DOE to Lose Tens of Millions on Green Car Company

Company tied to a leading Obama fundraiser

September 6, 2013

The Department of Energy (DOE) will likely lose tens of millions of dollars on a loan extended to a green vehicle company with ties to a top fundraiser for President Barack Obama.

The news comes days after DOE announced that it would restart the loan program responsible for lending taxpayer funds to the struggling company.

The department loaned $50 million to the Vehicle Production Group in March 2011. It announced this week that, after recouping a small amount of that loan, it will sell the remaining $45 million debt to AM General for $3 million.

As a result, taxpayers are expected to lose about $42 million on the deal.

"After exhausting any realistic possibility for a sale that might have protected our entire investment, the department determined that auctioning the remainder of VPG’s loan obligation offered the best possible recovery for the taxpayer," DOE spokesman Bill Gibbon told the Detroit News.

VPG ceased operations and laid off most of its staff in May.

Its DOE loan came through a federal financing scheme called the Advanced Technology Vehicle Manufacturing (ATVM) program.

The program also financed politically connected green vehicle company Fisker Automotive, which has ceased production and may declare bankruptcy.

DOE announced last week that it will restart the program, which has not doled out financing since 2011, despite criticism of the ATVM program.

DOE’s relationship with VPG came under scrutiny in 2011 after it was revealed that James Johnson, the former top executive at federal mortgage giant Fannie Mae and a major Obama fundraiser, chaired an investment firm, Perseus LLC, with a stake in the company.

Johnson bundled between $200,000 and $500,000 for Obama’s 2008 campaign. His financial support for Obama dates back to 2003, when he donated $1,000 to his U.S. Senate campaign.

Johnson helped Obama court Clinton supporters in 2008 after a bloody Democratic primary.

He also sat on a three-person vice presidential selection panel for the campaign, though he stepped down after it was revealed that he received sweetheart mortgages from predatory lender Countywide Financial.

Both Perseus and DOE have denied that federal financing for VPG was political in nature.

"I doubt there was anybody at DOE that even considered the fact that Jim was part of this firm. We went straight through the proper channels of the [loan] program," Perseus chairman Frank Pearl told the Washington Post in 2011.

"The decision to provide the Vehicle Production Group a loan was made based on the merits after more than two years of review by officials in the DOE loan program," added then-DOE spokesman Damien LaVera.

Perseus’ political muscle went beyond Johnson. Its former vice chairman was the late U.N. ambassador Richard Holbrooke, who was appointed to a top foreign policy position during Obama’s first term.

Holbrooke left Perseus before it received its DOE loan. He died in 2010.

Another VPG financier, billionaire energy tycoon T. Boone Pickens, met with the president during the 2008 campaign to discuss energy policy.

Pickens subsequently said he was "strongly encouraged by Sen. Obama's speech on America's energy future. Foreign oil is killing our economy and putting our nation at risk."