By Kenric Ward | Watchdog.org
RICHMOND – A Virginia government official expressed “grave doubts” about former Democratic National Committee chairman Terry McAuliffe’s request for state support of GreenTech Automotive Inc., his ambitious bid to create a new car company, documents obtained by Watchdog.org, National Review and the Washington Post show.
Jeffrey Anderson, CEO of the Virginia Economic Development Partnership, reviewed the project for then-Gov. Tim Kaine in 2009. Anderson concluded the project also was courting a “conflict of interest.”
In a six-page memorandum to Virginia Secretary of Commerce Patrick Gottschalk on Nov. 19, 2009, Anderson said financing of the project through a federal visa-investor program “does not fit the rules” of that program, in which foreign investors are granted U.S. citizenship in exchange for their investments in certain U.S. businesses. That program, called EB-5, has generated complaints about abuse, as reported by Watchdog.org and other media.
“If the rules of the EB-5 program are not followed, the investors will not receive the visas that they thought they would receive,” Anderson wrote in his review of McAuliffe’s plan for GreenTech. “If all, or any significant portion, of the investors were to not ultimately receive the visas, that would give the commonwealth a black eye, in the view of other companies or investors looking for possible business connections with the commonwealth.
“Knowing that the governor of Virginia strongly supported the creation of (a) regional (visa-investor) center would cause some to conclude that the commonwealth knew, or should have known, that there were problems, but proceeded nonetheless.”
Amid the current controversy surrounding McAuliffe’s quiet retroactive resignation from his car company, GreenTech sued Watchdog on Monday, accusing the news organization of defamation for its reporting on the firm. The lawsuit, filed in U.S. District Court in Northern Mississippi, seeks $85 million in damages.
Watchdog was not the first to explore GreenTech’s funding model. VEDP’s 2009 memorandum raised two questions as to whether the EB-5 program was a “valid financing mechanism” for GreenTech.
“Since GTA will need the funds to develop the plant, it will need the funds largely upfront. The EB-5 program requires that the jobs be created within about 2.5 years. … Even with a significant multiplier, it is unlikely that GTA will put enough folks to work quickly enough to satisfy the requirements of the EB-5 program,” Anderson wrote.
“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 and all of the other qualifying projects nationwide.
“GTA’s business plan indicated that it had identified approximately (redacted) potential investors, each of whom may be able and willing to make an EB-5 investment of $500,000. Even if each such investor provided $500,000, that would still leave a (redacted) billion funding gap.”
GreenTech, which eventually obtained a multimillion-dollar public funding package from the state of Mississippi to locate there, is using an affiliated EB-5 “regional center” — Gulf Coast Funds Management — to attract foreign investment.
The Kaine administration saw Gulf Coast’s connection to GreenTech as a “conflict of interest.”
“We believe that having the principals of the regional center be the same as the principals of the company benefiting from the investment creates a conflict of interest. Furthermore, having the principals benefit monetarily from the fees to be charged to the investors creates a conflict of interest,” Anderson informed Gottschalk in the 2009 memo.
“Certainly, the regional center will have expenses and will have ongoing obligations to its investors. Some may view the fees paid to the regional center as being excessive, when the principals may also be compensated by the company that is receiving the funds channeled through the regional center.”
Gulf Coast Funds Management today shares a headquarters office with GreenTech in McLean. GCFM promotes GreenTech’s “MyCar” on its website.
The president and CEO of Gulf Coast is Anthony Rodham, the younger brother of Hillary Clinton, for whom McAuliffe has raised millions of dollars in campaign cash. Gulf Coast’s board of directors includes Margret Richardson, a former IRS commissioner under Bill Clinton.
McAuliffe, who is making this second bid for governor, did not mention his departure as chairman when reporters asked him about his 4-year-old company last week. His Republican opponent pounced when the news leaked out April 5.
“Terry McAuliffe stepping down as chairman of GreenTech is an admission of failure where he has been claiming success. McAuliffe believes his business acumen qualifies him to be governor of the commonwealth, and this revelation completely invalidates the central premise of his candidacy,” said Attorney General Ken Cuccinelli.
