Cause of Action files opposing briefs in Department of Energy cronyism lawsuit

As we’ve seen over the past month the DOE is reviving its loan program, this time under new management.

Yet Cause of Action (CoA), a government accountability group, hasn’t forgotten how the DOE handled applications for the Loan Guarantee Program in the first go-round.

Today CoA took a step in a lawsuit we filed against the DOE for corrupting its lending programs to favor political insiders, and arbitrarily denying applications by failing to review applications with ‘established merit criteria’ as required by law.

CoA has been investigating the DOE’s loan guarantee program for  more than a year and has uncovered that the agency failed to give XP Vehicles and Limnia, Inc., two qualified applicants under the DOE’s loan guarantee program fair treatment and the honest opportunity to compete for Government loan funds to build advanced technology vehicles and components.

Click here to see the Opposition to Defendant’s Motion to Dismiss the Official Capacity Claims

Click here to see the Opposition to the Individual Capacity Defendants’ Motion to Dismiss

Washington Post cites our GreenTech Report

GreenTech fits pattern of investment that has made big profits for Terry McAuliffe

By  and , Published: September 21

The pitches to potential investors in a new electric-car company have been unabashed about its promise: It will enjoy “billions” in government subsidies and tax credits, will rise to a dominant position in the U.S. electric-car industry and, perhaps most critically, has a politically connected founder with the savvy to make it all happen.

That founder, Virginia gubernatorial candidate Terry McAuliffe (D), is listed in a recent confidential memorandum to prospective investors as GreenTech Automotive’s “chairman emeritus.” The 70-page document includes photographs and references to McAuliffe’s close ties to former president Bill Clinton. It recounts his political pedigree in detail, from serving as finance director for Jimmy Carter’s 1980 presidential reelection campaign to breaking fundraising records for the Democratic Party and chairing Hillary Rodham Clinton’s 2008 presidential campaign.

A section dedicated to GreenTech’s public relations efforts cites only one specific initiative: McAuliffe’s past promotion of electric vehicles on “national television news programs.”

Dated March 12, the previously undisclosed prospectus, provided to The Washington Post by the nonprofit watchdog group Cause of Action, notes that McAuliffe is “currently the largest individual shareholder” of GreenTech.

The prospectus, along with other documents reviewed by The Post, shows how GreenTech fits into a pattern of investments in which McAuliffe has used government programs, political connections and access to wealthy investors of both parties in pursuit of big profits for himself.

That formula has made McAuliffe a millionaire many times over, paving the way for a long list of business ventures, including his law firm, from which he resigned in the 1990s after profiting — along with his partners — from fees paid by domestic and foreign clients seeking results from the federal government.

A review of McAuliffe’s business history shows him often coming out ahead personally, even if some investments fail or become embroiled in controversy.

One high-profile example involved Global Crossing, a telecommunications firm whose demise in the 1990s cost investors billions of dollars. McAuliffe was working as a consultant to Global Crossing founder Gary Winnick, a prolific political donor, and became an investor in the company. McAuliffe sold some of his Global Crossing shares before the stock price plummeted and made an estimated $8 million before the company went sour.

Few of McAuliffe’s investments have been as ambitious as GreenTech, which the Democrat pointed to when he launched his candidacy as evidence of his entrepreneurial skill.

But in April, McAuliffe sought to distance himself from GreenTech. He issued a surprise statement saying that he had resigned as chairman that previous December — an announcement that came amid growing questions about GreenTech’s ambitious promises and its conduct in soliciting investors through a special visa program.

Nevertheless, the company’s confidential March memo implies to investors that he would remain involved. Were McAuliffe to win his race for governor, the memo says, he would “resign all positions with [GreenTech] and appoint a representative to vote his shares.”

McAuliffe’s campaign declined to make him available for an interview. Spokesman Josh Schwerin said in an e-mail that the memo “appears to have been written long after Terry resigned and he never saw or approved of this document. Terry left the company in early December and since then has had no official role and no responsibilities. Any suggestion to the contrary is simply not correct.”

GreenTech, in an e-mailed statement, said that McAuliffe was “no longer involved in the day-to-day operations of the company” and that his emeritus title “recognizes his previous contributions to the board’s efforts.” The firm declined to comment on the 70-page “Private Placement Memorandum,”saying that securities counsel advised that it “may not comment directly” on the memo “as these are communications with prospective investors that contain confidential nonpublic information about the company.”

Since the time McAuliffe says he resigned as chairman, GreenTech has become the focus of scrutiny in Washington.

The Securities and Exchange Commission launched an investigation this year looking in part at the firm’s claims to potential investors interested in using the visa program, known as EB-5. The SEC has subpoenaed documents from GreenTech and a sister company, Gulf Coast Funds Management, which is led by Anthony Rodham, brother of Hillary Clinton. Both firms have said they are cooperating.

It is not known precisely what the SEC is investigating. But agency investigators have examined possible fraud among other participants in the visa program, in which foreign investors pay at least $500,000 to companies to gain access to permanent U.S. residency for themselves and their families.

