Allegation of Illegality in the DOE Handling of the Solyndra Loan Guarantee – What if the DOE Had a Compliance Program?

A recent headline on on the Solyndra scandal caught my attention: “Say DOE [the Department of Energy] Broke the Law -- So What?” [1] My initial reaction was one of helpless resignation to the truth of that statement. If the DOE broke the law, there could be congressional investigations, adverse editorials, perhaps even some employee discipline, but no particular legal remedy.  We as taxpayers generally do not have standing to challenge agency actions.   Even if an individual were personally harmed, the sovereign immunity card could be played and the case may not last past a government motion for summary judgment.   As citizens of the United States, where the rule of law is paramount, and where public office is embraced as a public trust, don’t we deserve something better than the helpless inevitability of “So What” ?

The headline was written by Darren Samuelsohn, a reporter who is covering the oversight hearings by the House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, into the DOE loan guarantees to Solyndra, a now bankrupt company in the business of manufacturing solar cells.   Specifically, he was reporting allegations that officials of the Office of Management and Budget and the Treasury Department cautioned the DOE that the restructuring of a portion of the loan that allowed private investors priority payment in case of default is illegal and that the DOE should obtain a second opinion from the Justice Department.  The DOE went ahead with the loan without consulting with Justice.   The DOE has no compliance officer or corporate styled compliance program. 

The Rutgers Center for Government Compliance and Ethics advocates for corporate styled compliance programs in government organizations.  The DOE has no compliance officer or corporate styled compliance program, but what if there were one?   In order to understand that better, I think it might be helpful to translate the DOE experience into a private sector example, where compliance programs have been around for over 20 years. 

            Consider the following hypothetical.  The R&D Vice President (VP) of “Mega-Mega Company” is proposing a partnership with a smaller struggling company to develop a technology which would benefit “Mega-Mega Company.”   The R&D group is being pressured by the CEO, who also claims a mandate from the Board, to move on this as quickly as possible.   A contract specialist the finance division of “Mega-Mega” raises specific legal objections about the proposed partnership which, if correct, would present an absolute bar to pursuing the project in its current formulation.  The general counsel, who came into her job with the CEO, believes the project has no legal impediments and approves it.  There is a Chief Ethics and Compliance Officer (CECO) and a compliance program that has been established in accordance with the Federal Sentencing Guidelines for Organizations (FSGO).  The CECO is empowered to act in such situations and has the necessary clout as suggested by the FSGO, that is direct access to the CEO and the Board. 

            With the existence of a compliance program there is an institutionally stated commitment to carry on the business of “Mega-Mega” in compliance with the law, backed up by a multi-faceted management process to detect and prevent non-compliance.  This process includes:  employees who are regularly reminded of their individual and collective responsibility to comply with the law; employees who have a responsibility to report non-compliance and are encouraged to do so openly, confidentially, or anonymously and without fear of retaliation; a process to identify, evaluate and mitigate  risks of non-compliance; regular evaluations of the program; and, perhaps most importantly in this case, a compliance officer with the ability to resolve the allegations and/or raise it up to the organization’s governing authority for final resolution.  While this is available to employees of “Mega-Mega Company” it is not available to the DOE officials.

            In my hypothetical the mere existence of a corporate compliance program could, in and of itself, encourage the parties to find a resolution to the contract specialist’s concerns.  Assuming that It does not, the contract specialist, knowing she is backed by a non-retaliation policy , brings the matter to the CECO.  How the CECO reacts at this point is difficult to project, but one thing is certain, he will act.   In view of the support and approval of the project by the CEO and the Board he will notify them that he has taken the matter under advisement.  Thereafter, he would attempt to reach a solution with which all parties are comfortable.  If no resolution is reached at this level, the CECO may bring the concern to the personal attention of the CEO with a recommendation for action.  If the CECO remains concerned, he can bring it the attention of the Board. 

At the DOE, a properly structured compliance program led by a competent compliance officer would have provided a visible resource within the agency to consider the concerns raised by the Treasury and OMB people during the course of deciding the terms of the loan guarantee. The DOE compliance officer could have taken cognizance of the issue and either brokered a resolution or raised it  to the highest levels within the DOE for a final decision.  The key is that this can and should be resolved during the course of the decision making process.  It represents a one last chance within the agency to get it right, especially where compliance concerns are raised. 

Robust debate over the wisdom the DOE’s expenditure of half a billion dollars to Solyndra in particular and the role of government generally in supporting such endeavors is exactly what a free society should enjoy.   However, allegations of illegal and unethical [2] behavior create side issues that cloud that national debate on the core issues.  This could have been prevented by a compliance program geared to resolve such issues during the agency consideration of the loan guarantees.   

[1]  Darren Samuelsohn,, October 21, 2011.

[2] There are allegations that an individual employee of the Energy Department, who advocated on behalf of the Solyndra loan guarantees had a conflict of interest because of his wife’s law firm representation of  Solyndra.  He attempted to cure his conflict through recusal, but continued to advocate even after the recusal.  He is no longer with the DOE