After taking millions of dollars from foreign investors and the state of Mississippi, the eco-friendly car company GreenTech Automotive Inc. is attracting attention for all the wrong reasons. The company is now under investigation by the Securities and Exchange Commission, which hopes to unravel what appears to be a tangled mess of political entrepreneurship.
About four years ago, GreenTech started gathering money to build a $2 billion plant in Mississippi. It promised to mass produce electric cars and generate at least 350 jobs for the poor Mississippi Delta area.
The GreenTech factory was supposed to start producing vehicles last year. Not only has it failed to build thousands of energy-efficient cars, the company hasn’t even built its factory. Critics say the company is, at best, a poster child for failed green energy programs, or at worst, nothing more than an elaborate scheme to sell visas to foreign investors.
The project’s first funding came from prospective immigrants, working through a visa program called EB-5. The federal visa program lets foreigners invest $500,000 or $1million in the United States in exchange for a chance at permanent residency. At the program’s start in 1990, EB-5 immigrants had to create or sustain at least 10 jobs with their investment and had to be directly involved in the business. After two years of successful operations, investors could apply for permanent residency.
But the program has steadily loosened requirements. In 2011, a group of 95 businessmen obtained EB-5 visas by buying government bonds, and the program is now wide open for manipulation. Today, many EB-5 visa seekers go through federally designated business coalitions for their investment. These government-approved regional centers create their own projects and hunt down money from hopeful immigrants. They raise money by offering a visa-for-capital swap.
“In short, the program allows businessmen who know the system to sell green cards—mostly to Chinese millionaires,” noted Timothy Carney, of the American Enterprise Institute (AEI). “Unsurprisingly, you see these EB-5s wielded by politically minded U.S. businessmen.”
One such regional center provided much of GreenTech’s funding. Gulf Coast Funds Management is approved to represent all of Mississippi and Louisiana, the largest area of any regional center. It happens to be headed by Tony Rodham, Hillary Clinton's brother. The center raised $45.5 million from foreign investors for the GreenTech project, which was founded by Virginia gubernatorial candidate Terry McAuliffe, a close adviser to both former President Bill Clinton and former Secretary of State Hillary Clinton. McAuliffe served as the company’s chairman until December, according to Politico.
Carney said McAuliffe decided to do business in Mississippi, instead of his home state of Virginia, because he found better subsidies in Mississippi. Tunica County gave GreenTech 100 acres for its plant, at a cost of $1.8 million. In 2011, the state loaned the company another $3 million. And GreenTech isn’t McAuliffe’s first government-funded project. Global Crossing, a telecom giant, made him millions before the company went bankrupt, according to Carney.
GreenTech claims it is not failing, but simply having a hard time getting started.
A company spokesman said it is producing cars in a former elevator factory but declined to give reporters a tour. A McAuliffe spokesman said under his leadership the company built about 100 small electric cars and employed 100 people.
But the company clearly hasn’t done what it set out to do—mass produce eco-friendly cars. Instead, it’s made a lot of politically connected people money and created challenges for other entrepreneurs trying to build legitimate businesses.
“Those businessmen lucky enough—and connected enough—to have access to EB-5 visas find themselves competing over Chinese investors these days,” Carney said. “The schlubs trying to attract foreign investment simply on the strength of their business plan? They're left in the cold.”