In support of innovative technologies that promoted the Green energy, the government of the United States implemented an energy law that was meant to boost creative energy ideas that helped minimize air pollution in the environment and created employment opportunities through the provision of federal loans. Many start-up companies applied and Solyndra was one of the qualifying companies due to its unique creation of solar panels that supported the green energy movement. Founded in the year 2005 by Dr. Christian Govet, Solyndra’s products were purposely produced for public and commercial utilities. Compared to its competitors in the market, the solar panels that Solyndra created were not made out of polysilicon material that is costly in the market. Rather its cylindrical solar panels were made out of “copper indium gallium selenide” making it an outstanding initiative and manufacturer as compared to its competitors who manufactured the typical flat solar panels. Moreover, it provided extremely standard installation and solar panels that were efficient and high in nature as compared to other manufacturers. Solyndra’s woes began when it applied for a five hundred and thirty-five million dollars ($535) loan from the government. Considering that its innovation was promising and met the requirements for green energy, it was awarded the loan. Furthermore, the power law and the support from the White House catalyzed the quick processing of the enormous sum of federal baked loan applied by Solyndra. Due to mismanagement and contribution of other factors that affected the company, within two year of receiving the loan, the company sought bankruptcy.
According to business analysts, the company spent too much money in the production of the proposed solar panels. Consequently, the effect of the high production cost contributed to an increase in the expense of the product leading to a reduction in sales because of the availability of a variety of Chinese solar panel products that were much cheaper. Furthermore, the company was not in a position to revive its sales and opted to apply for a second loan that was not approved. Following this was the halt of production that saw close to one thousand one hundred individuals losing their jobs. In the end, the company resolved to closure.
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Specific Laws Applying To the Solyndra Situation
According to the United States Code of Bankruptcy, the Solyndra Company fulfilled Chapter 11 Title 11 requirements by filing for bankruptcy after it seized operation because of lack of finances to enhance production. After, laying off its employees, most of them accompanied each other and sued the company for losing their jobs without notice. To find out the cause of excessive expenditure and misuse of funds that contributed to the closure of the company and failure of the business, the department of FBI raided the company to commence an investigation. Moreover, the FBI agents accessed the computer documents and files of the founder and CEO of the Company Chris Gronet and Brian Harrison respectively to examine possible loopholes that would lead to the misuse of the half a billion loan funded by the company. Besides, the company underwent an investigation done by the United States Treasury Department. According to Kelly Rizzetta (2012), DOE – the Department of Energy intentionally broke the United States Law that requires a particular progression in investment. DOE advised and supported Solyndra in collaborating with the government as investors as equal partners and ensure that the Limited Liability Company excessively invested in the manufacturing of the solar panels.
The General Legal Concepts discussed
Following the controversies that surrounded the Solyndra's issues, the matter had to be handled by some general business legal concepts that applied to the case. Some of these concepts include the ethics of the company involved, the authority that dictates partnership or the corporation’s operations and the applications of the federal law that govern the business operation of the given area.
The Silicon based Liability Company applied for a loan after convincing the government that its business operations were liable and would turn out to be successful. Using its authority, the White House fully supported the company’s request for the half a billion sums of money and advocated for more Companies to get involved in the creation of Green energy that would support the generation of employment opportunities. While it entered a partnership with the company, the processing of the finances failed to meet the requirements of the law that applies to business operations and according to 2005 implemented Energy Policy Act. In relation to the government’s Energy Commerce (2012), the White House ignored the red flags that were shoved by the Office of Management and Budget (OMB) probably because of the authority it had in the country and the government. The OMB alerted the government authorities of the inability of the Solyndra Company to handle and manage the finances it was offered by the government. Moreover, specialists in the Department of Energy warned of the possible Bankruptcy that the Company would face before it became stable to be able to repay the loan. Ethically, the government failed to take action on the information it acquired from the OBM instead it progressed with the initial plan to implement the establishment of Solyndra (Willis, 1933).
Despite the lack of financial records of the income generated by the Company and the continuous negative cash flows that it experienced, the Department of Energy failed to monitor the Company’s financial state a condition that highly contributed to the failure of the Company. Before its application of bankruptcy, the Company made efforts to convince suspecting Republican committee members of the Commerce Committee and House Energy. Reasons as to why the government’s administration is considered to be the driver of the conspiracy are primarily because of the adamancy of the Office of Management and Budget reluctance to provide the documents and files that exposed the operations and communications of Solyndra for purposes of investigation and analysis of the Company’s financial progression. In most cases, it is the government’s responsibility to ensure that its citizens abide by the law and order that has been enacted. On the contrary, the inability of a higher office in the government to cooperate with the FBI raised questions of its ethical values towards the management of the taxpayer’s finances awarded to start-up Companies in the form of loans.
