The Cronyism Candidate

Terry McAullife used political connections to grow business, critics say

Terry McAuliffe / AP
March 11, 2013

Virginia Democratic gubernatorial hopeful Terry McAuliffe has touted his business expertise as a qualification for office despite criticisms that he has opened plants outside of the Old Dominion and relied on cronyism to fuel his success in the private sector.

Speaking at a Saturday gathering of Arlington County, Va., Democrats, McAuliffe recounted a long business career, starting at age 14 when he wheeled buckets of tar around Syracuse, N.Y., filling potholes.

McAuliffe told the crowd he would put in place policies to spur employment. "We want our five children to stay in Virginia," which requires a strong job market, he said.

"Other states are moving ahead of us in manufacturing and other things. We’ve got to bring that business here," McAuliffe added.

McAuliffe opted against bringing jobs to Virginia in his capacity as chairman of electric and hybrid vehicle manufacturer GreenTech Automotive. GreenTech has two manufacturing facilities in Mississippi, where the company has received state subsidies, and one in China.

"I have to go where, obviously, they're going to put incentives," McAuliffe insisted.

"That he would go to the best deal speaks volumes about where his heart is at," Jeannemarie Davis, a former state senator and current Republican candidate for lieutenant governor, told Watchdog's Virginia Bureau.

McAuliffe’s Republican opponent in the gubernatorial race, state Attorney General Ken Cuccinelli, leveled similar criticisms, pledging to "creat[e] jobs in the Commonwealth, not Mississippi."

But critics say McAuliffe’s extensive political connections—he is a former chairman of the Democratic National Committee, a legendary political fundraiser, and a long-time ally of some of the nation’s most prominent political figures—suggest that GreenTech’s business model is based not on the quality of its products but the quality of McAuliffe’s Rolodex.

"The McAuliffe-Cuccinelli race might be the clearest contrast we've seen of a corporatist Democrat running against a free-market populist," said Tim Carney, director of the Culture of Competition Project at the American Enterprise Institute.

GreenTech has received political support from former U.S. president Bill Clinton, two sitting U.S. governors, the brother of a sitting secretary of state, and other prominent public officials in McAuliffe’s political circle.

McAuliffe ignored a Washington Free Beacon reporter when asked about the company’s political clout at Saturday’s event. His campaign did not respond to a request for comment.

GreenTech activated McAuliffe’s network of high-profile political allies to secure funding through a Department of Homeland Security program that provides U.S. visas to foreign investors.

The DHS program, known as EB-5, offers visas to foreigners who provide at least $1 million in capital and create at least 10 jobs for American businesses.

The investment threshold is reduced to $500,000 for projects in rural areas or areas of high unemployment. GreenTech’s new Tunica County, Miss., plant is in one of these "targeted employment areas."

Its McLean, Va., headquarters is not.

The EB-5 program has come under fire for alleged graft. According to Ann Lee of the left wing group Demos, "the program is so rife with fraud and corruption that it could actually … deter investment."

Regional centers administer the EB-5 program. State or local governments or private corporations can run the centers. Private regional centers generally take a commission of all EB-5 investment that they handle.

GreenTech asked the Virginia Economic Development Partnership, a state agency, to back its plan to be Virginia’s first regional center and enlisted the help of then-Virginia governor Tim Kaine, a Democrat and McAuliffe ally. Kaine "strongly supported the creation of the regional center," according to internal VEDP emails.

GreenTech was not after processing fees alone, however. As Virginia’s first EB-5 regional center, the company would administer the quasi-public body in charge of the visa program it was using to attract its own foreign investors.

The VEDP said the ethical conflict was unacceptable. "We believe that having the principals of the regional center be the same as the principals of the company benefitting from the investment creates a conflict of interest," wrote Jeffrey Anderson, executive director of the VEDP.

Jefferson also expressed concerns about GreenTech’s financing plan. "We have grave doubts about the business model presented to us," he wrote. "We are concerned that the financing plan does not fit the rules for the EB-5 Program."

The agency rejected GreenTech’s regional center bid; the company moved forward with an EB-5-funded manufacturing facility in Tunica County, Miss.

Rather than try to establish itself as its own regional center in Mississippi, GreenTech partnered with Gulf Coast Management Funds, an EB-5-focused investment firm run by Anthony Rodham, brother of then-Secretary of State Hillary Clinton.

GreenTech referred questions to a spokesperson who was out of the country and could not be reached. Gulf Coast did not return requests for comment.

Gulf Coast’s board includes former Louisiana Governor Kathleen Blanco (D), former Internal Revenue Service commissioner Margaret Richardson under Clinton, and Randy Wright, a former Norfolk, Va., city councilman and McAuliffe supporter.

Bill Clinton, Rodham, then-Mississippi Governor Haley Barbour (R), and officials from the Mississippi Development Authority (MDA) all traveled to China to help GreenTech secure EB-5 investors.

Barbour, who is personal friends with McAuliffe, also looked to secure state subsidies for the company. The MDA would eventually loan GreenTech $3 million for its Tunica County plant.

Officials with the MDA did not respond to requests for comment and suggested the Free Beacon file a public records request to obtain information on its support for GreenTech.

The company is reportedly working to secure more than $8 million in state and local support by the end of 2014, but that support is contingent on it gathering $60 million in private investment by the end of that year, making EB-5 investment particularly important for the company.