The program requires that the investments create jobs. But critics say the program is loosely regulated, allowing U.S. companies to profit from foreign payments and fees sometimes with little job creation to show for it. In the meantime, these critics say, investors gain entry to the United States, even if they have little direct involvement in the fate of the companies they have ostensibly invested in.

GreenTech has also become a focal point in an increasingly vitriolic dispute within the Department of Homeland Security, where several career employees have raised concerns about favoritism shown to the firm and about whether there has been sufficient scrutiny of foreign nationals whose investments in GreenTech have entitled them to special immigrant visas.

The courtship of Chinese investors by McAuliffe and his partners has already proved fruitful — dozens of investors have contributed tens of millions of dollars to the effort. The March prospectus says that the company has received about $46 million from EB-5 investors, with a goal of $60 million.

The investments have led to little in the way of making cars. In Tunica County, Miss., where a mostly vacant lot sits where GreenTech plans to build a plant, local officials remain hopeful but a bit nervous.

“At this point, it sounds like they’re selling visas,” said state Rep. Gene Alday (R), whose district includes Tunica County.

Special treatment alleged

In Washington, GreenTech’s aggressive pursuit of the special investor visas has prompted complaints by career immigration service staffers who say top managers have given the firm and other politically connected applicants special treatment.

The complaints about Department of Homeland Security managers, now under investigation by the department’s inspector general, have stalled the nomination of the immigration agency’s top official for the No. 2 post at DHS.

Department officials and GreenTech have denied that the company received any favorable treatment. McAuliffe and his partners have complained of repeated delays by the government in approving visa applications, which they said put the project at risk of losing much-needed capital.

But eight career employees of the division have requested “protected status” as whistleblowers so they can make their “preferential treatment” case to members of Congress. Sens. Tom Coburn (R-Okla.) and Charles E. Grassley (R-Iowa) have reviewed the employee complaints and say they are concerned. Many of the whistleblowers cite alleged favors provided to McAuliffe’s company — among others — to support their claim.

“It’s not often that so many whistleblowers come forward on the same subject, with similar concerns,” Grassley said Friday. “It shows that this isn’t just one person who has a gripe with their boss, but rather fundamental concerns by several career civil servants about political favors and national security.”

Some whistleblowers claimed that top managers ignored or waved off warnings that some GreenTech investors from China merited extra scrutiny before being granted immigrant visas.

Whistleblowers who talked with Senate staff in the past two weeks said their concerns about GreenTech visas were heightened late last year when they learned that some company officials had previously been affiliated with a Chinese firm that had been the subject of a classified government inquiry about national security risks. Ties with the previous firm were severed before McAuliffe joined the newly formed company as a co-founder.

A DHS official familiar with the matter rejected the employee claims, saying staff concerns were heeded. Holds were placed on several GreenTech applicants and were removed “only after further checks were made in coordination with other law enforcement agencies,” said the official, who requested anonymity because he was not authorized to speak on the matter.

Self-described entrepreneur

McAuliffe, 56, has long described himself as an entrepreneur, pegging his start to a driveway-sealing business he launched as a precocious 14-year-old in Syracuse, N.Y.

In the 1980s, McAuliffe was the chairman of a small financial institution, the Federal City Bank of Washington, which made loans to several top Democratic Party leaders. It was cited by regulators in the early 1990s for unsound banking practices and then merged with another bank.

After Bill Clinton was elected president in 1992, federal investigators examined a $375,000 fee paid to McAuliffe in case his services were needed to help secure a lease of office space from the federal Pension Benefit Guaranty Corp. Ultimately, the payment was deemed improper. McAuliffe was not accused of any wrongdoing, but the leasing company — Prudential Insurance — was required to pay a fine.

In the 1990s, McAuliffe launched what might be his most lucrative and substantive business, American Heritage Homes, with Carl H. Lindner Jr., who headed Chiquita Brands International. During this period, the Clinton administration initiated a favorable policy on a complex banana tariff issue, and Lindner, a longtime GOP donor, stepped up his donations to Democrats, staying overnight as Clinton’s guest in the Lincoln Bedroom.

In 1999, the Labor Department reviewed a real estate venture involving McAuliffe that used money from the International Brotherhood of Electrical Workers’ pension fund. The department sued the union, saying the deal was a bad investment for its members. Union officials said the deal ultimately provided profits to the labor group. McAuliffe, who had invested only $100,made millions.

McAuliffe has not disclosed his net worth. His campaign referred to the Virginia financial disclosure form that he was required to submit as a candidate, but the form is vague. He lists, for instance, 25 assets worth a minimum of $250,000 each.

Predictions of jobs

McAuliffe joined GreenTech soon after his failed 2009 bid for Virginia governor.

At the start, company documents predicted the firm would have 25,000 employees in the United States capable of producing 1 million electric cars in 2015-17.

In speeches in Virginia and elsewhere, McAuliffe has offered varying predictions of the jobs that would be created by his company. Several times in 2012, he told reporters that 900 U.S. jobs would be created by the year’s end by GreenTech, which is based in McLean. The firm has produced few, if any, cars, and a statement from the company says it employs “more than 80 full time employees.”

