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Experts question source of McAuliffe car-company funding

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Part 4 of 73 in the series Terry McAuliffe - Carmogul
WAITING FOR HIS SHIP TO COME IN: Virginia gubernatorial hopeful Terry McAuliffe touts "green" jobs for Mississippi, but officials there have seen little progress.

WAITING FOR HIS SHIP TO COME IN: Virginia gubernatorial hopeful Terry McAuliffe touts “green” jobs for Mississippi, but officials there have seen little progress.

CLARIFICATION:  Attorneys for GreenTech have contacted us and asked for a retraction of our April 1 and April 3 articles.  In particular, they object to the use of the term “fraud” in our reporting. Lest there be any confusion about the point of our articles, we have updated them.  To be clear, our articles were not intended to (and did not) accuse GreenTech of committing fraud.  Instead, the articles pointed out that the federal EB-5 visa program – which trades U.S. green cards for business investments and which GreenTech has used as a source of capital – has lax oversight, is prone to abuse and fraud, and cannot possibly deliver on its promises to taxpayers and investors. Our articles also quoted sources who criticized GreenTech’s reliance on the EB-5 program – the same criticism that Virginia officials leveled against the company in 2009. We stand by our reporting about the EB-5 program and will continue to investigate this important story. — Editors

By Kenric Ward | Watchdog.org Virginia Bureau

RICHMOND — Gubernatorial candidate Terry McAuliffe’s use of an immigrant-investor program to raise money for his electric-vehicle venture [updated] is unworkable, experts said.

To kick-start GreenTech Automotive in Mississippi, the Virginia Democrat has sought funding through federal EB-5 immigration visas. In exchange for investments of $500,000, foreign nationals can gain U.S. residency for themselves and their families.

But the EB-5 system has been heavily criticized for its lack of transparency and lackadaisical enforcement. McAuliffe’s venture is seen as a particularly bad fit for the alien-investor program that’s supposed to create U.S. jobs.

Documents obtained by Watchdog.org show that, in their 2009 analysis of the project, Virginia officials warned Gov. Tim Kaine about the project. Allowing GreenTech to proceed with EB-5 funding in that state “would cause some to conclude that the commonwealth knew, or should have known, that there were problems, but proceeded nonetheless.”

“EB-5 is good for funding certain kinds of projects, but it’s not appropriate for this type of large-scale, long-term funding,” said Michael Gibson, managing partner of U.S. Advisors, a Florida-based research and investment firm knowledgeable about the program.

McAuliffe, the company’s founder and chairman, announced in 2009 intentions to build “neighborhood electric vehicles” that are little bigger or faster than golf carts. The GTA website touts “Green Jobs Made in the USA,” but, in fact, few U.S. jobs and fewer cars have been created.

“This project is a fantasy. It’s really a very poorly conceived project for EB-5 financing, and extremely problematic,” Gibson told Watchdog.

GreenTech’s conduit for EB-5 investors is Gulf Coast Funds Management Ltd., a regional center authorized by the U.S. Citizenship and Immigration Services. The center’s board of directors is larded with political cronies who have close connections to Bill and Hillary Clinton.

Per its non-disclosure policy, USCIS would not provide financial details about the Gulf Coast center, which the federal agency approved in 2008 to fund job-creating ventures in “targeted zones” in Louisiana and Mississippi.

Officials in Mississippi and Tunica County, where GreenTech plans to build a manufacturing plant, assert that the company has millions of dollars in pending EB-5 investments through Gulf Coast Funding.

“We understand, they’re having trouble getting funds released from the immigration system,” Clifton Johnson, Tunica County administrator, told Watchdog. Johnson estimated that “$10 million to $20 million is at stake.”

USCIS spokesman Christopher Bentley said he could not comment on the situation.

Executives at Gulf Coast and GreenTech, including McAuliffe, did not respond to Watchdog’s repeated requests for interviews. Previously posted news releases and pictures of McAuliffe showing off cars no longer appear on the GTA website.