Charles Wang remains president and CEO of the firm.
Gottschalk, who is a partner at the powerhouse law firm of Williams Mullen in Richmond, declined to comment on the state’s decision not to pursue GreenTech. Anderson, who also left state government when Kaine left office, could not be reached.
In his analysis of GreenTech, Anderson raised several questions about its viability. Specific queries focused on the engineering and marketability of GTA’s “MyCar” neighborhood electric vehicle:
- “In what vehicle(s) and where has this hybrid powertrain technology been successfully demonstrated and/or certified?
- “How does the ‘super platform’ technology differ from the cost competitive, shared global platform manufacturing strategy currently utilized by several market lead(ers)?
- “How will GreenTech be cost competitive, given that capital investment, job creation and acreage requirements are (redacted) percent to (redacted) percent of recent automotive assembly projects with comparable annual production capacity?”
Turning to financing, Anderson asked the bottom-line question: “What capital contribution currently exists?”
No answers were reported by VEDP.
Mindful that GreenTech was simultaneously negotiating with Mississippi, Anderson asked the company for a “better understanding (of GTA’s) unique value proposition for a successful start-up of operations in (redacted), especially in light of GreenTech’s recent announcement to establish a $1 billion and 1,500 employee assembly plant operation in Mississippi.”
GreenTech then informed the Virginia officials that it would choose one state or the other.
While Kaine and his successor, Republican Gov. Bob McDonnell balked, the Mississippi Development Authority under then-Gov. Haley Barbour came through with a multimillion-dollar public-financing package to locate the GTA plant in economically stressed Tunica County.
A decade of “growth and prosperity” tax exemptions, plus $8 million in grants and loans, free land and other incentives, including rebates to the company for a share of state income tax withheld from employees, were pledged by the state in exchange for GreenTech’s commitment to raise $60 million in capital (public funds included) and hire 350 workers by the end of 2014.
At the time, McAuliffe valued the Mississippi deal at $15 million.
Mississippi officials did not reference EB-5 investor financing in their 2011 Memorandum of Understanding with the company. Nor have officials there disclosed how much capital the company has raised on its own so far.
“I don’t want to go into specifics,” said James Dunn, president of the Tunica County Board of Supervisors. “Our focus is to continue to support (the GreenTech venture). Hopefully, we’ll have the jobs.”
GTA says it currently has 100 workers at a small, leased facility in nearby Horn Lake. That number could not be confirmed by local officials.
The EB-5 program requires that 10 jobs be created, directly or indirectly, for every $500,000 of foreign investment. Under EB-5 rules, the jobs wouldn’t necessarily have to be at GreenTech.
GreenTech and Gulf Coast Funds Management – both privately held companies – did not respond to Watchdog’s repeated questions about their financial status or GTA’s car production.
The U.S. Citizenship and Immigration Service, which authorizes EB-5 regional centers to collect foreign-investors’ money, does not disclose the finances of individual regional centers.
Kenric Ward is a national reporter for Watchdog.org and chief of the Virginia Bureau. Contact him at firstname.lastname@example.org or at (571) 319-9824. @Kenricward
Like Watchdog.org? Click here to get breaking news alerts in your state.
- VA: As he runs for governor, McAuliffe wheels and deals electric cars in Mississippi
- VA: Media echo Watchdog exclusive on McAuliffe’s electric car maneuvers
- No news here: PolitFact brands Terry McAuliffe’s electric-car claim ‘false’
- Experts question source of McAuliffe car-company funding
- Terry McAuliffe on business ventures: ‘Some work, some don’t’
- How McAuliffe’s car company failed the Virginia test, landed in Mississippi
- Virginia official wants probe of McAuliffe company ‘visa-for-sale’ program
- McAuliffe car company sues Watchdog in libel claim
- Barack Obama’s GreenTech connection: Rick Wade
- Silence, secrecy, cops follow GreenTech’s China deal
- McAuliffe hones China’s crony-capitalism model in U.S.
