This is the first in a series of articles about Terry McAuliffe and GreenTech Automotive.

by James A. Bacon and Carol J. Bova

In September 2016, the Office of the State Auditor (OSA) of the state of Mississippi began undertaking a review of the contracts signed by the state’s economic development authority. The goal was to see if the corporations benefiting from state incentive money had made good on the capital investment and job creation they had promised. Several companies were targeted for a closer look.

One of those was Greentech Automotive Inc., a Virginia company whose chairman in 2011 when the Memorandum of Understanding was signed was Terry McAuliffe.

GreenTech had announced ambitious plans for a multibillion-dollar business by designing and manufacturing hybrid and electric vehicles. Between 2009 and 2013 the company raised a total of $141.5 million from Chinese investors under the EB-5 program, which gave foreigners a U.S. green card in exchange for a $500,000 investment in the United States. Incentive financing from the state of Mississippi and Tunica County, Miss., amounted to another $6 million. All told, GreenTech raised at least $147.5 million in funding.

Despite a GreenTech commitment to invest $60 million in the manufacturing plant, very few cars ever rolled off the assembly line… assuming there even was an assembly line. The Mississippi auditor’s report could find documentation for only $3.4 million spent on automotive assembly equipment and parts. Further, despite promises to create 350 full-time jobs, the auditors determined that the company had never supported more than 94 active, full-time jobs in Mississippi at a time. GreenTech made only a single $150,000 payment to the state.

Despite having scrimped on manufacturing expenditures, the company listed minimal assets when it filed for bankruptcy in 2017. In a final settlement, agreed to last year, investors and creditors recovered only $6.6 million. Mississippi and Tunica County recovered only $575,000.

What happened to the other $140 million?

After winning the 2013 gubernatorial election, McAuliffe said he would divest his interest in GreenTech and an unrelated venture, Franklin Pellets, and place his family’s assets into a blind trust for his duration as governor, reported the Richmond Times-Dispatch.

“Gov.-elect Terry McAuliffe and his wife, Dorothy McAuliffe, with my assistance, have begun the process of establishing a blind trust for their personal assets and divesting from potential conflicts of interest,” said Thomas Richards, an attorney with the Tax, Trusts and Estates practice group of Arnold Porter LLP.

In a follow-up interview, an Arnold Porter spokeswoman reaffirmed that GreenTech was among the holdings that would be divested. She described McAuliffe then as a “passive investor.” Other than Franklin Pellets, no details about McAuliffe’s holdings were provided.

According to a 2010 State Corporation Commission document*, McAuliffe owned 25% of GreenTech (WM GreenTech Automotive Corp.). A holding company owned by CEO Xiaoling “Charlie” Wang held the other 75% of the shares. It’s a reasonable assumption that McAuliffe sold his shares to Wang — no mention of any other shareholder appears in the public record — although that is not known for certain. More to the point, it is not known what sum he sold his 25% stake for, nor the terms and conditions of the sale.

GreenTech lost so much money, generated so little revenue, and left behind such meager assets that it has few parallels in the annals of Virginia business history. Most companies have something to show for an investment of that size — software code, technology, products, sales, whatever. GreenTech produced almost nothing. Yet McAuliffe walked away with money in his pocket.

GreenTech’s bankruptcy petition claims that the company “exhausted its financial resources” fighting several lawsuits and battling “negative perceptions” from press coverage. But lawyers provided no documentation to support its contention that lawsuits consumed anywhere close to $140 million.

It certainly was not a case of GreenTech spending heavily to build its EV auto manufacturing plant or burning through tens of millions of dollars on payroll. Assuming the company paid its employees what it promised it would, Mississippi payroll would have consumed about $3 million a year at peak levels. (The company also maintained staff in its McLean headquarters, but the number of employees was much smaller.) The other major business-as-usual expense would have been hiring a German engineering firm to design the prototype car. The company did suffer damages in the “tens of millions” of dollars stemming from one of its lawsuits, but even that leaves large sums unaccounted for.

