Economic advisers to Tim Kaine had concerns about McAuliffe’s green-car company.
What is the purpose of GreenTech Automotive?
The company, founded by Terry McAuliffe, is now a top issue in this year’s Virginia race for governor. Until recently, the controversy over the company centered on the firm’s October 2009 decision to build a plant in Mississippi instead of Virginia. McAuliffe contended that he wanted to build a plant in Virginia, but the Virginia Economic Development Partnership (VEDP) — the state’s business-recruitment agency — wouldn’t play ball.
“We had sites, we had meetings, and they chose that they weren’t going to bid on it,” McAuliffe declared. PolitiFact looked at the paperwork and rated that assertion false, concluding that “VEDP asked GreenTech to address its concerns and waited in vain for replies.”
But internal communications from VEDP now reveal that the state agency didn’t merely think that McAuliffe’s company had a risky business model. At least two high-ranking officials actually suspected that the company’s real aim was to make money by selling U.S. residency visas to wealthy foreigners.
In an e-mail dated November 17, 2009, Liz Povar, then the director of business development at VEDP, wrote to her colleagues:
Sandi et al. Even if the company has investors “lined up”, I maintain serious concerns about the establishment of an EB-5 center in general, and most specifically based on this company. Not only based on (lack of) management expertise, (lack of) market preparation, etc. but also still can’t get my head around this being anything other than a visa-for-sale scheme with potential national security implications that we have no way to confirm or discount. . . .
This “feels” like a national political play instead of a Virginia economic development opportunity. I am not willing to stake Virginia’s reputation on this at this juncture.
The e-mails were revealed pursuant to a Freedom of Information Act request filed by PolitiFact; 79 pages of documents were posted online in January.
Before the Mississippi Development Authority, a state agency, loaned GreenTech $5 million to help get started and buy the land for its production facility in that state, the company sought assistance and incentives from Virginia. High on its list of priorities was the establishment of a “Regional Center” to help attract foreign investors who would also be interested in obtaining an EB-5 U.S. residency visa.
Congress created the federal EB-5 program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. To qualify, a foreigner must invest at least $1 million, or $500,000 in either a rural area or an area with high unemployment. The investment must “create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years.” The government makes 10,000 EB-5 visas available each year, with 3,000 administered through Regional Centers, government-approved organizations that aim to help economic growth in a particular area. According to one advocate for the program quoted in the Memphis Commercial Appeal, three out of every four visa recipients come from China.
While the Regional Centers are not allowed to sell the U.S. visas, they are allowed to point out that investment in their projects may qualify a foreign citizen for a residence visa, and they may appear to suggest that one directly leads to the other. For example, at the top of the website for Gulf Coast Funds Management LLC, the Statue of Liberty’s torch is next to the slogan, “Invest in your future with EB-5.”
One of Gulf Coast Funds Management’s current clients is . . . GreenTech Automotive.
GreenTech Automotive asked Democratic Virginia governor Tim Kaine to write to secretary of homeland security Janet Napolitano to ask her to expand a Regional Center into the company’s preferred corner of rural Virginia. (The site location that GreenTech sought has not been specified, although one VEDP memo refers to its being “outside Richmond,” and another refers to “the Sussex site.” Sussex County is in southeast Virginia.)
Povar had been in her position at VEDP since January 1995, serving under both Democratic and Republican governors. At the time of GreenTech’s request, her agency was tasked with making recommendations to the administration of outgoing governor Tim Kaine — who, at that point, was chairman of the Democratic National Committee. Lest one suspect that Povar had some kind of partisan axe to grind against McAuliffe, it should be noted that her sole campaign donation in recent years was $100 in 2009 to Democratic lieutenant governor candidate Jody Wagner.
About an hour after Povar sent her e-mail, Roy Dahlquist, the international-investment manager at VEDP, replied, “Liz, please note that I agree with your observations and opinions on this subject.”
Dahlquist elaborated on his concerns in another e-mail the following day:
The executives involved with this project are not selecting Virginia based on its business value proposition. They are not evaluating Virginia based on the long term success of the company, its employees and the community partnership in general. They are choosing Virginia because we are the #1 best state for business and they are using our recognition as a selling tool to easily raise funding. They are also using our current political “opportunities” to rush this process prior to a new administration taking office.
At the time of that message, Republican Bob McDonnell had just won the state’s gubernatorial election and would be sworn in in January 2010.
Jeffrey Anderson, the VEDP executive director, wrote to Governor Kaine’s secretary of commerce and trade, Patrick Gottschalt, on November 19, 2009, about the political risk presented by the GreenTech proposal:
We are concerned that the financing plan does not fit the rules of the EB-5 Program. If the rules of the EB-5 Program are not followed, the investors will not receive the visas that they thought they would receive. If all, or any significant portion, of the investors were to not ultimately receive the visas, that would give the Commonwealth [of Virginia] 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 the Regional Center would cause some to conclude that the Commonwealth knew, or should have known, that there were problems, but proceeded nonetheless.
Anderson also warned:
‐GreenTech was unlikely to create ten jobs in two years at the plant site.
‐ Even if GreenTech’s claims about the number of investors who were willing to offer $500,000 were true, they would still be at least $1 billion short of the capital that they needed.
‐Creating a Regional Center designed to assist one specific project and one group of investors created a potential conflict of interest.
He did not mention any fears that GreenTech represented a “visa-for-sale scheme.” But that concern, expressed by Povar, is not based on far-fetched paranoia; sadly, the EB-5 program provides an increasingly enticing lure for unscrupulous con artists. NYU professor Ann Lee wrote in the New York Times last year that “the program is so rife with fraud and corruption that it could actually . . . deter investment.”
Just last month, the Securities and Exchange Commission announced charges and an asset freeze against two companies and an alleged scam artist living in Illinois; allegedly, these parties were behind a scheme to defraud 261 Chinese investors seeking profitable returns and a legal path to U.S. residency through a federal visa program. The SEC charges describe a “green energy” angle to that alleged scheme as well, as investors were told that they would be financing construction of the “‘World’s First Zero Carbon Emission Platinum LEED certified’ hotel and conference center near Chicago’s O’Hare Airport.”
McAuliffe stepped down from GreenTech’s board in December 2012, but didn’t mention publicly that he had done so. In fact, at least seven days after GreenTech’s CEO accepted McAuliffe’s resignation as chairman, he continued to talk about the company with the pronoun “we” — “we wanted to,” “our headquarters are here,” “we had meetings,” “I have to go where the incentives are.”
Aside from the fear that GreenTech’s EB-5 efforts were designed to help the company effectively “sell” U.S. residency visas, Virginia officials had good reason to be wary of the company’s prospects. On October 22, 2009, Mike Lehmkuhler, the vice president of business attraction at VEDP, assessed GreenTech’s hurdles in withering fashion:
The sales forecasts suggest a completely successful start-up, despite
‐no brand recognition
‐no demonstrated vehicle performance
‐no safety and fuel economy certification from the National Highway Traffic Safety Administration
‐no emissions approval from the EPA
‐no established distribution network
‐no demonstrated automotive industry experience within the executive management team
All of this was to manufacture a product with a quite limited market. Almost no media coverage of GreenTech mentioned the limits of the GreenTech Automotive product: “MyCar is a Neighborhood Electric Vehicle in the U.S., but can be adapted to 45mph for in Europe. NEVs are low-speed vehicles; and depending upon the state you live in are limited, by law, to 25–35 mph. No highway driving, please.”
— Jim Geraghty writes the Campaign Spot on NRO.