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Tags: GreenTech Automotive

Will McAuliffe Be Deposed in GreenTech Libel Suit?



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This weekend, Terry McAuliffe became the 72nd governor of Virginia. It’s still possible that sometime in the coming year, McAuliffe may have to interrupt his work as governor to be deposed as part of his auto company’s libel lawsuit against an investigative-journalism foundation.

GreenTech Automotive, a company founded by McAuliffe, remains in a holding pattern in its libel suit against the Franklin Center for Government and Public Integrity, a nonprofit investigative-journalism organization, and its website, Watchdog.org. The company is seeking $85 million in damages.

Watchdog.org wrote an eight-part series on GreenTech, its relationship with the Virginia and Mississippi state governments, and McAuliffe.

The lawsuit asserts that the articles “materially injured” GreenTech’s ability to raise capital:

Specifically, as a direct and express result of the articles published by Defendants . . . investors are wavering in their commitment to provide $25 million in investments already promised to GTA. GTA . . . intended to raise $60 million in capital, [and] is now in significant danger as a direct result of the loss of investor confidence in GTA arising from the publication of Defendants’ articles.

Franklin Center countered the lawsuit was a “SLAPP” suit — a “strategic lawsuit against public participation,” a form of harassment designed to silence a critic by imposing massive legal fees and hassles.

“GreenTech’s lawsuit against the Franklin Center is baseless political bullying in an attempt to silence the free press,” said Jason Stverak, president of the Franklin Center. “Our reporters raised legitimate questions about GreenTech’s questionable business practices and Governor McAuliffe’s role through honest, investigative reporting and we’ve continued to pursue the truth despite intimidation from the company. There is no doubt in my mind that this lawsuit should be dismissed in good time.”

Lawyers for the Franklin Center filed a motion to dismiss last year, and on June 25, U.S. Magistrate Judge Jane Verden issued a stay — meaning a delay of further proceedings — pending the ruling on the motion to dismiss.

“As Terry McAuliffe begins his term as governor, I can’t imagine he wants to spend his afternoons stuck in depositions,” Stverak said.

Tags: Terry McAuliffe , Franklin Center , GreenTech Automotive

Here’s the GreenTech Deal that the SEC Is Investigating



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Leading off the Tuesday edition of the Morning Jolt:

Did GreenTech’s Contract With EB-5 Visa Applicants Violate the Law?

Let’s connect some dots, and see if we can figure out why GreenTech Automotive is in such hot water. Here’s what the SEC investigation of Terry McAuliffe’s electric-car company is about, in part:

An electric-car company co-founded by Virginia gubernatorial candidate Terry McAuliffe (D) is being investigated by the Securities and Exchange Commission over its conduct in soliciting foreign investors, according to law enforcement documents and company officials.

In May, the SEC subpoenaed documents from GreenTech Automotive and bank records from a sister company, Gulf Coast Funds Management of McLean. The investigation is focused, at least in part, on alleged claims that the company “guarantees returns” to the investors, according to government documents.

Here’s the GreenTech Automotive promissory note, as obtained and published by the Franklin Center’s Kenric Ward:

“GTA Shall Issue Individual Certificate To The Fund For The Benefit Of The Individual Investor A Unit Of Preferred Stock To Be Converted At The End Of The Five-Year Term To GTA’s Common Stock Market Value Of Five Hundred And Fifty-Five Thousand Dollars ($555,000). Alternatively, GTA Promises To Purchase back Its Preferred Stock Unit As A Way Of Reducing The Proportion Of Preferred Equity From The Individual Investor Named Herein ________________, In Case GTA Fails To Go Public Upon Five-Year Anniversary Of The Named Investor’s Investment In The Amount Of Five Hundred Thousand US Dollars (USD $500,000.00)

Meaning either the investor gets preferred stock worth $555,000, or GreenTech buys back its preferred stock for $500,000.

An EB-5 visa requires an investment of $500,000 . . . and investors were charged $55,000 as an administrative fee, according to the offering memorandum.

So the only potential loss to investors was the $55,000 administrative fee. As any EB-5 site will tell you, the investment from the EB-5 applicant must involve risk; otherwise it’s not really an investment. As one immigration lawyer put it, “The law requires the capital to be at risk, and case law forbids guaranteed redemption agreements — a certain price and a certain time. That’s not really an investment; it’s more like a loan.”

I’m not a Securities and Exchange Commission lawyer, but don’t GreenTech Automotive’s terms sound an awful lot like guaranteeing a return?

Tags: Terry McAuliffe , GreenTech Automotive , Virginia , Securities and Exchange Commission

‘Stand Over the Car With Tools... and Look Like We Were Doing Something.’



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Gee… this looks like an interesting story from a Memphis television station.

MEMPHIS, TN -(WMC-TV) – Action News 5 is taking you inside a Mid-South car company that promised to bring hundreds of jobs to North Mississippi. A former employee is raising concerns about how much the company has actually accomplished.
“We would stand over the car with tools in our hand and look like we were doing something to the car, but we wasn’t doing anything,” said the former employee.
It is a strong statement against a company that until now has refused to go on camera or let our cameras inside. But that, too, all changes on Action News 5 at 10 p.m.
“This is a real company, it’s a building company, we have set very aggressive goals for ourselves, but we will not meet anyone’s arbitrary deadline for us,” said Greentech Automotive Vice President Marianne McInerney.
More questions. More answers. It is all coming up Wednesday in an Action News 5 investigation at 10 p.m.

Quite an interesting quote, although the breathless stay-tuned commentary suggests the newscast may be anchored by Ron Burgundy.

UPDATE: The Memphis station’s report overlaps a lot with this one from Ryan Nobles of NBC’s Richmond affiliate:

For the first time we get a look inside this private company. But that visit was only granted after we were approached by a former employee who saw our initial report and told us he was concerned that the start- up venture was not headed in the right direction.

In July of 2012 the picture of Greentech automotive was a car company on the verge of revolutionizing the industry.

“But now we start at full factory production and at full capacity we can make a car an hour,” said McAuliffe at the time.

But according to a worker- who was there, those lofty goals were nowhere near reality.

“We were worried, scared. A lot of us were scared for our jobs.”

This worker asked us to protect his identity. He describes himself as a happy employee who never missed a pay-check. But he was constantly worried that what the company was telling the public wasn’t actually happening inside

“We were told, you know, when we first went in the fall of ‘11 we were going to build a 100 by Christmas, that didn’t happen,” he said.  “Then we were told we were going to build x amount through the year 2012 and that didn’t happen.”

It is a culture of uncertainty that his former employers forcefully reject.

“This is a real company, it’s a building company,” said Greentech spokesperson Marianne McInerney.We have set very aggressive goals for ourselves, but we will not meet anyone’s arbitrary deadline for us.”

McInerney took us in a ride of one of the Greentech prototypes. It is a 5 seat sedan that runs on no gas. She said Greentech is selling cars all over the world.

“We have distribution agreements that account for 30,000 vehicles over the next three years,” she said. “That’s pretty significant.”

But she can’t provide specific numbers on actual cars that have been produced. The former employee told us that in his more than a year in a half on the line maybe 30 cars were built and most of them never left the building.

“They would take everybody and put them out on the line and we would stand over the car with tools in our hand and look like we were doing something to the car but we wasn’t doing anything,” he said.

The worker claims the company had them put on a show for what he believed to be foreign investors. According to McInerney he simply misunderstood the training process of a complex and new technology.

“There’s what we would call a training build.”  

Tags: GreenTech Automotive

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