BAD DEAL: Michael Gibson of U.S. Advisors questions GreenTech's business model, and use of the federal EB-5 immigrant-investment program.

BAD DEAL: Michael Gibson of U.S. Advisors questions GreenTech’s business model, and use of the federal EB-5 immigrant-investment program.

Gibson said that Gulf Coast’s politically connected board of directors is out of its depth.

He noted that its members – including president and CEO Anthony Rodham (Hillary Rodham Clinton’s brother), Clinton IRS Commissioner Margaret Richardson and ex-Louisiana Gov. Kathleen Blanco – are distinguished by their long-time ties to the Democratic Party and the former president.

“They don’t know anything about the automotive business. This is very deceptive advertising. They’re out there fishing,” Gibson asserted.

Watchdog.org, meanwhile, uncovered a second EB-5 funding operation: the Virginia Center for Foreign Investment and Job Creation. That regional center, founded in 2011, shares the same McLean, Va., address as GCFM. McLean also happens to be McAuliffe’s hometown, and Rodham is listed as VCFIJC’s registered agent. None of the privately held companies has publicly disclosed their financial records.

David North, a policy analyst with the enforcement-oriented Center for Immigration Studies, said the EB-5 program is marred by bureaucratic opacity and loose oversight.

“USCIS thinks of itself as a benefits-granting agency, not an enforcement agency,” North told Watchdog. “That they will provide no (job or investment) numbers (about Gulf Coast) is par for the course.”

Virginia officials were skeptical about EB-5 as a funding source for GreenTech when they reviewed a preliminary proposal in 2009.

An internal memo from former Gov. Tim Kaine‘s administration obtained via the Freedom of Information Act contained this warning:

If GTA is looking to raise significant funds through the EB-5 program, there may not be enough EB-5 visas available for this project. … Even if each investor provided $500,000, that would still leave a (figure deleted) billion-dollar funding gap.”

Ultimately, both Kaine (a Democrat) and his successor, Bob McDonnell (a Republican), declined GreenTech’s loosely arranged proposition.

McAuliffe, a former chairman of the Democratic National Committee who ran unsuccessfully for his party’s Virginia gubernatorial nomination in 2009, found a more receptive audience in Mississippi.

Republican Gov. Haley Barbour’s Mississippi Development Authority signed a Memorandum of Understanding with GreenTech in July 2011, pledging more than $8 million in land, grants and other incentives to lure the start-up to Tunica County. The firm also got 10 years’ worth of state income and franchise tax exemptions.

The agreement stipulates that GreenTech must raise $60 million in capital (including public funds) and have 350 workers on the payroll by the end of 2014.

WORKING THE LINE: Bill Clinton visited GreenTech's temporary quarters in Horn Lake, Miss. The ex-president's brother-in-law heads a board that raises capital for the project.

WORKING THE LINE: Bill Clinton visited GreenTech’s temporary quarters in Horn Lake, Miss. One of the ex-president’s brothers-in-law heads a board that raises foreign capital for the project.

GreenTech reportedly has spent $5 million on initial site preparation for its Tunica plant. But work has moved at a snail’s pace.

GTA initially pledged to hire thousands workers who would be assembling tens of thousands of vehicles by the end of 2012. None of those projections has come close to fruition.

“They talk of a big assembly line. They had six cars,” noted Michael Sheffield, a Memphis Business Journal reporter who visited GreenTech’s temporary facility in Horn Lake, Miss., 15 miles north of Tunica.

“Without EB-5, they’re in trouble,” Tunica County administrator Johnson says.

As GreenTech idles, McAuliffe is, ironically, making job creation a centerpiece of his gubernatorial bid in Virginia. And his Mississippi gambit hasn’t been a total loss for the Old Dominion.

Despite its name and regional mission, Gulf Coast Funds Management is headquartered in McLean and adding staff. It recently obtained federal approval to hire one of two requested law clerks.

