Solyndra, LightSquared and Teapot Dome

Ever heard of the Teapot Dome Scandal? Three naval oil fields – Elk Hills and Buena Vista Hills in California and Teapot Dome in Wyoming – were tracts of federal land that had been set aside as emergency underground supplies of oil to be used by the navy when the regular oil supplies were running low. The Teapot Dome oil field got its name because of a rock resembling a teapot that was located on the oil-bearing land. Both politicians and private oil interests had opposed the restrictions placed on the oil fields, asserting that reserves were unnecessary and that the American oil companies could provide for the U.S. Navy.

When Senator Albert B. Fall became Warren Harding’s Interior Secretary in 1921, he convinced Secretary of the Navy Edwin Denby to turn control of the oil fields over to him. In turn, Fall leased the Teapot Dome oil field to Harry Sinclair’s Mammoth Oil Company and the Elk Hills reserve to Edward Doheny’s Pan American Petroleum Company.  For his efforts, Fall received kickbacks from the oilmen totaling $400,000. Unfortunately for Secretary Fall, his lavish lifestyle  following the payoff drew the attention of the U.S. Senate, causing the scandal to go public in 1924. A series of civil and criminal suits sprang forth from the scandal, lasting throughout the 1920s.

In 1927, the Supreme Court ruled that the oil leases had been obtained illegally, invalidating the Elk Hills lease in February of that year and the Teapot lease in October of the same year. The navy regained control of the Teapot Dome and Elk Hills reserves.  Albert Fall was found guilty of bribery in 1929, fined $100,000 and sentenced to one year in prison. Harry Sinclair refused to cooperate with the government investigators and was charged with contempt, receiving a short sentence for tampering with the jury. Edward Doheny was found innocent in 1930 of attempting to bribe Fall.

Even though the Teapot Dome scandal was not a victory for either political party in the 1920s, it still became a major issue in the presidential election of 1924. However, neither party could claim full credit for exposing the scandal, which became synonymous with government corruption in America.

Yesterday, thehill.com broke the following story:

Rep. Darrell Issa (R-Calif.) said Tuesday that his committee plans to investigate government loan programs to private corporations in light of allegations of improper dealings between the White House and failed energy company Solyndra and wireless start-up LightSquared.

“I want to see when the president and his cronies are picking winners and losers… it wasn’t because there were large contributions given to them,” the chairman of the Oversight and Government Reform Committee said Tuesday morning on C-SPAN.

Issa said the committee was looking at whether it was improper for members of Congress or White House staff to select companies eligible for subsidized government loans when those companies could give campaign donations. Loan programs have been a popular tool to provide funding for popular industries — like tech, green energy, and American auto companies — at more favorable terms than could be secured privately.

Per businessinsider.com, the administration may have something to worry about concerning Solyndra:

When Solyndra went bankrupt last month it blew the lid off a scandal that had been simmering for months — and now threatens to ensnare the administration in months of hearings and bad headlines going into the 2012 election.

There is no evidence, nor is it likely, that Obama had any ties to the controversial $535 million loan, but already senior advisors are under fire for their roles in assisting the struggling company — which had strong ties to a key Obama donor.

George Kaiser, whose Argonaut Private Equity was a major backer of Solyndra, raised between $50,000 and $100,000 for Obama’s 2008 campaign, though the White House denies this was why it maintained close ties to the company.

ABC News reported that administration officials sat in on Solyndra board meetings as observers in the months leading up to the company’s bankruptcy.

Even before the loan was approved in September 2009, auditors raised serious doubts about the company’s finances, Bloomberg reported — enough to write that the “problems raise substantial doubt about its ability to continue as a going concern.”

But as they were conducting due diligence on the loan, officials from the Office of Management and Budget said they felt pressure from the White House to conduct their analysis quickly.

The Washington Post reported today that senior officials from OMB raised specific concerns about the company’s finances — and the consequences of it failing — as early as January 31, 2011.

“The optics of a Solyndra default will be bad,” one OMB staffer wrote to another. “If Solyndra defaults down the road, the optics will be arguably worse later than they would be today. . . . In addition, the timing will likely coincide with the 2012 campaign season heating up.”

As far as LightSquared is concerned, again, businessinsider.com gives us a concise summary of the situation:

LightSquared, a Virginia-based start-up, has received support from the Obama administration for its nationwide broadband initiative.

However, LightSquared’s business is still on hold because it has to receive Federal authorization.

That’s because the Pentagon has raised concerns about the LightSquared venture possibly interfering with the satellite GPS system that the U.S. military uses.

Four-star Air Force General William Shelton recently dropped a bit of bombshell on the Falcone-backed project, officials told The Daily Beast.

In a classified briefing, Shelton apparently revealed that the White House asked him to change two things in his testimony.

From The Daily Beast:

According to officials familiar with the situation, Shelton’s prepared testimony was leaked in advance to the company. And the White House asked the general to alter the testimony to add two points: that the general supported the White House policy to add more broadband for commercial use; and that the Pentagon would try to resolve the questions around LightSquared with testing in just 90 days. Shelton chafed at the intervention, which seemed to soften the Pentagon’s position and might be viewed as helping the company as it tries to get the project launched, officials said.

However the content of the general’s testimony is unknown.

There’s definitely smoke there.  But, is there fire?  Will the Solyndra/LightSpeed scandal become the Obama administration’s Teapot Dome?  Or will it be just a display of sound and fury, signifying nothing?

The jury’s still out.  Although…Attorney General Eric Holder announced yesterday that the Administration still plans on closing Gitmo.

A preemptive strike, perhaps?

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