO at the time, Eric Schmidt, served as an informal adviser to President Obama. Dan Reicher, director of climate and energy initiatives at Google, was one of the founders of Cleantech and Green Business Leaders for Obama. When the administration proposed, in February 2011, to stimulate electric car sales by offering consumers a $7,500 rebate, stock in Tesla rose 6% on the news.34 Google's billionaires were also investors in Brightsource, which won the large loan guarantee mentioned earlier. $275 million went to Solar City, to install solar panels on military bases. Solar City is headed by Elon Musk, and Google is a large investor.
Throw Them All Out Page 9
