DOE Hid Info About Loan Recipient's Bad Condition in April House Hearing

DOE Hid Info About Loan Recipient's Bad Condition in April House Hearing
September 9, 2013

Paul Chesser

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes ... (read full bio)

Being an Obama administration stimulus failure doesn’t mean you have to be electric, and it also doesn’t mean the Department of Energy won’t pretend you’re still legitimate when Congressional pressure is on.

The neutrally named Vehicle Production Group, which was loaned $50 million by the DOE thanks to the Recovery Act, revealed in May it had stopped operations in February and laid off 100 staff, after DOE froze its assets. Now, in a typical Obama administration “hope-they-don’t-notice” Friday announcement, DOE told American taxpayers that $42 million of that money won’t be paid back. Apparently there weren’t many assets left to freeze.

About $5 million was recovered by the government. The weekend info release said the rest of the debt was sold at auction for about $3 million to AM General, a Humvee manufacturer.

“After exhausting any realistic possibility for a sale that might have protected our entire investment,” said DOE spokesman Bill Gibbons in an email, “the department determined that auctioning the remainder of VPG’s loan obligation offered the best possible recovery for the taxpayer.”

The agency struck its now-familiar stance, acting as though the money it’s “investing” in these losers was offered up to them voluntarily rather than forcibly taken from hard-working taxpayers. DOE is still proud of its “portfolio,” with losses accounting for “only” two percent of all its clean energy financing in the program, and “only” approaching $1 billion in total losses. Good news if you ask DOE – that’s only 10 percent of what Congress allegedly expected them to lose!

“While an auction was not what anyone hoped,” Gibbons said, “our overall portfolio of more than 30 projects remains strong.”

The DOE “investments” – including VPG – are something you’d expect more in public service warnings about scams, rather than in boasts about bureaucrats’ savvy and ingenuity.

For example, there’s the near-dead electric charging company Ecotality, which was created by a former kitchen manager who wanted to sell his own environmentally friendly cleaning products, but then a business partner changed the business to EV chargers. He turned management of the company over to a self-admitted “political beast” that once led a hotel chain and – Voila! – Ecotality had $135 million from DOE.

Or Fisker Automotive, which was going to sell a $107,000 electric luxury car to rich Hollywood liberals in enough quantity that would remove the equivalent of 30,000 cars off the road annually, “displace” 17.4 million gallons of gasoline per year, leading to 154,000 tons of carbon dioxide avoided. For that equivalent of beachfront property in Nebraska the DOE granted Fisker a $529 million loan.

And there’s Vehicle Production Group, who you might think would have saving grace by not having the electric car curse hanging over it. You’d be wrong.

The mission that VPG chose to accept, and DOE chose to fund with your money, was to produce a line of wheelchair accessible vans that ran on compressed natural gas. We all know because of the pending disaster from global warming, and because the world doesn’t have enough vehicles for handicapped people that run on CNG, that the market demanded these vans – right?

The only problem was the market wouldn’t pay for them, so DOE did – with your money. DOE and VPG had so much hope, too: 900 “green” jobs, 3,000 cars off the road per year, 1.4 million gallons of gasoline “displaced,” 12,200 tons of CO2 kept out of the atmosphere. But it wasn’t meant to be, and company officials now say “don’t blame us.”

According to Business Insider Australia, VPG CEO John Walsh said fear caused by bad publicity and Congressional scrutiny of Fisker led DOE to impose greater restrictions on his company. The news site said VPG raised $400 million in private equity in addition to the DOE loan, and like other recipients was required to keep a certain level of cash in reserve. Walsh said when VPG dropped below that amount, DOE froze its assets, which forced it to stop operations and lay off its employees. Still, he insisted the business was healthy, with a few thousand vans sold and thousands more ordered from customers.

“I think the DOE has made a major error with this company because of the pressures of the Fisker situation, and that is unfortunate,” Walsh said. “It has everything to do with Fisker.”

Business Insider Australia reported that DOE froze VPG’s assets on February 29th, but that didn’t keep the embattled agency from including it among its list of successes before an April 24 hearing of the Subcommittee on Economic Growth, Job Creation and Regulatory Affairs, under the House Committee on Oversight and Government Reform. Nicholas Whitcombe (on left in photo), Acting Director of DOE’s Advanced Technology Vehicles Manufacturing Loan Program, gave testimony in which he defended DOE’s loan to failed Fisker. In doing so he cited his office’s efforts to “protect the interests of taxpayers” and “due diligence,” while boasting of its “critical role in the development of advanced technology vehicles by providing long-term capital….”

At that point he included VPG on his list of DOE loan successes.

“The Vehicle Production Group received a $50 million loan from the Department in March 2011,” Whitcombe testified, “allowing the company to support the development of the six-passenger MV-1, a factory-built wheelchair accessible vehicle that will run on compressed natural gas.”

There was no mention that DOE froze VPG’s assets two months earlier. And then Whitcombe had the audacity to conclude with this:

“Four years ago, the American automobile industry was on the brink of collapse during a historic economic crisis,” he testified in April. “Now, in part because of help from the ATVM program, America’s automotive industry is reinventing itself — expanding production, growing profits, creating jobs, and making more fuel efficient automobiles. While American manufacturing continues to face substantial challenges, its future prospects are stronger than they have been in over a decade. The Department looks forward to continuing its support of this success.”

Rep. Jim Jordan, R-Ohio, chairman of the House Oversight subcommittee where Whitcombe testified, has called the loan program “one of the most disastrously mismanaged and corrupt programs in U.S. history,” and said during that Fisker hearing, “The Obama administration owes the American taxpayer an explanation as to why this bad loan was made in the first place.”

He might also want an explanation why Whitcombe hid the truth about VPG while under oath before his subcommittee.

Paul Chesser

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes ... (read full bio)