Legal And Ethical Issues Surrounding Solyndra Institution
Abstract
The collapse of an organization that has been fronted as having a good model often raises a lot of questions. Solyndra is one such organization that went down in the years of the recent economic downturn, despite a lot of money having been pumped into it by both the government and private investors. In this paper, we interrogate what might have gone wrong in the whole issue surround the fall of the organization, and more so some of the ethical and legal issues that might have been raised bas far as market analysis is concerned.
Introduction
At one time or the other in the process of business development, the organization is likely to face immense challenges that may shake up the way business is done and greatly affect its operations. This happened to the renowned Californian manufacturer of cylindrical solar panels, Solyandra in September 2011.The company had cut a niche for itself as a provider for high-tech solar panels that had been widely used over several countries and were increasingly gaining popularity. In today’s challenging economic times, organizations are being affected by several internal and external factors that may sometimes be unseen until they strike hard on some operational system within the organization. Increasing commodity prices and fluctuating markets are some of the immediate factors that may contribute to the fall of an organization. The case of Solyndra is not far from these factors. However, there are deeper underlying ethical and legal issues that must be looked into in order to understand what exactly prompted this decision.
Background
Dr. Christian Gronet founded Solyndra in 2005. Its offices came later In 2006 headquartered in Fremont, California. Actual production began in 2007 and there was a relatively speedy growth given that by 2008 Solyndra the company set in Germany. This year also saw their first shipment of commercial solar panel It was a promising season for Solyndara and by 2009, the company hit the $100 million dollar revenue mark and hard the largest single installation in the U.S. In this year still they received a $535 million stimulus package loan from the Department of Energy that was meant for continued construction. It was meant to boost its activities a great deal and it elicited varied reactions even prompting factory visits by top government officials. Unfortunately, this also marked the beginning of its overall problems.
Solyndra’s products were manufactured at a $733 million state-of-the-art plant in Fremont, California. This plant is the one for which the company had received a $535 million federal loan .At the same time, investment by private investors was estimated at $198.In addition, the company was expected to have a production capacity of 610 megawatts by 2013. 2008 expansion same the company stop using its older plant(known as Fab 1) while also postponing further expansion of Fab 2 (David, 2008).).These developments were associated with market conditions where by low cost solar panels more so from China had seen the Solyndra’s sales start to plummet.. By August 2011, the company was filling filed for bankruptcy. This raised a lot of questions as to how a company that has acquired a $539 million n stimulus loan can so rapidly fall into bankruptcy. The begging question was: What laws if any were broken and what exactly went wrong? These are some of the issues we may try to fathom in this discussion
Discussion
One of the unique qualities that seem to have endeared the company to the general public and to specific consumers is its hi-tech photovoltaic (PV) panels that could perform superbly by applying a few mounting techniques such as horizontal placement and packing them really close. This could ensure that most of the available roof –top could be covered significantly to enhance maximum production of electricity per roof top. Than a conventional roof top could do (Baker, David 2011). Plainly put, the company intended to introduce and had actually introduced a product that was like no other as afar as solar /green energy is concerned. Consider , for instance that their panels were made of cylindrical tubes while the conventional solar panels are flat. The effect of this cylindrical tube was that it could absorb energy fro any direction. Such a technology seemed to have been timely considering that consumers are looking for simplified technology with optimum output. While Solyndra was able to offer this, perhaps it ay rightly be said that other market factors were not considered and the inconsistency in prices of production materials formed part of the problems of the company as later analysis revealed.
Ethical and Legal Issues
A number of issues come into perspective when looking at the whole bankruptcy issue of the company. Perhaps the best point from which this matter may be approached is looking at its duration of operation. It is agreeable that an undertaking so heavily invested in by both the government and the private sector going down in a period of about six years raises more questions than answers. The idea of the company is initially seen to have put every investor in high sprits. However, there seems to have been several aspects of the business that only became visible too late. International competition is undoubtedly one of these factors. The unforgiving question nonetheless is how the federal government could have failed to foresee the dwindling nature of the company before issuing the loan to the company while there was enough evidence that the company was not doing very well in terms of profits. For instance, ale a 2010 report by Energy and Commerce Committee showed that Solyndra had never reported a profit since its inception. It also reported that Solynda was experiencing negative cash flows. The company had also reportedly cancelled a $300 million initial public stock offering. The ethical questions that comes into focus is whether a responsible body failed to do a through research as to the financial status of the company and its future(Washington Post, 2011). At this point, The, committee points out, the Department of Energy (DOE) is seen to have failed to adequately monitor Solyndra’s financial condition. This could be termed as laxity by a government body to thoroughly execute its mandate. It has to be borne in mind that this was the department directly responsible for issuing the loan. When questions were raised about these issues particularly by the Republican members on the House Energy and Commerce Committee, Solyndra is said to have attempted to mislead the committee by producing a document in July of 2011(Exceeding Expectations: Solyndra Today) that claimed the company’s financial condition was improving. These events points out to a possibility that a group of individuals within the organization and most likely even within the DOE were colluding for personal gain. This digs into the moral fabric of concerned persons since it is evident that there was essential information to diverge that largely remained unearthed. Consider for instance the fact that in March 2009,an administration Office of Management and Budget (OMB) employee wrote in an email that could have suggested it was not yet time to overestimate Solyndar’s. Another email by an employee of the DOE employee warned that Solyndra would be out of cash in September 2011.This seems to have been a p prophetic revelation given that at exactly that month the FBI sparkling a series of events whose climax was the closure of the company(Washington Post, 2011). These events indicate that someone somewhere knew a number of facts about the actual financial standing of the company and the possibility of its bankruptcy or eventual downfall. At this point the role of public officials to diverge important information especially without bias comes into sharp focus. It boils down to personal ethics, which greatly contributes to advancement or deterioration of organizational ethics.
