Earlier this week it was reported that the White House considered a last-minute taxpayer bailout of Solyndra, the failed solar panel maker that received a $529 million loan guarantee. One of the more interesting aspects of that deal—which would have had taxpayers purchasing as much as 40 percent of the company—was that it was allegedly recommended by Wall Street firm Lazard Ltd. According to the Associated Press:
Lazard was paid $1 million for analyzing options related to Solyndra. Without an infusion of new cash, Lazard wrote in an Aug. 17 memo to the Energy Department, Solyndra was almost certain to fail, which would "likely result in little recovery to the DOE." The department rejected the refinancing plan sometime after Aug. 28, and Solyndra shut its doors on Aug. 31.
A Department of Energy spokesperson disputed the characterization that Lazard Ltd. "recommended" the bailout, but that's the way it's been characterized by the Associated Press, the New York Times, and a host of other media outlets.
The Lazard deal is significant in its own right because, as a former high ranking Department of Energy official confirmed to me, million dollar deals for outside consulting work to Wall Street firms are highly unusual. (Then again, prior to the Obama administration, the Department of Energy making half a billion dollars worth of loan guarantees to tech companies was unheard of as well.) The Department of Energy spokesperson hasn't returned my call to answer my question about whether the contract to Lazard was awarded through a competitive bidding process or "sole-sourced." Based on the information about the grant at USAspending.gov, it appears that the grant was simply handed to Lazard without a competitive bidding process.
That's curious because, according to Opensecrets.org, Lazard Ltd. is one of the top contributors to the Democratic party, as well as a top 20 donor to the Democratic National Committee and the Democratic Senatorial Campaign Committee. Antonio Weiss, a Lazard employee, is also listed as one of Obama's 2012 bundlers, having raised between $100,000 and $200,000 for the president's reelection. Finally, on Lazard's website, Vernon Jordan is listed on the firm's board of directors. Jordan is a former adviser to Bill Clinton and a consummate Democratic insider.
Paying out $1 million to a consultant to analyze a $529 million loan may not be a disproportionate amount of money. It's also possible Lazard was ideally positioned to evaluate Solyndra's problems.
However, looked at through the lens of Solyndra scandal, it's telling. It appears that the Obama administration made a huge, unwarranted loan guarantee to Solyndra based not on having done the financial due diligence, but largely on the basis of political connections and campaign donations. The moment it became obvious Solyndra was going bankrupt and the administration started to grapple with what to do about it, they immediately sought out a Democratically-connected firm and major donor, and awarded them a million dollar contract to sort out Solyndra's finances. The firm then made a recommendation for a taxpayer bailout, which was not acted upon.
Crony capitalism appears to beget more crony capitalism.
UPDATE: Associated Press has subsequently revised their story to reflect that Lazard Ltd. did not advise the government to dump more money into Solyndra. The updated AP report now reads:
It was one of several scenarios outlined in August by the investment banking firm Lazard Ltd. Lazard was paid $1 million for analyzing options related to Solyndra.