In 2005, in Fremont, California, Dr. Chris Granet founded the promising start-up company. It was the solar energy corporation, “Solyndra”. This company became popular because of its unique production. The thing is that it manufactured tubular solar panels of copper indium gallium selenide (CIGS), while any other similar company produced the traditional flat panels, which were dearer and less efficient. Solyndra’s photovoltaic (PV) solar system was revolutionary (Green, 2008). It seemed to be true because of the structural features of the invention. Thus, in contradiction to the traditional solar panels, these ones did not need to be located strategically, or anchored down. It could be possible through the absence of necessity to use the ballast anchoring. These constructional features allow increasing the efficiency of the solar panels to absorb the sunlight (Biello, 2008).

In 2009, the Solyndra Corporation received a huge loan grand from the US Energy Department. The company got half a billion U.S. dollars and the tax break from California’s Alternative Energy & Advance Transportation Authority (CAEATA) to the tune of $ 25.1 million. This money was transferred in order to facilitate the construction of a new manufacturing plant. It was planned that new solar panel would be extremely demanded.

It seems to be reasonable to mention that the amount of loaned money was quite big. It was possible since the new energy legislation was adopted and came into force. It was in 2005. The new law gave the ability to get federally backed loans, which were issued by the authorized department and aimed to limit air pollution. In addition, the total support of the White House facilitated the obtaining of such a huge loan. Despite the excellent prospects and innovative technologies, after 24 month since the money was transferred, the company filed for bankruptcy (Biello, 2008). Subsequently, manufacturing was stopped, and 1.100 employees were laid off. There are several reasons for this. First, the production process was very expensive and, accordingly, the price was also high. The second problem was the increasing competition from the Chinese manufacturers, whose product was much cheaper. The company, finally, lost the chance to survive, when the administration failed to agree on the additional cash infusion. It happened in August 30, 2011. After these developments the company had not enough money to continue the production.


As it was mentioned above, the U.S. government took a bold step and gave a big loan to the promising, but the dubious corporation. If to take into account that the legislation of that time provides such an opportunity, the Solyndra Corporation got a great amount of money for the development of its production. It was the governmental attempt to reduce the anthropological impact on the environment. As it was planned by the White House and the American President Barack Obama, this step should have been an example of judicious funding of advanced technology and concern for the ecological safety.

However, Solyndra collapsed, and it became the cause of the numerous complaints addressed to the American government, and one of the strong arguments against Barack Obama, as the candidate for a second term in the office. Of course, it is impossible not to agree with the statement that this step was unreasoned and led to the fact that a huge amount of taxpayers’ money has been wasted (Woody, 2011). Moreover, there were several ethical and legal issues, which proved that it was a good example of serious mistakes in management planning because even the arisen situation connected with the bankruptcy could be solved better. In order to analyze the extremely complex issue, it is necessary to use the philosophy of economist Milton Friedman, which is applicable to this situation. Thus, despite the good intentions of the government, innovative technologies and prospects of successful market intervention, the company Solyndra did not live up to expectations, failed the task, and wasted taxpayers’ funds.

Legal and Ethical Issues Surrounding Solyndra

When Solyndra filed for bankruptcy, it became the object of the investigation by the U.S. Department of Justice and the Prosecutor’s office. The inquest lasted ten weeks and there were a few questions, which should have been answered. The first question was whether the management of the company led the entity to the bankruptcy intentionally. The second task was to find out, why such a perspective company, which got the big loan, did not cope with the difficulties and worked for only 2 years after the U.S. Energy Department transferred the loan. Furthermore, there were more than two specific legislature acts, which are applicable to this situation and ethical codes, which should also have been used.

