An internal federal watchdog called on the Biden administration’s green loans office to stop working on new deals in a Tuesday letter, citing concerns that the office has insufficiently managed potential conflicts of interest in its work.
Department of Energy (DOE) Inspector General Teri Donaldson wrote to Under Secretary of Energy for Infrastructure David Crane on Tuesday to inform him of preliminary findings that the Loan Programs Office (LPO) does not keep track of conflict of interest disclosures or waiver requests for its loans. Donaldson also said the LPO should “put into abeyance all loan and loan guarantee packages” until LPO can ensure that all appropriate safeguards are being observed. The LPO has been on a tear since President-elect Donald Trump won the election on Nov. 5, locking in several major loans and reportedly hustling to seal others in the transition period. This, over the protests of Republicans who believe the office’s lame duck lending bonanza flies in the face of the electorate, whose will was expressed on Election Day.
“Despite the risks and conflicts that could arise if the LPO contracts with contractors that also work for prospective borrowers, the [Office of the Inspector General (OIG)] audit team was surprised to learn that the LPO does not ensure that contracting officers and contracting officers’ representatives track third-party experts,” Donaldson’s memo states. “For example, for the 18 projects reviewed by the OIG, the LPO Technical Division was able to provide the OIG with the name of the applicant’s third-party engineering experts for only 3 of the 18 projects.”
DOE OIG – LPO Memo by Nick Pope on Scribd
The OIG’s memo also states plainly that “LPO does not track contractors who may be serving both the LPO and prospective borrowers” and that a key LPO contractor called Archetype “did not implement the organizational conflicts of interest training program required by its own Management Plan.” Its shortcomings in abiding by procedures to ensure taxpayers are protected amount to a situation in which “the LPO has functionally abandoned any responsibility for identifying, evaluating, avoiding, neutralizing, or mitigating conflicts of interest,” Donaldson wrote.
To date, LPO has finalized 15 loans, worth a combined total of $15 billion, and the office is apparently planning to cement another 13 loans worth $22 billion before the Trump administration takes office next month, according to Donaldson’s memo. The DOE OIG has previously highlighted in official documents that LPO is prone to waste, fraud and abuse of taxpayer funds, particularly given its push to finalize loans quickly.
Just days before Donaldson sent her memo to Crane, a group of House Republicans demanded that LPO stop issuing new loans in light of risks to the taxpayer posed by rushing to shovel billions of dollars out the door in a small window of time. For its part, the DOE contends that the OIG’s reporting is “unorthodox” and “filled with errors,” according to Bloomberg News.
However, Donaldson’s Tuesday memo includes a comment from the auditor hitting back at DOE’s assertions that the review never identified a specific example of a conflict of interest.
“The Department’s assertion that the OIG has not identified any actual conflicts of interests misses the point of the audit. The scope of the OIG audit is to assess the LPO’s processes and internal controls to prevent and mitigate potential conflicts of interest,” the memo states. “The scope of the audit did not include attempting to audit the entire LPO portfolio for actual conflicts of interest. Moreover, an audit to identify actual conflicts would be very difficult to perform at this time because the LPO simply does not track the information necessary to identify conflicts of interest.”
Additionally, LPO Director Jigar Shah has also attracted scrutiny from elected Republicans who have suggested he is essentially selling access to his massive LPO war chest by continuing to associate with the Cleantech Leaders Roundtable, a green energy trade group he established prior to joining the Biden administration.
The LPO was active under the Obama administration, granting a $535 million loan to Solyndra, a green company that went bankrupt approximately two years after it closed on the LPO loan. The office was not especially active during the Trump years, but the Biden administration and Congress gave hundreds of billions of dollars to LPO to loan to fledgling green companies that may otherwise struggle to secure private sector financing.
The DOE did not respond immediately to a request for comment.
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