The cost to taxpayers for the failure of solar panel company Solyndra may be much higher than the $535 million dollar federal loan guarantee the company received. After the company went bankrupt in last August, 2011, the Energy Department, which had given the original loan, okayed an unprecedented deal to attract more private investment to Solyndra. One result of this deal is that it has allowed more than $350 million in tax write-offs to pass to those private creditors, one of which is owned by a major donor to President Obama. The House Oversight Committee now warns the total loss on Solyndra now could be as high as $849 million.

According to its IRS filings, the one remaining major asset that Solyndra has is, ironically, its debt. It has $875-975 million in losses that can be used to write off about $350 million in future tax liabilities. Ordinarily, this would be useless because, of course, Solyndra is bankrupt, but a 2010 deal with the Energy Department allows the debt to pass on to its other creditors. In this case the main ones are Argonaut Ventures I LLC and Madrone Partners LP.

Argonaut is the main investment vehicle for the George Kaiser Family Foundation. Kaiser is a Tulsa oil billionaire and major fundraiser for President Obama. He met privately with White House officials in during which they discussed Solyndra.

Kaiser’s foundation is technically a nonprofit but was created under a special tax law that, as the Washington Post reported, allows the wealthy to park their assets tax-free.

As part of a last minute deal in late 2010 to Keep the struggling Solyndra afloat, the Energy Department agreed to give Solyndra’s private investors first crack at recovering any loses in the event of a bankruptcy in exchange for $75 million more in private equity. This was in direct violation of the Energy Department’s own loan rules, which unequivocally state that the taxpayers must have first crack at recovering any loss. Internally, the department struggled to justify the decision. Officials at the Treasury Department and the Office of Management and Budget balked at it. Nevertheless it went ahead.

As a result of the decision, taxpayers are likely to recover only $24 million of the $535 million federal loan guarantee.

But that’s not all. The private creditors also get the debt. As the Wall Street Journal has reported, there are indications that Argonaut and Madrone were seeking that from the beginning of the December 2010 deal:

Meanwhile, Mr. Kaiser’s mind was on the net operating losses (NOLs). He mused to [Argonaut managing director Steve] Mitchell that “I would go a long way to preserve the NOLs,” and he suggested that the final decision to ante up to $75 million could be “subject to our better understanding of whether the NOLs can conceivably be preserved in a semi-liquidation (that is, somehow maintaining the line of business and avoiding change of control).”

In February 2011, Energy signed off on a deal that would subordinate its repayment interests to a new $75 million loan to Solyndra from Argonaut and Madrone. The two owners would open this tranche of senior debt to other investors for equity warrants. But under the Energy term sheet, those warrants would then bounce back to the Argonaut-Madrone holding company if Solyndra became defunct. That gave Argonaut-Madrone 99.9% control of the net operating losses.

Solyndra went bust in September 2011, but Mr. Kaiser referred in August emails to “the consolation prize NOL” and wrote that “we could get the same benefit out of a new entity in there without absorbing the costs of resuscitating this one.” In other words, the holding company will merge with another profitable Argonaut business that can use the tax breaks.

House Oversight Committee Chairman Darrell Issa, R-Calif., is concerned that a similar deal might have been cut regarding Fisker Automive, which received a $528 million Energy Department loan. Issa has sent a letter to Energy Secretary Steven Chu noting that the Department has allowed Fisker to seek additional private investors when it began to have trouble meeting the original terms of the loan. Issa wants to know it the Energy Department allowed its loan to Fisker to be subordinated in the same way as the Solyndra loan.