Another possibility is that Wang used millions of dollars in GreenTech capital to purchase McAuliffe’s shares.

There has never been a full accounting of where the money went, so we just don’t know. When Mississippi OSA inspectors attempted an on-site visit to review records, GreenTech denied them access. When the company filed for bankruptcy, it coughed up no earnings statements. Its finances are a mystery.

One thing that is clear is that the level of mismanagement had few parallels. Much of the blame belongs to the CEO, Charlie Wang. But McAuliffe was responsible for the hype, puffery and empty promises that parted Chinese investors from more than $140 million and duped economic development officials in poverty-ridden Mississippi and Tunica County. And as chairman, he shared responsibility for setting the company on its disastrous path to bankruptcy four years after he departed.

If GreenTech were just another busted business in an entrepreneurial U.S. economy that accepts business failure as the price of progress, the question might not be worth answering. But GreenTech wasn’t just another failed business. Its chairman would go on to serve four years as Virginia governor and today is less than a week away from possible re-election.

Virginia voters are entitled to know how much money McAuliffe extracted from the company and a clearer picture of his role in the doomed enterprise. Bacon’s Rebellion cannot answer the first question, but we will endeavor to flesh out his track record as chairman in the days to come.

(Bacon’s Rebellion efforts to contact the McAuliffe campaign were unsuccessful.)


* The ownership shares are documented in “Articles of Share Exchange of WM Greentech Automotive Corp., Capital Wealth Holdings Limited, and Greentech Automotive Inc.” filed with Virginia’s State Corporation Commission. The document laying out the distribution of shares, dated March 18, 2010, was signed by McAuliffe as chairman, Wang as chairman, and Gary Yi Tang as chief operating officer.


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Comments

27 responses to “Where Did $140 Million in GreenTech Money Go?”

  1. Kathleen Smith Avatar
    Kathleen Smith

    Great read. Exactly why we need to think before we vote.

  2. Jake Spivey Avatar
    Jake Spivey

    Perhaps McAuliffe should have called in Hunter Biden to handle the deal?

  3. DJRippert Avatar

    The difference between an entrepreneur and a rent seeking charlatan is what happens when failure occurs. Entrepreneurs, at best, are badly under-compensated for their time. More often, they are out actual cash. Rent seeking charlatans always seem to leave a business failure considerably wealthier than they were before the failure. In the worst cases the rent seeking charlatan never really had a viable business plan. They simply saw a scam, ran a con and pocketed some other peoples’ money.

    I hope your articles lead us to a conclusion as to whether Terry McAuliffe, in the case of GreenTech, operated as an entrepreneur who pursued a reasonable business plan and failed of if he operated as a rent seeking charlatan who knew (or should have known) that the business plan was flawed but went forward anyway in order to dupe people out of their money.

    1. tmtfairfax Avatar
      tmtfairfax

      Sort of like LBJ did through Lady Bird’s radio stations?

  4. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Do we know if that $141.5 million from Chinese investors actually materialized or was some of it “commitments” that never came to fruition?

    1. Yes. The payment to the EB-5 regional centers of $500,000 plus a processing fee of $55,000 with the petition starts the EB-5 process. There were 283 investors.

      1. The $141.5 million figure comes from GreenTech’s own bankruptcy filing.

        1. LarrytheG Avatar

          From what I understand, this was a bunch of Chinese investors who hoped to be able to immigrate to the US by investing in a company that would produce jobs.

          And the venture failed.

          So what was McAuliffes role?

          And didn’t this happen some number of years ago and it’s still an issue mostly with folks on the right who have nothing to say about folks like McDonnell?

          Pure partisan twaddle – again!