It is the mandate of the necessary authorities to thoroughly examine and verify the legibility of any startup company before handing it large sums of money equivalent to what was offered to Solyndra Corporation. Hence as recorded in the Department of Energy website (2011), the testimony from the Director Loan Programs – Jonathan Silver, confirmed that his duties that included, overseeing the Energy Policy Act loan guarantee programs and Recovery Act of 2009, ensured that Solyndra underwent the proper scrutiny before being qualified for the applied loan. The President’s move in collaboration with the whole White House Team to some extent lacked the judicial process and in many cases contributed to the mismanagement of the funds and collapse of the Company (Speaker Paul Ryan, 2011).
The filing for bankruptcy was a possible tactic of avoiding further payment of taxes and cover up of the assets of the financial managers of the Company to be looked into. Besides, the ethical step expected from the company was to strategically make use of the remaining funds after filing for bankruptcy to re-establish the Company to avoid its collapse. Moreover, concerning the United States Fair Labor Standards Act, it is required and expected of any Company to notify its employees of a possible layoff before the act, a step that Solyndra Company did not follow (Murphy, 2012).
The Philosophy of Economist Milton Friedman
According to Economist Milton Friedman (1970), the core responsibility of any business in to ensure it generates revenue into its business operations. Hence for a competitive market and business establishment, it was necessary for the government to allow business entities to operate by themselves and ensure that they thrive even without Government’s support. Moreover, he advocated for a free market in the business world that promoted fairness and stiff competition that favored the consumer and production of good goods. Concerning the case of Solyndra and Friedman’s beliefs, the role that the Department of Energy played in offering the federal baked loans, lacked the most vital procedure of following up on the progress of the Company and their use of the finances. The negligence of allowing Companies to operate as they wished without monitoring them played a role in the loss of the taxpayer’s funds. As deliberated, Solyndra’s failure is pegged on the actions of the government’s Department of Energy and the inability of the Company to make the most of the fund offered by the government. In case Solyndra’s executives would have implemented Friedman’s philosophy a lot would have been avoided. For instance, if the officials raised funds they needed to establish and produce the solar panels; it would have been easy for them to manage their funds through ensuring that they make revenues from their productions. Moreover, the signs of losses would have alerted the executives and pushed them to take the right steps of handling the matter to ensure that they evaded collapse.
A part of the free market philosophy deployed by Friedman, some of the ethical frameworks that should apply in the situation is the ability of the government to allow businesses and startup companies to establish themselves. On the other hand, it is ethical to provide a limited amount of money and ensure the right authorities follow up on the Company’s progression. That way the executives are in a position to fight for a better position in acquiring a second loan after proving responsibility in financial management. Furthermore, the government would ensure that taxpayer’s money is not embezzled.
Startup Companies can be very tricky to support especially due to the lack of their performance record. Solyndra’s innovation of creating solar panels that promoted the Green environment was the American government’s desire due to the negative effects greenhouse gasses has on the environment. Therefore, the initiative the Solyndra Corporation proposed was a powerful way to deal with air pollution. The government, on the other hand, focused on the ability of the Company to create employment opportunities for the American citizens. Contrary to the government’s ideology of the ‘successes’ that Solyndra would have contributed to the economy of the country, it faced a closure within two years of receiving the loan. The government’s influence in the operation of startup business like Solyndra and hasty decisions to fund millions contributed to the loss of the government revenue provided by its citizens. With the immense breaches in handling the issue of Solyndra, it is the government that bore a bad reputation in dealing with sensitive matters and not the company.
E & C. (2012, September 14). The Energy and Commerce Committee: Ten Lessons of the Solyndra Failure . Retrieved March 14, 2017, from Energy Commerce, Government House: https://energycommerce.house.gov/news-center/blog-posts/ten-lessons-solyndra-failure
Energy.gov. (2011, September 14). Testimony of Jonathan Silver, Executive Director Loan Programs Office, U.S. Department of Energy Before the Subcommittee on Oversight and Investigations Committee on Energy and Commerce U.S. House of Representatives . Retrieved March 15, 2017, from Energy Government: https://energy.gov/articles/testimony-jonathan-silver-executive-director-loan-programs-office-us-department-energy
Friedman, M. (1970, September 13). The Social Responsibility of Business is to Increase its Profits . Retrieved March 15, 2017, from University of Colarado: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
Murphy, R. P. (2012, February 6). Lessons from Solyndra . Retrieved March 15, 2017, from Library of Economics and Liberty: http://www.econlib.org/library/Columns/y2012/Murphysolyndra.html
Rizzetta, K. (2012, July 25). DOE's Deal With Solyndra Investors Broke Law, GOP Says . Retrieved March 14, 2017, from Law 360 : https://www.law360.com/energy/articles/363878/doe-s-deal-with-solyndra-investors-broke-law-gop-says
Ryan, S. P. (2011, September 22). Solyndra Deal Violates 'Fundamental Laws of Economics' . Retrieved March 15, 2017, from Fox News: http://www.foxnews.com/opinion/2011/09/22/america-cannot-afford-more-solyndras-congress-must-put-end-to-obamas-crony.html
Willis, H. (1933). Legal Ethics. Ethics , 43 (3), 269. http://dx.doi.org/10.1086/208085