Yet there’s a catch there, too. The new hire is not a Virginian, but a foreign national imported through the H-1B visa program.

Noting there is no known shortage of law clerks residing in the D.C. region, North called Gulf Coast’s move “exploitative.”

“This EB-5 regional center has had the chutzpah to simultaneously apply to the Department of Labor and USCIS to bring in two foreign workers for its headquarters in lush McLean,” he said.

North said the $36,500 annual salary for the position was “quite low for a professional job hired through H-1B.”

Contact Kenric Ward at kenric@watchdogvirginia.org or at (571) 319-9824. @Kenricward

Part of 73 in the series Terry McAuliffe - Carmogul
  1. VA: As he runs for governor, McAuliffe wheels and deals electric cars in Mississippi
  2. VA: Media echo Watchdog exclusive on McAuliffe’s electric car maneuvers
  3. No news here: PolitFact brands Terry McAuliffe’s electric-car claim ‘false’
  4. Experts question source of McAuliffe car-company funding
  5. Terry McAuliffe on business ventures: ‘Some work, some don’t’
  6. How McAuliffe’s car company failed the Virginia test, landed in Mississippi
  7. Virginia official wants probe of McAuliffe company ‘visa-for-sale’ program
  8. McAuliffe car company sues Watchdog in libel claim
  9. Barack Obama’s GreenTech connection: Rick Wade
  10. Silence, secrecy, cops follow GreenTech’s China deal
  11. McAuliffe hones China’s crony-capitalism model in U.S.
  12. Promises keep Tunica County afloat
  13. McAuliffe company’s China hook-up: Will it work?
  14. McAuliffe car lags in Domino’s delivery
  15. McAuliffe car co. parent in off-shore tax shelter
  16. Lawmaker gives feds one more week for EB-5 answers
  17. Bolling: McAuliffe’s Mississippi package ‘attractive’
  18. Inside, execs knew McAuliffe plan had ‘substantial risk’
  19. Union darling McAuliffe and his non-union car company
  20. Did Clinton aid the birth of ‘McAuliffe’ car company?
  21. McAuliffe feels heat over GreenTech resignation
  22. TV report: One year later, ‘party is over’ at GreenTech
  23. Months after he said he left company, McAuliffe kept talking GreenTech
  24. Clinton connection: More money for McAuliffe
  25. Terry McAuliffe used loophole to avoid key SEC oversight of his car company
  26. VA officials: McAuliffe green car more politics than biz
  27. McAuliffe car company announces it’s ready to roll — again
  28. Before Watchdog, McAuliffe blamed federal officials for money trouble
  29. McAuliffe gets cash from GreenTech exec, board members
  30. Watchdog report on McAuliffe spurs FOI request to Homeland Security
  31. McAuliffe leaves GreenTech questions hanging at debate
  32. Totally wired: McAuliffe went to Napolitano to expedite company funding
  33. McAuliffe bragged about GreenTech’s cash position while begging feds for faster processing of ‘cash for visas’
  34. Investigation targets Homeland official’s relationship to McAuliffe company
  35. Even before news of federal probe, McAuliffe ducked GreenTech questions
  36. McAuliffe company pressed Homeland official on 81 investor visas
  37. Rodham company sought visa for controversial Chinese exec
  38. Immigration official says he met with McAuliffe to discuss visas for foreign investors
  39. Whiners: Mayorkas says Gulf Coast ‘continues to complain’
  40. VIDEO: Ex-GreenTech employee says little happened at Horn Lake plant
  41. Online ad to Terry McAuliffe: Drop your lawsuit
  42. National security on ‘hold’: Lawmakers press McAuliffe for answers
  43. Citizens United documentary film delves into McAuliffe, GreenTech
  44. VIDEO: Terry McAuliffe’s 15 million-square-foot car plant … in China
  45. Feds call McAuliffe car company’s use of investment program ‘possible fraud’
  46. GreenTech courted Obama’s Solyndra aide
  47. GOP legislators call for McAuliffe to answer GreenTech questions
  48. McAuliffe ‘desperate’ over documentary, Citizens United says
  49. GreenTech weighed Fisker-style federal loan
  50. Group tells Terry: Follow ‘McAuliffe Standard’ on disclosure
  51. Car and Driver races into GreenTech controversy
  52. Congressman: McAuliffe owes Virginians explanation about White House meeting
  53. Feds loosen oversight as McAuliffe car company makes mysterious management change
  54. GreenTech execs use Times and ABC to throw McAuliffe under the (non-electric) bus
  55. Aide in union contribution swap hosts California fund-raiser for McAuliffe
  56. Despite denials, docs show McAuliffe company asked feds to fast-track visa for investor tied to spy list
  57. Former Democrat Party director was on GreenTech payroll
  58. More bad news for McAuliffe car company as GreenTech China venture stalls
  59. Clinton Foundation posts deficits on McAuliffe’s watch
  60. VIDEO: GreenTech record dogs McAuliffe at energy forum
  61. Auto industry expert labels McAuliffe electric car ‘preposterous’
  62. Democratic leaders have their own Bain pain in Mideast private equity deal
  63. Hillary PAC adviser served as GreenTech spokeswoman
  64. New emails add evidence McAuliffe pressed U.S. officials to approve GreenTech funding
  65. After endorsement, Post shrinks facts to cover Terry McAuliffe
  66. Ties that bind: Following the McAuliffe-Clinton money trail
  67. McAuliffe tilts at windmills; Chinese venture goes bust
  68. Federal investigations cast shadow over McAuliffe on Election Day
  69. DHS inspector over GreenTech-McAuliffe case is under investigation
  70. McAuliffe names former GreenTech employee secretary of commonwealth
  71. McAuliffe lawyers, accountants sort GreenTech stock amid federal investigations
  72. Nuking filibusters, Dems clear way for Mayorkas at Homeland Security
  73. U.S. judge hands Watchdog a victory over VA governor’s green-car company