          1. DJRippert Avatar

            Spare me the blather. McAuliffe was the Chairman of the company. He made speech after speech about how he bought a Chinese car company and was moving the jobs from China to the US. He claimed his salesmanship as a big reason to vote for him in 2013. He tried to hook Virginia into subsidizing his con. Our Economic Development organization was too smart. But Mississippi’s was not. He lied about that claiming Virginia refused to bid. Politifact called him out.

            https://www.politifact.com/factchecks/2013/jan/24/terry-mcauliffe/terry-mcauliffe-says-virginia-officials-decided-no/

            The GreenTech business plan never made sense. They never had near the capital needed to start a car manufacturing company. It was a con from the start.

            Partisan twaddle my ass.

          2. LarrytheG Avatar

            Right – December 5, 2012. This is the date of that article – and it’s STILL going on.

            It was no more a “con” than a lot of economic development efforts and the bottom line is the business community did not like the business model – not too different than they like Tesla or other newly emerging technologies.

            But yes.. this is 9 years ago and it’s still going on with folks on the right – so yes – it’s pure partisan twaddle blathered by the usual “conservative” suspects in BR!

          3. Matt Adams Avatar
            Matt Adams

            McAuliffe used his name as bait for the investment. Your whataboutism knows no bounds.

  5. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Are you planning a similar deep dive into Youngkin’s business practices? Oh, that’s right; there is not enough time to do that and Terry between now and Election Day! https://www.usnews.com/news/business/articles/2021-07-01/gop-candidates-private-equity-resume-draws-scrutiny-in-va

    1. The Washington Post already did that. No need to duplicate its work.

  6. Peter Galuszka Avatar
    Peter Galuszka

    Dick, Of course there will not be a Youngkin companion piece to this pathetic little probe coming in six days before the election. Probing Carlyle, a private equity firm, would take much, much more in time and expertise. The Green Tech stuff is years old and is largely based on a public Mississippi state report. Astonishingly, it leaves out some juicy aspects such as Hillary Clinton’s brother’s involvement with Green Tech while she was Secretary of State. Where’s that? Plus, there have been a number of lawsuits from Chinese investors. Where are those? Should be easy to find out. Whatever happened to the years-long FBI probe. Didn’t McA get out of this deal maybe 10 years ago? If our investigative Batman and Robin want to get serious, why not Trump Wine, Trump U., Trump Russia, Trump Japan, Trump hotel downtown DC, two impeachments and so on?

    1. It’s a series, Peter. More to come.

    2. tmtfairfax Avatar
      tmtfairfax

      Keep in mind that the Media Company that exposes bad guys on the right allowed its editorial department to break company policy and pressure a news reporter to pull his punches on then Governor Tim Kaine. (I got that straight from the reporter who was pressured.) Why would the MSM investigate Democrats?

      1. LarrytheG Avatar

        like this?

        GreenTech formula has made big profits for McAuliffe

        https://www.washingtonpost.com/politics/greentech-formula-has-made-big-profits-for-mcauliffe/2013/09/21/3c6e332c-2136-11e3-b73c-aab60bf735d0_story.html

        And here is WaPO on Kaine:

        Kaine’s acceptance of gifts in Virginia could create opening for Republicans

        https://www.washingtonpost.com/politics/kaines-acceptance-of-gifts-in-state-office-could-offer-republicans-an-opening/2016/07/22/8508b2cc-4f7f-11e6-a7d8-13d06b37f256_story.html

        The idea that WaPo does not report on these things is simply not true.

        And one more:

        Donor gave McDonnell and family a lake-house vacation

        https://www.washingtonpost.com/local/va-politics/donor-gave-mcdonnell-and-family-a-lake-house-vacation/2013/04/18/7573321c-a76f-11e2-8302-3c7e0ea97057_story.html

        Doesn’t look like they played favorites, except maybe to partisans.

        And here’s the truth – despite what TMT and others say about WaPo – they STILL READ IT because WaPO covers issues even when other media skips it.

        Over and over the right-leaning media has the opportunity to do real reporting and over and over they choose to stoke the culture war and partisan issues.