Legal issues

The legal background of the case was very complex. It seemed to be true because it was very difficult to analyze the company’s management process and verify the information concerning the fact that Solyndra’s executives ensured the financial safety of the company, and the bankruptcy was caused by reasons that did not depend on the will of the company’s managers. In order to analyse the situation properly, these is the necessity to disclose the concept of bankruptcy. Thus, the bankruptcy is the declared by the court inability a debtor to satisfy creditors’ claims relating to monetary obligations and failure to pay the required payments. The financial inability can be divided into the three types. First, is the unforeseen bankruptcy, which addresses to the situations, when the management team of the company proves that there were no causes to expect the financial difficulties. Second type is the false bankruptcy. It takes place, when the company’s owners have the aim to hide their assets in order to avoid the payment of debts to creditors. Accordingly, if this fact will be proved, such people will be held to criminal liability. Finally, the third type is the incautious bankruptcy, which occurs due to inefficient and unsustainable activities of the management team. It is the most common type of bankruptcy. This failure to provide creditors with appropriate payments can be foreseen due to the fact that it doesn’t occur instantaneously. In addition, the process of dismissal of thousands of workers should also be analyzed for the compliance with the current legislation.

When authorities become aware of the financial conditions of Solyndra, the actions of the company’s CEO and the board of directors became the object of the detailed examination by the U.S. Department of Justice. It was extremely necessary to find out what exactly became the cause of all troubles. There was an urgent need to determine who was responsible for the firm’s financial health and whether the actions of the executives included a malpractice. In addition, the Republican faction of the House committee initiated the detailed clarification of case circumstances. Many legal issues were raised. The first interesting fact was concerned the refusal of Solyndra’s executives to discuss customer contracts and the process of engaging trustees to take charge for company’s failures.

There was one more notable fact that it was one condition for receiving back private investors’ money, which was connected to the intention of the managers to lead the company to the bankruptcy before the tax payers accused the company of violating the Energy law of 2005. One should take into account that the majority of Solyndra funding was provided by the Energy Policy Act of 2005, or more precisely, in accordance with the Title XVII section 1705, which also was amended by the American Recovery and Reinvestment Act. Thus, the legality of remittances from the government to the company was not in doubt. Nevertheless, the consequences of Solyndra’s actions were such that the public community learned about the wasting of their money.

Legal Issues Filled by Employees

During the bankruptcy process, thousands of employees were laid off with the violations of the labor legislation. Thus, the offended staff filed a claim with the court and mentioned that the company acted illegally. They argued that Solyndra was obliged to notify the workers within 60 days before the dismissal, as it is prescribed by the U.S. Fair Labor Standards Act. The company had to issue the WARN (Workers Adjustment & Retraining notification) but did not do it. As a result, the staff claimed the payment of its 60 days pay, 401(k) contributions, health benefits, and the additional indemnification for the more than 1,100 employees (Baker, 2011). The court ruled partially in favor of employees, but the thing was that the bankrupt company had not enough money to cover all expenses. In addition, the creditors also expected the refund. In such situation, it is very important for the court to establish the priority of creditors in a proper way. This process is strictly regulated by the U.S. Bankruptcy Code, under which, as a general rule, workers have a preferential right to the satisfaction of their claims.

Ethical Issues Facing Solyndra

The collapse of Solyndra caused a great scandal not only because of the financial problems. There was the ethical issue, which had made the situation even more outrageous. The point was that the biggest Solyndra’s shareholder, George Kaiser, financed Obama’s presidential campaign. Some say that exactly this fact helped the company to get extremely huge loan easily, within a short period of time, and without carrying out a proper due diligence. Now it is impossible to say for sure what was the main aim of providing a loan, but there are several facts, which prove that there were some extra interests, mostly connected to the politics (Baker, 2011). It seems to be reasonable not to discuss things that no one knows for sure, and only to mention that the Energy Department was accused of having forced Solyndra’s executives not to dismiss the personnel before the primaries of 2010. Moreover, this governmental department was aware of the financial difficulties of the company but had concealed it. It proves that there were some ethical issues and failings on the side of the government.

Two Laws and the Ethical Code that Apply to the Situation

The U.S. Energy Policy act stated that: “The Department of Energy shall consult with Office of Management and Budget, and the Secretary of the Treasury before granting any deviation in the loan”. In this case, the governmental financial institution ignored the mentioned provision and did not comply with the procedure of giving financial help. As a result, Solyndra’s assets and financial perspectives were not evaluated, and the likelihood of government loan repayment was at the great risk. Initially, the corporation was not able to acquit the expectations, and with normal development of the events, such a large sum of money would not be transferred (Baker, 2011).