Did Solyndra Break any Laws?: The Legal Issues
The question of the laws that Solyndra might have broken any laws may be looked at from various angles. The process that led to the awarding of the may in itself be seen from a suspicious angle. A break down of these events may give a clearer picture. The company was formed in 2005 ostensibly to provide competitive alternative to silicon based a solar panels noting that the there was an increasing shortage of silicon that had led to an a rise in the prices of solar photovoltaic. In the same year, the Energy Policy Act of 2005 was passed creating the loan guarantee program
. In the following year, Solyndra applies a loan guarantee under the 1703 program which is granted in 2007.In the subsequent years, the price of silicon remains substantially high making Solyndra’s technology favorable and attractive to investors. In January 2009, a DOE review committee remands the loan and Solyndra reapplies with strengthened conditions and a DOE’s Credit Review Board(CRB) approves the loan after issuing of conditional commitment setting out terms for a guarantee (Todd,2011).So far, the series of events seem to be so closely associated especially in relation to creation of a loan guarantee act and creation of a company that applies for this loan almost immediately. Still in 2009 the American Recovery and Reinvestment Act of 2009 (ARRA) also known as the Stimulus or The Recovery Act was enacted.
The purpose of this law was to save and create jobs within the shortest time possible. It was also meant to provide temporary relief especially for those affected by the recession. It gave emphasis to infrastructure, education, health, and 'green' energy. Solyndra falls in the category of companies that needed a boost after the recession. It also must be noted that president Obama had pointed out that it is companies such as this one that were responsible for “leading the way toward a brighter and more prosperous future,” thus portraying an interest in the overall business of associated with the company. This close association of occurrences tends to lean towards a conspiracy especially considering the fact that the company was indeed declared bankrupt through a due legal process. These suspicions have nonetheless been put to rest by the governments response that claimed the loan and the acquisition processes were properly vetted and the collapse was an unfortunate failure in an otherwise successful program
This issue further raises eyebrows ethically when it is considered that George Kaiser, a key financier of the Obama presidential campaign was a major investor of Solyndra. Consider too the fact that the loans was abnormally fast-tracked and one may read mischief in the campaign
The legal issue that raises queries restructuring of the loan by DOE to a level where it is seen to have violated the Energy Policy Act by subordinating the taxpayers’ interest to those of private investors (Trivedi, 2012). The statute found in the Energy Policy Act of 2005 states that obligations, or loan guarantees, shall not be subordinated to other financing. The DOE is seen to have contravened this law by guaranteeing the loan though it claims that this move was indeed meant to protect the federal investment by giving the struggling company a chance to stay afloat thus giving taxpayers the best chance of being repaid.
There is also another issue in that there was need to understand whether the company and the management misjudged or misrepresented the actual state of the firm’s financial standing. That is the need to find out whether there were accounting malpractices involved (Washington post 2011) .These form part of the issues raised by House committee who cited occurrences such as Solyndra’s refusal to discuss customer contracts.
Philosophy of Milton Friedman
One of the advocacy’s of Milton is that of free markets. He was a firm believer in the economic of markets that are largely self controlled especially in terms of supply of goods and services. In addition, Friedman supported provision of some public goods by the state especially those that that the privates sector is considered unable to provide. Nonetheless, he pointed out that most of the services provided by government could be provided even better by the private sector. In that case, it may be said that if the government had left the energy firm to operate independently and leave the speculation to market experts, it is possible that the firm could have dwindled but not to a point of closure as it happened. In other words, Milton could have cited a situation in which the government was meddling in a private business that could have performed better if left on its own grounds(Global public square ,2011).
Conclusion
Whereas the ides that led to the conception of the company was valid and timely, several things went wrong somewhere in the whole process. One of the underlying observations though is that several key issues were put at stake. For instance, there was a high number of people whose jobs were put at stake following the closure of the company. This is made worse by the smell of political influence that could have contributed to the processing of the loan just as it might have contributed to the failure of the company. This puts the integrity of important persons to question and one wonders the extent to which such matters can influence the overall budget of the federal government and impacts of such occurrences to the economy.
References
David B. (7 October 2008). "Cylindrical Solar Cells Give a Whole New Meaning to Sunroof". Scientific American. Retrieved 13 June 2012. From http://www.scientificamerican.com
Baker, David R. (7 September 2011). "Solyndra files bankruptcy, employees sue". The San Francisco Chronicle p4
Washington Post, (7 October 2011) “Solyndra loan deal: Warning about legality came from within Obama administration”p18
Washington Post, (29 September 2011) Chu takes responsibility for a loan deal that put more taxpayer money at risk in Solyndra, p 3
Todd Woody (6 September 2011). "Solyndra: Pay Some Investors Before Taxpayers In Solar Flame Out".Retrieved 14 June 2012.from http://www.forbes.com
Trivedi, Shamik (2012)SOLYNDRA BANKRUPTCY PLAN SERVES TO AVOID TAX, DOJ INSISTS.) Retrieved /11/10/ 2012)
United States Bankruptcy Court for the District of Delaware (2012) Bankruptcy Trustee Objects To Confirmation Of Solyndra BankruptcyPlan. (In re: Solyndra LLC et al.) (No. 11-12799) Retrieved 10 /10 2012
Global publicsquare (11 October 2011) “Milton-Friedman magic” Retrieved 2011/10/11blogs.cnn.com
LA Times (Feb 23 2012) “Solyndra execs get bonus despite Solyndra filling for bankruptcyRetrieved 2012 Feb. 23 From http://articles.latimes.com