  7. LarrytheG Avatar

    Is someone claiming that Dems in Va are worse than GOP at this or are we just sloshing the kool-aid here for the election?

    When did this happen?

    I don’t excuse any of it but how about we compare this to say Bob McDonnell or Dominion Power and the dismantling of the SCC or Phil Hamilton?

    1. DJRippert Avatar

      It’s not Dems vs Repubs. It’s McAuliffe.

  8. Richard Smith Avatar
    Richard Smith

    As an Aside…. does McA still get to be on the ballot when he never signed the paperwork. .. and speaking of punishments, what is going to happen to the two guys that “Witnessed” McA’s signature… what a bunch of crooks!!!

  9. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    McAuliffe divested himself, or at least his blind trust did, in 2014. At that point, he resigned from the board and sold his share to Wang. Three years later, the company declared bankruptcy. A lot can go wrong in three years. You have provided no evidence that the mismanagement that led to the bankruptcy was due to McAuliffe, who had walked away from the company years earlier.

    Also, why should I care if Wang took some of the Chinese investors’ money and bought out McAuliffe? It seems that it is Wang that needs to do the explaining to his investors as to what happened to their money.

    Finally, I love this statement: “GreenTech produced almost nothing. Yet McAuliffe walked away with money in his pocket.” And what about Mr. Youngkin? He was with the Carlyle Group, which produced nothing itself, only buying and selling other companies that had been set up to produce something. For some of those companies it bought, it stripped them of their assets and left them to go bankrupt. So, Mr. Youngkin also produced nothing and walked away with hundreds of millions in his pocket.

    1. Matt Adams Avatar
      Matt Adams

      Tu quoque fallacy and lovely cover for our Former Governor. Would like to explain away his federal investigation too?

    2. LarrytheG Avatar

      You have the standard BR and like-minded view of GreenTech and McAuliffe then you have accounts that have more clarity and truth:

      https://www.politico.com/story/2017/11/28/greentech-automotive-lawsuit-terry-mcauliffe-262771

  10. Apparently the Dems are not bad at all math…

  11. Here is what happened when a representative from each of the major-party candidates for governor of Virginia got together the other day to have an intelligent, reasoned, substantive dialogue to explain why people should support their candidate:

    Partisan 1: Your guy is worse than my guy.
    Partisan 2: No, your guy is worse than my guy.
    Partisan 1: No, your guy is worse.
    Partisan 2: No, your guy is worse.
    Partisan 1: No, your guy is worse.
    Partisan 2: No, your guy is worse.
    Partisan 1: No, your guy is worse.
    Partisan 2: No, your guy is worse.

    Citizen/Voter: Uh, guys? Yeah, over here. Can either of you tell me something positive your guy will do to improve the lives of Virginians should he be fortunate enough to be chosen to lead our Commonwealth for the next four years?

    [crickets] [more crickets] [still more crickets]

    [brief silent pause] [slightly longer brief silent pause]

    [footsteps receding]

    Partisan 1: Is he gone?
    Partisan 2: Yes.
    Partisan 1: Good. I was starting to think he’d never leave.
    Partisan 2: Yeah. What does he know, anyway?
    Partisan 1: Okay, where were we? Oh, right. Your guy is worse.
    Partisan 2: No, your guy is worse.
    Partisan 1: No, your guy is worse.
    Partisan 2: No, your guy is worse.
    Partisan 1: No, your guy is worse.
    Partisan 2: No, your guy is worse.

    1. Matt Adams Avatar
      Matt Adams

      This is almost as illustrative as the practice of “what about so and so”.

    2. We can only speculate. So the time will come when one of these dudes has to fill out his administration. Are such positions available to Chinese investors who invest, say, $560,000 in a Virginia economic development enterprise — as in, for example the economic development enterprise in Warren County that JB reported on here a while back? The possibilities! The future BR columns!

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