- Promises keep Tunica County afloat
- McAuliffe company’s China hook-up: Will it work?
- McAuliffe car lags in Domino’s delivery
- McAuliffe car co. parent in off-shore tax shelter
- Lawmaker gives feds one more week for EB-5 answers
- Bolling: McAuliffe’s Mississippi package ‘attractive’
- Inside, execs knew McAuliffe plan had ‘substantial risk’
- Union darling McAuliffe and his non-union car company
- Did Clinton aid the birth of ‘McAuliffe’ car company?
- McAuliffe feels heat over GreenTech resignation
- TV report: One year later, ‘party is over’ at GreenTech
- Months after he said he left company, McAuliffe kept talking GreenTech
- Clinton connection: More money for McAuliffe
- Terry McAuliffe used loophole to avoid key SEC oversight of his car company
- VA officials: McAuliffe green car more politics than biz
- McAuliffe car company announces it’s ready to roll — again
- Before Watchdog, McAuliffe blamed federal officials for money trouble
- McAuliffe gets cash from GreenTech exec, board members
- Watchdog report on McAuliffe spurs FOI request to Homeland Security
- McAuliffe leaves GreenTech questions hanging at debate
- Totally wired: McAuliffe went to Napolitano to expedite company funding
- McAuliffe bragged about GreenTech’s cash position while begging feds for faster processing of ‘cash for visas’
- Investigation targets Homeland official’s relationship to McAuliffe company
- Even before news of federal probe, McAuliffe ducked GreenTech questions
- McAuliffe company pressed Homeland official on 81 investor visas
- Rodham company sought visa for controversial Chinese exec
- Immigration official says he met with McAuliffe to discuss visas for foreign investors
- Whiners: Mayorkas says Gulf Coast ‘continues to complain’
- VIDEO: Ex-GreenTech employee says little happened at Horn Lake plant
- Online ad to Terry McAuliffe: Drop your lawsuit
- National security on ‘hold’: Lawmakers press McAuliffe for answers
- Citizens United documentary film delves into McAuliffe, GreenTech
- VIDEO: Terry McAuliffe’s 15 million-square-foot car plant … in China
- Feds call McAuliffe car company’s use of investment program ‘possible fraud’
- GreenTech courted Obama’s Solyndra aide
- GOP legislators call for McAuliffe to answer GreenTech questions
- McAuliffe ‘desperate’ over documentary, Citizens United says
- GreenTech weighed Fisker-style federal loan
- Group tells Terry: Follow ‘McAuliffe Standard’ on disclosure
- Car and Driver races into GreenTech controversy
- Congressman: McAuliffe owes Virginians explanation about White House meeting
- Feds loosen oversight as McAuliffe car company makes mysterious management change
- GreenTech execs use Times and ABC to throw McAuliffe under the (non-electric) bus
- Aide in union contribution swap hosts California fund-raiser for McAuliffe
- Despite denials, docs show McAuliffe company asked feds to fast-track visa for investor tied to spy list
- Former Democrat Party director was on GreenTech payroll
- More bad news for McAuliffe car company as GreenTech China venture stalls
- Clinton Foundation posts deficits on McAuliffe’s watch
- VIDEO: GreenTech record dogs McAuliffe at energy forum
- Auto industry expert labels McAuliffe electric car ‘preposterous’
- Democratic leaders have their own Bain pain in Mideast private equity deal
- Hillary PAC adviser served as GreenTech spokeswoman
- New emails add evidence McAuliffe pressed U.S. officials to approve GreenTech funding
- After endorsement, Post shrinks facts to cover Terry McAuliffe
- Ties that bind: Following the McAuliffe-Clinton money trail
- McAuliffe tilts at windmills; Chinese venture goes bust
- Federal investigations cast shadow over McAuliffe on Election Day
- DHS inspector over GreenTech-McAuliffe case is under investigation
- McAuliffe names former GreenTech employee secretary of commonwealth
- McAuliffe lawyers, accountants sort GreenTech stock amid federal investigations
- Nuking filibusters, Dems clear way for Mayorkas at Homeland Security