By Kenric Ward, Tori Richards and Earl Glynn | Watchdog.org
Terry McAuliffe has one more reason to regret linking his Virginia governor’s campaign to GreenTech Automotive, his beleaguered green car company.
Government documents released Friday reveal that the U.S. Securities and Exchange Commission is investigating GreenTech’s sister company, Gulf Coast Funds Management, prompted by a lengthy Watchdog investigation into the company’s cash-for-visas financing.
Declaring that “fraud (is) possible,” a U.S. Citizenship and Immigration Services memo among the 97 pages of government documents released Friday says the SEC has already subpoenaed bank records from Gulf Coast Funds Management, GreenTech’s funding arm or “regional center.”
“The SEC is looking into the Regional Center for possible security violations,” one of the documents, a U.S. Citizenship and Immigration Services (USCIS) memo, reveals. The memo goes on to note “(m)ultiple articles posted online scrutinize the Regional Center and Principal for possible wrongdoings.”
The SEC issued the subpoena in May, a month after GreenTech filed an $85 million lawsuit alleging that Watchdog reports defamed the company.
Until recently, McAuliffe made GreenTech Exhibit A in his run for the governor’s job in Virginia — proof, he said, that he knew how to create an economic rebound in the challenged commonwealth. But in April, just hours after the company filed its defamation suit against Watchdog, GreenTech abruptly announced that McAuliffe had resigned as company chairman four months earlier. He remains a major stockholder in the company. His campaign spokesman told the Washington Post that McAuliffe was not aware of the SEC investigation.
The SEC declined to comment on the investigation.
Documents show SEC investigators linked their probe to a GreenTech promissory note first published by Watchdog. That promissory note says GreenTech “promises to purchase back” preferred stock issued to investors if the company does not go public within five years.
A recent Watchdog investigation discovered a Chinese-language website in which a reporter documented company executives making similar no-risk promises to potential investors during massive presentations in China in 2010.
GreenTech is partially funded through the government EB-5 program, which awards visas to foreign nationals who invest at least $500,000 in targeted U.S. companies. Federal guidelines “absolutely require” that the investments be “at risk,” said Chris Bentley, spokesman for USCIS, which oversees the program.
For those reasons and others, “guarantees of investment returns are prohibited under the EB-5 program, as are guarantees of citizenship, but it is well known that such promises are used to attract investment from foreign nationals,” said Eric Ruark, director of research for the Federation for American Immigration Reform.
“USCIS has long been aware of this problem and has consistently failed to take steps to prevent this from happening,” Ruark said, though not specifically referring to GreenTech.
USCIS director Alejandro Mayorkas said he saw no violation in such arrangements.
Speaking before a Senate panel convened last month to consider his nomination to the No. 2 spot at the Department of Homeland Security, Mayorkas said GreenTech investors’ funds were “at risk” because there may be no value to the start-up company’s stock at the end of five years.
“The conclusion was that the capital remained at risk because there may never be a market,” Mayorkas told the Senate Homeland Security Committee.
The unsigned GreenTech promissory note was part of a Gulf Coast Funds Management training manual obtained by Watchdog.
The USCIS document revealing the investigation is undated, but it notes that Gulf Coast’s “Principle Administrator is the brother to current Secretary of State and former First Lady of the United States Hillary Rodham Clinton. A query of [databases] found that Anthony Rodham had previous tax liens as well as judgments.”
Clinton resigned her Cabinet position in February.
Rodham is president and CEO of the Gulf Coast regional center, which shares an office with GTA in McLean, Va.
The Chinese website Xin Tong News reported in 2010 that GreenTech CEO Charles Wang and Rodham met in October with potential investors. Xin Tong said the “GTA car project has been well received” by Chinese investors and receives “strong support from the U.S. government at all levels.” Significantly, the website noted, “Investors can quickly complete an immigration application” and “after easily” receiving a U.S. green card, claim a “five-year full refund or 555,000 shares [in a] high-return business.”
Watchdog reported last month that an executive with China’s Huawei Technologies – which has been under congressional investigation over national-security issues – had applied for an EB-5 visa through Gulf Coast.
Neither GTA nor Gulf Coast officials were available for comment.
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