The Work

September 21, 2011 6:09 PM

Solyndra Bankruptcy Fallout Generating Plenty of Work for Lawyers

Posted by Brian Baxter

Attorneys from at least seven firms have landed roles advising various parties connected to the increasingly controversial bankruptcy filing this month by government-subsidized solar panel manufacturer Solyndra—a company whose sudden collapse has begun to cast shadows over the entire U.S. solar energy industry.

Solyndra, which made photovoltaic cells for solar power systems marketed to commercial clients in North America and Europe, filed for Chapter 11 after finding it difficult to compete against Chinese manufacturers. The bankruptcy filing came a week after Fremont, Calif.–based Solyndra let go of 1,100 employees—triggering a class action suit under the WARN Act—and shuttered its operations. The company failed despite receiving a $535 million federal loan made under the Energy Department's 1705 program and authorized by the U.S. Department of the Treasury's Federal Financing Bank.

In the wake of the Chapter 11 filing, agents from the Energy Department's Office of the Inspector General and the Federal Bureau of Investigation raided Solyndra's Silicon Valley offices. The company claims it is cooperating with the U.S. attorney's office for the Northern District of California, which is overseeing the federal investigation.

At the same time, federal lawmakers began to complain that they had been misled about Solyndra's precarious financial situation. Congressional Republicans in particular have sharply criticized the Obama administration for loaning taxpayer money to the failed company and have questioned where that money went. (The criticisms and questions have come despite many of the same legislators pressing the administration to support federal loans for renewable energy projects in their home states, according to data gathered by The Associated Press.)

Media outlets have begun asking questions as well. In a story posted on its Web site late Wednesday, The Washington Times, citing public federal contracting records, zeroed in on payments to three law firms that the paper says came out of the proceeds of the controversial Solyndra loan.

Morrison & Foerster, the Times reports, received more than $1.9 million for representing the Energy Department as the loan guarantor. Wilson Sonsini Goodrich & Rosati, which represented Solyndra, collected more than $2.4 million, according to the Times. The newspaper reports that records show Gibson, Dunn & Crutcher also received payments totaling about $1 million in connection with the Solyndra project.

The political firestorm is likely to reach a new level of intensity Friday at a House Energy and Commerce Committee hearing. Solyndra CEO Brian Harrison and CFO W.G. "Bill" Stover, Jr., have retained their own counsel after being called to appear before the panel. Lawyers for both executives—Orrick, Herrington & Sutcliffe litigation head Walter Brown, Jr., is representing Harrison; Stover has turned to Jan Nielsen Little of litigation shop Keker & Van Nest—have advised their clients to invoke their Fifth Amendment right to refuse to answer questions, stepping back from previous statements that they would testify. (Click here for Brown's letter to Congress.)

Earlier this week, sibling publication The National Law Journal reported on Solyndra's hiring of five lawyers from McDermott Will & Emery to serve as special counsel to the company ahead of the congressional inquiry. Court records show the lead attorneys from the firm are former Massachusetts governor and of counsel William Weld ($825 per hour), government strategies practice head Stephen Ryan ($775), regulatory partner David Ransom ($525), white-collar defense partner Eugene Litvinoff ($525), and senior professional adviser Jon Decker ($425). An affidavit by Ransom reveals that Solyndra has paid $23,830 to McDermott so far this year.

Gibson Dunn business restructuring and reorganization cochair Michael Rosenthal, partner J. Eric Wise, and of counsel Matthew Kelsey are advising Argonaut Solar—Solyndra's largest shareholder—along with Sean Beach from Delaware firm Young Conaway Stargatt & Taylor. Gibson Dunn alum Steven Mitchell serves on Solyndra's board of directors and is a managing director of Argonaut Private Equity.

Argonaut is an investment vehicle tied to Oklahoma oil billionaire George Kaiser, a leading fund-raiser for President Barack Obama. The link between Kaiser and Obama first came to light last year when Solyndra received its government-subsidized loan, despite its own auditors raising doubts about the company's financial health. (Kaiser has said publicly he did not seek to use his political influence to obtain federal loans for Solyndra.)

Ratcheting up the rhetoric this week, House Judiciary Committee chairman Lamar Smith called for the appointment of independent counsel to probe a restructuring of Solyndra's debt obligations in February that called for Argonaut and another private investor, Madrone Partners, which is tied to the Walton family, to be repaid ahead of the federal government's debt being satisfied. Madrone and Argonaut contributed a combined $69 million in emergency loans to keep Solyndra afloat.

As previously reported by The Am Law Daily, bankruptcy boutique Pachulski Stang Ziehl & Jones is advising Solyndra on its Chapter 11 proceedings through name partner Robert Pachulski ($950), partners Debra Grassgreen ($795), Bruce Grohsgal ($705), and Joshua Fried ($650), and of counsel Shirley Cho ($650). Court records show that Solyndra paid $400,000 to Pachulski Stang in the year prior to its bankruptcy filing.

Blank Rome bankruptcy partners Bonnie Glantz Fatell and David Carickhoff in Wilmington are serving as proposed counsel to Solyndra's official committee of unsecured creditors.

Among those unsecured creditors: Cravath, Swaine & Moore, which is owed almost $2.1 million in legal fees by the debtor, according to court records. A source familiar with the Solyndra bankruptcy says that Cravath has been representing the company in an international arbitration. A Cravath spokeswoman declined to comment when asked by The Am Law Daily for more information about the firm's representation of Solyndra.

An S-1 filing with the SEC made by Solyndra last year connected to the company's aborted initial public offering reveals that the company was involved at the time in an arbitration over a sales agreement with German company Von Ardenne Anlagentechnik, which is claiming breach of contract and a misappropriation of confidential information. (It is unclear whether this is the arbitration matter on which Cravath has worked for Solyndra.)

Solyndra's general counsel John Gaffney spent more than 20 years at Cravath, where he became a partner in 1993. Gaffney, who has not been asked to appear at the House hearing on Friday, joined Solyndra as general counsel and senior vice president for corporate development in February 2010 after a two-year stint as head of legal operations for Tempe, Ariz.–based First Solar. (Cravath has in the past handled corporate work for First Solar, according to a 2009 report by The Deal.)

Wilson Sonsini corporate finance head John Fore and partner Michael Russell in Palo Alto advised Solyndra on its failed $300 million IPO, according to the company's amended S-1 filing of a year ago. Latham & Watkins emerging companies practice cochair Patrick Pohlen and partner Andrew Williamson in Menlo Park, Calif., advised underwriters on the proposed offering led by Goldman Sachs and Morgan Stanley.

According to Latham's Web site, the firm previously represented Goldman as financial adviser to Solyndra on its $535 million loan guarantee from the Energy and Treasury departments to finance construction of a new solar manufacturing facility for the company in Fremont. Latham states the loan guarantee was the first to close under Title XVII of the Energy Policy Act of 2005.

The controversy over Solyndra has begun to draw attention to other Obama administration–backed energy initiatives. Among them: a renewable energy project in California involving a company called BrightSource Energy that is in line for a $1.6 billion federal loan, according to L.A. Observed. Obama's current nominee for Commerce Secretary, onetime Morrison & Foerster partner and Natural Resources Defense Council cofounder John Bryson, was until recently a member of the BrightSource board.

BrightSource filed registration papers with the SEC on Earth Day earlier this year for a $250 million IPO. Orrick is representing BrightSource on the proposed public listing, while Skadden, Arps, Slate, Meagher & Flom is advising underwriters led by Goldman, Citigroup, and Deutsche Bank Securities.

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Is there any question that bankruptcy practices are still alive. $950/hr is not bad!

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