By Steven Greenhut| Watchdog.org
As he runs for Virginia governor, Terry McAuliffe has touted his efforts to start a “green car” company in Mississippi as a prime example of his old-fashioned American entrepreneurial know-how. Yet McAuliffe really is a master of the Chinese-style “crony capitalist” model. It’s a system where political connections, government favors and even some thuggery determine the success of an enterprise.
The politically well-connected McAuliffe – a former Democratic National Committee chairman described this week by the Washington Post as someone who “made a fortune in an array of businesses, often by using his political contacts” – apparently purchased GreenTech Automotive in 2009 from the Chinese government, which seems like a match made in heaven.
McAuliffe quietly resigned as chairman of the company in December — so quietly the public only learned about it on April 5 —but was still championing his role with the company as recently as this month, when one of its funding sources turned into a campaign disaster. That financing mechanism is the EB-5 program, whereby foreigners are offered green cards in exchange for investments in U.S. companies.
In short, McAuliffe, who helped Bill Clinton raise campaign cash by selling $100,000 sleepovers at the White House, was building a car company based on $500,000 “investments” from foreigners seeking to live in the United States. “GTA counts among its allies Hillary Clinton’s brother, Anthony Rodham, who shares an office with GTA and is CEO of Gulf Coast Funds Management, an EB-5 center that raises visa-investor money for GTA,” according to a Watchdog.org story.
The Associated Press featured a photograph of Bill Clinton at the unveiling of the MyCar at the Horn Lake, Miss., facility where thousands of cars would supposedly be produced in its first year of production. Crony capitalism is bipartisan, of course, and Mississippi’s used-car-salesman-like governor, Haley Barbour, former Republican National Committee chairman, was in on the action, too. His development authority pledged more than $8 million in taxpayer-funded freebies so that GTA could build a plant on a still-vacant parcel in Tunica County.
In a real market enterprise, investors pledge private dollars based on the hopes of making profits on the sale of the product. That tends to focus the mind more on, say, the fundamentals of the product than on the political connections and subsidies surrounding “the deal.”
It’s hard to envision a huge market for $18,000 “neighborhood electric vehicles” with a top speed of 35 miles per hour and the appearance of a circus car. For perspective, that’s roughly the same price as my new V8 pickup truck that could probably – and accidentally, I note – drive over a few of these mini cars without even noticing.
McAuliffe and his fellow GreenTech executives went to job-desperate Mississippi after Virginia officials scoffed at the plan. In 2009, a Virginia economic development official, Jeffrey Anderson, reviewed the project for then-Gov. Tim Kaine’s administration. His conclusions were devastating.
“Since GTA will need the funds to develop the plant, it will need the funds largely upfront,” he wrote. “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.” He also questioned its cronyism: “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.”
Not that much is happening in Mississippi. GTA was late on its property tax bill in Mississippi because it hadn’t started construction of its permanent plant. A Memphis Business Journal reported visited the leased facility and noted that there were only six cars on an assembly line. Automotive News said the project “doesn’t add up” and declared it “dead on arrival.”
This gets is to the “thuggery” part of the picture. The Chinese may have opened up their economy, but their political system remains repressive. Chinese journalists who report on these self-enrichment deals are harassed by the authorities. Their publications are censored or shut down.
Even though McAuliffe imported the Chinese business model, he still has to contend with First Amendment issues. After Watchdog.org, produced investigative reports about GreenTech and its reliance on EB-5 financing – and quoted analysts who made the same points as those made in the media and by Virginia officials – GreenTech slapped Watchdog’s parent company (the Franklin Center for Government and Public Integrity, where I am vice president) with a massive lawsuit, for $85 million.
The goal is to stop us from writing our stories. GreenTech sent a copy of the suit to other news publications as a warning. They figured they would pick on a small media outlet and try to tamp down on the story elsewhere. It’s pure intimidation, but it hasn’t worked. We are gearing up for a legal battle and have stepped up our coverage. Other media outlets have stood up for us.
But what does this approach say about the man who hopes to be the next Virginia governor?
In China, the children and grandchildren of Communist China’s revolutionary leaders, called “princelings,” used their family and political connections to become the country’s new robber barons and use political force to shut down critics. In America, political princelings such as McAuliffe are trying to copy that strategy. Let’s hope a free press can at least expose what’s going on.
Steven Greenhut is vice president of journalism at the Franklin Center for Government and Public Integrity. Write to him at [email protected]
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