Solyndra has also breached the provision of the American tax law. When the company initiated the process of bankruptcy, it evaded taxes and did not use the saved money for the restructuring of the company. Thus, the managers did not have an aim to save the company and its credibility. All American tax provisions are incorporated in the U.S. Tax Code.

The U.S. Code of Ethics was also breached. Solyndra did not inform the Department of Energy concerning its financial inability. Moreover, the biggest company’s shareholder George Kaiser provided the funding of Obama’s presidential campaign. His contributions equaled 75 millions of U.S. dollars. Therefore, this had had an indirect effect on the possibility of funding activities of the corporation (Scott, 2011).

When the community became informed about Solyndra’s collapse, thousands of employees were dismissed without an appropriate and timely notification. It was the breach of the labor law provisions, especially the U.S. Fair Labor Standards Act.

The Ethical Framework

The ethical framework of this situation is connected with the abuse of power by officials of the Department of Energy, who were not authorized to finance the startups like Solyndra only because of its activity, which was connected to the production of the pollution-free technologies. Granting of the governmental loan, especially of such size, should be carried out only after the proper and detailed evaluation of a company’s activities and financial capacities. The proper due diligence should be conducted in all cases. Additionally, as it was previously mentioned, the Department of Energy had to get the approval from other governmental institutions. Thus, these breaches and the fast and unjustified granting of a huge loan to the untested company suggested an idea about some additional backgrounds of the case (Lott, 2011).

Milton Friedman’s Philosophy

Milton Friedman was a well-known economist, who lived and worked in the 20th century. He supported the ideas of a free market without the governmental support. The scientist argued that the state administration should reduce its influence on the market and let business entities act independently. He thought that it leads to the economical prosperity. Thus, companies can create a fair market competition.

Despite the fact that these thoughts can be criticized, the approach of Milton Friedman can be applicable to the situation around Solyndra. The concept of the unregulated market can prove the inexpediency of financing startups like Solyndra. If to imagine the situation, under which the Department of Energy left the energy firm to its own devices and let it conduct an independent struggle for consumers in the market without any support, there would be no risk of loss of a quarter of taxpayers’ billion dollars. As a result, the government would not be liable for the failures of a company’s management (Fehrenbacher, 2010).

The Influence on Solyndra’s Executives

As it was proved by the defendants in the court, the company’s executives did not have the intention to avoid the tax liability. This win made possible to avoid the criminal liability. But the managers were involved in the court proceedings regarding the repatriation of money granted by the government. The labor organizations filed actions against the executives for the breach of the labor legislation and demanded full compensation for the unreasonable dismissal and absence of notification. The House committee and the Prosecutors office initiated the internal investigation on the issue of the unjustified granting of the loan without the proper due diligence (Fehrenbacher, 2010). All these actions affected Solyndra’s executives materially. The court ruled that the top managers were obliged to return a part of the granted money in the amount of 370 thousand dollars each. In addition, most of the executives and investors agreed that the government should not interfere to the development of startups in the Silicon Valley.


The analyzed case shows that the premature actions of the government can lead to the negative consequences. Political, ethical, and economical issues were mixed and led to the fact that the huge amount of taxpayers’ money was wasted. The Solyndra Company was a promising business entity with unique technologies and innovations. Its solar panels could make the step toward the development of pollution-free manufacturing. These benefits became one of the causes of Solyndra’s funding. Besides the economic and ecological advantages, there were also some ethical reasons. The Democratic candidate for the U.S. presidency received 75 million dollars aid from Solyndra’s largest shareholder. Following the election of the American President, the White House influenced the decision to grant the material assistance to the company. Thus, the Department of Energy did not conduct the due diligence, did not get the approval from other financial institution, and used taxpayers’ money independently. As a result, Solyndra became insolvent, people’s money was disappeared, the process of bankruptcy was conducted with numerous breaches, and all these problems negatively influenced the reputation of the government.

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