An audit of the Energy Department’s Loan Programs Office, which handles more than $385 billion in loan authority, found that the LPO failed to ensure all its employees had no conflicts of interest that would undermine the impartiality in the course of working on loans coming out of the office.

The Office of Inspector General’s audit reviewed 40 employees of the office’s 219 full-time staff, and found that 20% of those reviewed had a potential conflict of interest or the appearance of a loss of impartiality in performing their duties. 

One senior-level employee did not disclose a prior position at a large financial investment company for which this person still held millions of dollars in stock. 

“Given the importance and sensitivity of the LPO’s mission, it is critical for LPO federal employees to be impartial and free from COI [conflicts of interest] with companies conducting business with the LPO. Any real or apparent COI may undermine public trust, accountability, and the LPO’s integrity,” the report said. 

Solyndra and EV charging

During the Biden administration – through the Infrastructure Investment and Jobs Act, Inflation Reduction Act and related legislation – the LPO was granted over $385 billion in new loan authority. The report explains that the loans support “innovative clean energy, advanced transportation, and tribal energy projects” in the U.S., and these loans would be considered too risky by traditional lenders. 

In 2009, Joe Biden, who was then vice-president under former President Barack Obama, touted a $535 million loan guarantee from the LPO for solar energy startup Solyndra, which went bankrupt in 2011. The OIG produced a report in 2015 that found that Solyndra provided the DOE with “statements, assertions, and certifications that were inaccurate and misleading” relevant to the loan process. 

The LPO under the Biden-Harris administration provided billions in loan guarantees for carbon capture infrastructure, electric vehicle charging stations, and a solar manufacturing facility in Georgia. Under the Trump administration, the LPO has provided billions in loan guarantees to restart a reactor at Three Mile Island, a fertilizer plant powered by coal-fired energy, and to rebuild transmission lines. 

Energy Secretary Chris Wright testified in May that the LPO had issued about $40 billion in loans for energy projects over the previous 15 years. But in the last 76 days of the Biden administration, he said, that number jumped to $100 billion. Wright said that the rushed loan agreements lacked clauses traditionally required by the DOE. 

LPO staff doubled in size

With Congress and the Biden-Harris administration pushing an accelerated climate agenda, the LPO was expected to have an increased loan activity, according to the report on the OIG’s audit of the LPO. 

To assist with loan application processing and evaluation, the office requested an additional 105 full-time employees from fiscal years 2022-2024, and as of September 2024, the office had 219 full-time employees, on top of 300 contractor and subcontractor employees. 

Under federal law, federal employees are prohibited from participating personally or substantially in a government matter in which they have a financial interest if their work will have a direct effect on that interest. This can include ownership of stocks, bonds, mutual funds, real estate, and it can include receiving a salary, loan or job offer. 

Among the findings of the audit was the case of one former employee of the LPO who had previously held management positions with a large financial business and investment firm. While working for the LPO, the employee communicated and participated in matters with this investment firm, including the loan approval process. The employee, the OIG report states, should have been recused from working on the matter. 

Another employee worked on matters while continuing to have financial ties to LPO contractors. On multiple occasions, according to the report, the employee discussed LPO business that created a potential financial conflict of interest and “an appearance of loss of impartiality in performing official duties.”

Failure to disclose

The audit also found that LPO employees didn’t always disclose all outside positions in their financial disclosure reports. Out of 24 senior-level employees, the audit identified two of them who didn’t disclose outside positions, as required by federal law. 

One of the employees didn’t disclose holding millions of dollars in stock at a company the employee was formerly employed with, and this employee also failed to disclose membership on the board of trustees of a nonprofit corporation. The other didn’t disclose having worked for multiple LPO contractors prior to working at the LPO. 

The report also found that nine out of the 40 employees the audit reviewed did not get approval for outside positions they held. Employees, the report stated, are required to get written approval from their immediate supervisors prior to starting outside positions. 

One high-level employee who failed to disclose an outside position had instead “self-determined” that the outside position this employee held had no conflict of interest. 

“Disclosure of all outside positions is essential to ensuring compliance with Government ethics regulations and COI mitigation strategy requirements,” the report stated. 

Recommendations

The audit also uncovered a failure to provide accurate and sufficient information to ensure conflict of interest reviews were effective for seven of the employees the audit reviewed. The LPO also failed to ensure one of its employees filed a financial disclosure report. Other employees weren’t properly vetted for potential conflicts of interest prior to being onboarded. 

The OIG recommended that the LPO develop a comprehensive standard operating procedure to identify and manage conflicts of interest and designate an ethics official within the LPO legal division to ensure compliance with regulations and resolve potential conflicts that the audit identified. 

According to the report, management concurred with the recommendations and will address the reported issues.