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Kenric Ward is a veteran journalist who has worked on three Pulitzer Prize-winning newspapers. A California native, he received a BA from UCLA (Political Science/Phi Beta Kappa) and holds an MBA. He reported and edited at the San Jose Mercury News and the Las Vegas Sun before joining Watchdog.org in 2012 as Virginia Bureau Chief.

  • AnnaYeisley

    I support alternative fuel innovation and promotion. Reducing dependence upon foreign oil and creating alternative options for petroleum will help restore planetary balance and reduce pollution. Too bad the venture has received so much bad publicity; it appears there is a media disdain for alternative fuel options and I believe that disdain is fueled by ruling energy monopolists that own the media. The electric car around neighborhoods is a great idea – the electric car that came out in the 70′s was a great success so much so, it is believed that those that monopolize the car industry shut the electric car industry down. I believe this story may be more of the same. https://vimeo.com/19863733

  • Jameson Reynolds

    I don’t think the media has a disdain for electric vehicles, but rather the cronyism and corruption surrounding the many government handouts by those in power to their friends. After the money is taken from the taxpayers, the companies go bankrupt or, in this case, sit idly by. Often, these funds are then donated by the companies in question right back to the democratic party. A political money laundering scheme that needs to be stopped. Not to mention the fact that electricity is predominantly produced with fossil fuels. It truly is a scam.

  • http://www.facebook.com/madbrad1953 Bradley Jones

    we dont need foreign oil, America per US geological agentcy a gov agency says the USA has more oil thne all middle eastern countrys and as far as an alternitve to oil its impossable at this time all plastics, paints, meds, electronics have oil products in them

  • Annoyed_By_Losers

    One of the Clinton’s best friends is a crook? NO WAY. What a POS. Oh, and TM…if you’re reading this…suck it.

  • Ta Rouse

    If Mr. Barber gets sucked into this type of “selling America” deal.. Mississippi may end up getting the exaust.

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