an outside economic adviser and a member of the President's Economic Recovery Advisory Board. As a member of that board he called for increasing fines for carbon pollution and pushing for rules to encourage electric utilities to move to a smart-grid system. As Doerr put it, 'God bless the Obama Administration and the U.S. government. We have really got the A-team now working on green innovation in our country.' That A-team was busy, of course, rewarding some of Doerr's own investments.
Of the companies listed on Doerr's website as part of his Greentech venture-capital portfolio, well over 50% of them received taxpayer grants or loan guarantees through Obama's stimulus program. Of the 27 listed, at least 16 received direct taxpayer support in the form of loans, grants, or stimulus work: Altarock, Amonix, Amyris, Aquion Energy, Ausra (which was acquired by Areva), MiaSole, OSIsoft, Primus Power, Transphorm, Recyclebank, Silver Spring, Great Point Energy, Hara, Harvest Power, Lilliputian Systems, and Mascoma. Considering that the acceptance rate in most of the Department of Energy programs was often 10% or less, this is a stunning record. That $2 million Doerr had invested in politics may have provided the best return on investment he had ever seen. Among the results:
Solar panel maker MiaSole received $102 million in special clean-tech manufacturing credits.
$24 million went to another Doerr company, Amyris Biotechnologies. The DOE grant was to build a pilot plant to use altered yeast to turn sugar into hydrocarbons. (Steve Westly was also a major shareholder.) Just weeks before the grant was announced, on December 4, 2009, Senator Dianne Feinstein and her husband bought $1 million of equity in the company (November 18). It was their only transaction of the entire year.
With federal money in hand, Amyris went public with an IPO the following year, raising $85 million. John Doerr's firm, Kleiner Perkins, did very well, more than tripling its investment. A $16 million investment was now worth $69 million. It's not clear how Steve Westly or Senator Feinstein did, but it's safe to assume that they did well too. Meanwhile, Amyris continues to lose money, and the grant created forty jobs.37
Curiously, in 2011 Senators Tom Coburn and Ben Cardin introduced legislation to immediately repeal the ethanol tax credit. This would threaten biofuel makers such as Amyris. So Senator Feinstein introduced her own bill that would repeal the ethanol tax credit for corn-based ethanol only. That would leave the credit in place for Amyris and actually benefit the company by making competing forms of ethanol more expensive.38
One of the biggest winners for Doerr was Silver Spring Networks, which provides 'smart-grid projects.' In 2008, Doerr and his partners invested $75 million in the company. Silver Spring doesn't receive grants from the federal government directly; it's a contractor for utilities and other companies that obtained grants to develop a smart grid. Close to 60% of Silver Spring's customers were winners of government grants, totaling more than $560 million.39
Silver Spring Networks won a lot of smart-grid projects because of how the stimulus bill was written. It was Al Gore, a partner with John Doerr at Kleiner Perkins, who inspired President-elect Obama not only to invest in clean energy but to put 'billions more in the stimulus for construction of the so-called smart grid.' Whether Gore revealed to Obama that he had his own money invested in Silver Spring Networks is not known.40
Gore was closely wedded to the Obama administration's alternative energy initiative, both directly and indirectly. President Obama asked Gore to serve as his 'climate change czar,' but the former vice president declined. In his place, Carol Browner, a Gore protegee, got the nod. Rahm Emanuel wondered openly whether Browner would work for Gore or Obama. 'When Gore comes and chains himself to the White House gate, it will be Carol's problem,' he told colleagues.41
The question of Silver Spring's success in the smart-grid business is particularly interesting. The stimulus bill was vague on the protocols and technical standards required. The bill simply read:
Obama Bundlers, Large Donors, and Supporters
(as of September 15, 2011)
'The Secretary shall require as a condition of receiving funding under this subsection that demonstration projects utilize open protocols and standards if available and appropriate.'42 This language had several Silver Spring competitors crying foul. According to Ed Gray, vice president of regulatory affairs for the smart-meter competitor Elster, the insistence on 'open protocols' gave a leg up to Silver Spring at the expense of other providers. Some smart-grid companies rely on other types of standards or use proprietary technology in parts of their smart-grid networks. Silver Spring does not. And Silver Spring seemed not at all defensive about the move. 'There's going to be a lot of people complaining,' one executive told
Billionaire Vinod Khosla was also a big winner in the taxpayer-funded giveaway. Khosla had been the head of Obama's India Policy Team during the 2008 election and contributed to Democratic candidates. He was a major investor in Coskata, a relatively new company whose goal is to make fuel out of waste. Coskata received a $250 million loan guarantee from the federal government.44 Company executives have been quite clear that one important measure of corporate success is the amount of 'government money we attract.'45 Khosla's Nordic Windpower was approved for another $16 million for a wind power manufacturing facility in Idaho. And his company AltaRock secured $25 million in stimulus money.
In April 2010, $25 million went to ZeaChem, which hired Steve Farber (mentioned above) to lobby on its behalf. One of ZeaChem's major investors are Globespan Capital, where managing director Jonathan Seelig is a Democratic donor (he too has never given to another party). The other major investor is PrairieGold Venture Partners, which is headed by Paul Batcheller, a former aide to then-Senator Tom Daschle. The grant was awarded to modify a 'demonstration sale' biorefinery. According to the federal government, the project created two jobs as of December 2010.
$21.7 million went to Solazyme, based in South San Francisco. The company was founded and is chaired by Jerry Fiddler, a large Democratic donor (who has also never given to another party). He was a contributor to the Obama Victory Fund, gave $24,000 to the campaign, and made contributions to the DNC. Principal owners of Solazyme include Kennedy's VantagePoint, Lightspeed Ventures, which is headed by John Luongo, another major Obama donor, and the Roda Group, where Roger Strauch is a DNC and Obama campaign supporter. Solazyme had receipts of $38 million in 2010 and lost $13.7 million. Taxpayer money created a total of thirteen jobs. After it received the money, Solazyme announced plans for an IPO.
The list goes on and on. It would take a large team of investigative reporters to untangle every example of cronyism, and it will take more time to assess how many actual jobs these billions of dollars might have helped stimulate. But there is no question that the money failed to produce any significant short-term job gains. The true short-term effect has been to enrich cronies of the party in power. The only thing that many of these grants and loans appear to have in common is how they stimulated the wallets of well-connected investors.
Cathy Zoi, who oversaw the awarding of grants, left the Department of Energy in 2011. Where did she go? She landed as the head of a new green-tech investment fund being established by George Soros, the investor whose firms received taxpayer money through Zoi. As Steve Coll of
Crony capitalism is good for those on the inside. And it is lousy for everyone else. But it does provide a hybrid-powered vehicle to sustain a large base of rich campaign contributors with taxpayer money.
Imagine for a minute that you are a corporate executive and you start using your company's assets to 'invest' in projects that in turn benefit you directly. What would happen? You would be risking possible criminal charges for the misuse of those assets. But if it's taxpayer money? Suddenly it becomes legal. Even acceptable. And for the billionaire who is looking to get a big return on his investment, there are few returns that can be higher than those resulting from campaign contributions. After all, how else can you turn half a million dollars from yourself and your friends into hundreds of millions of dollars after a single election?
Not surprisingly, many of those named here are raising money again, for President Obama's 2012 campaign. As a jobs program—the stated purpose—these billions in grants and loans were a failure. But as a method for transferring billions in taxpayer funds to friends, cronies, and supporters, they worked perfectly.
