The Campaign Spot

Here’s the GreenTech Deal that the SEC Is Investigating

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?

Most Popular

White House

More Evidence the Guardrails Are Gone

At the end of last month, just as the news of the Ukraine scandal started dominating the news cycle, I argued that we're seeing evidence that the guardrails that staff had placed around Donald Trump's worst instincts were in the process of breaking down. When Trump's staff was at its best, it was possible to draw ... Read More
Politics & Policy

Elizabeth Warren Is Not Honest

If you want to run for office, political consultants will hammer away at one point: Tell stories. People respond to stories. We’ve been a story-telling species since our fur-clad ancestors gathered around campfires. Don’t cite statistics. No one can remember statistics. Make it human. Make it relatable. ... Read More
World

Is America Becoming Sinicized?

A little over 40 years ago, Chinese Communist strongman and reformer Deng Xiaoping began 15 years of sweeping economic reforms. They were designed to end the disastrous, even murderous planned economy of Mao Zedong, who died in 1976. The results of Deng’s revolution astonished the world. In four decades, ... Read More
Economy & Business

Andrew Yang, Snake Oil Salesman

Andrew Yang, the tech entrepreneur and gadfly, has definitely cleared the bar for a successful cause candidate. Not only has he exceeded expectations for his polling and fundraising, not only has he developed a cult following, not only has he got people talking about his signature idea, the universal basic ... Read More
Politics & Policy

O’Rourke’s America

With apologies to Margaret Atwood and a thousand other dystopian novelists, we do not have to theorize about what an American police state would look like, because we know what it looks like: the airport, that familiar totalitarian environment where Americans are disarmed, stripped of their privacy, divested of ... Read More