The documents obtained by The Post show that GreenTech’s success depends on government help.

A 2009 prospectus said that billions of dollars in subsidies could potentially be granted by Mississippi to support the plant. The current prospectus estimates the combined value of its local and state government aid in Mississippi to be $25 million. So far, the numbers are much smaller. The state lent GreenTech $3 million under the condition that the firm create 350 jobs by December 2014, according to Mississippi Development Authority spokesman Jeff Rent. Tunica County, using a separate $2 million loan from the state, purchased the land where the company has said it will build the factory.

In an e-mailed statement to The Post, the company said that “market and financial conditions and other current events have led GTA to reexamine our original target market and, therefore, our initial projected capacity needs.”

GreenTech’s struggles have become fodder for Republicans and their allies, who have spent months scouring McAuliffe’s business record. Cause of Action, which provided the confidential investor memo to The Post, received more than $900,000 two years ago from the libertarian-leaning Franklin Center, whose Web site has been sued by GreenTech for defamation.

McAuliffe put his bipartisan political muscle on display during a star-studded event at the GreenTech site in Mississippi last year with former governor Haley Barbour and Bill Clinton. The event showcased models of the “MyCar,” the golf-cart-like 40-mph vehicles that would be the signature product of GreenTech.

Barbour, in an interview, said he had no regrets. “We felt that if they invested $60 million of hard cash, we’d be willing to take a couple-million-dollar risk,” he said.

Barbour, a McAuliffe friend who left office in 2012 after two terms, said McAuliffe’s role was not a factor in the state’s decision to provide help. “It doesn’t disqualify you to know the governor, but you’ve still got to meet the same standards” as any firm appealing for state development aid, he said.

The confidential 2013 memo to potential investors explained in some detail how McAuliffe’s run for governor would affect his role in the firm.

“Until the election, Mr. McAuliffe will dedicate his full time to the election campaign but will remain as a shareholder of GTA’s Parent,” it says. “If Mr. McAuliffe becomes Governor of Virginia, federal and state law requires that he resign all positions with GTA and appoint a representative to vote his shares of GTA’s Parent.

“On January 7, 2013, the board of directors of GTA assigned to Mr. McAuliffe as Chairman of the Company the duties and responsibilities appropriate for a Chairman Emeritus during the course of his gubernatorial campaign,” the memo added. Describing that job, it says: “The Chairman Emeritus of the Company will have such duties and responsibilities as designated by the Board of Directors from time to time.”

Alice Crites contributed to this report.

Washington Post: GreenTech fits pattern of investment that has made big profits for Terry McAuliffe

Read the full story: Washington Post

A section dedicated to GreenTech’s public relations efforts cites only one specific initiative: McAuliffe’s past promotion of electric vehicles on “national television news programs.”


Dated March 12, the previously undisclosed prospectus, provided to The Washington Post by the nonprofit watchdog group Cause of Action, notes that McAuliffe is “currently the largest individual shareholder” of GreenTech.


The prospectus, along with other documents reviewed by The Post, shows how GreenTech fits into a pattern of investments in which McAuliffe has used government programs, political connections and access to wealthy investors of both parties in pursuit of big profits for himself.


That formula has made McAuliffe a millionaire many times over, paving the way for a long list of business ventures, including his law firm, from which he resigned in the 1990s after profiting — along with his partners — from fees paid by domestic and foreign clients seeking results from the federal government.


REPORT: GreenTech Automotive: A Venture Capitalized by Cronyism

Executive Summary

“It seemed like a win for everyone involved when a startup car company, backed by political heavyweights, wooed investors with plans to build a massive auto plant in the Mississippi Delta, hire thousands of people and pump out a brand new line of fuel-efficient vehicles…But today, the company is under a federal investigation and about the only thing on its land in Tunica County is a temporary construction office.”

–          Associated Press, August 12, 2013

Less than half of all businesses started between 1977 and 2000 survived to five years.  Market competition is cruel but it’s not unfair.  Unfair is when political heavyweights use their influence to skew the market and force taxpayers to underwrite the risk of speculative new business ventures; taxpayers suffer while crony companies reap the profits.  Such is the case with GreenTech Automotive, Inc. (GreenTech), a startup automobile manufacturer that promised jobs and economic growth in Virginia and Mississippi but has failed to deliver.  The following report is the latest from Cause of Action’s (CoA) investigations into companies that rely upon the politically powerful, not the competitive marketplace, to determine economic winners and losers.

The story of GreenTech and its principals, Terry McAuliffe and Charles Wang, weaves a tale of promises to invest billions of dollars and create thousands of jobs as a result of alleged technological breakthroughs.  What is becoming increasingly likely, however, is that taxpayers will instead bear the costs of broken promises by subsidizing a failed business that used political connections and pressure to profit from taxpayer dollars.

Terry McAuliffe has made a career of using politics to profit.

As far back as 1997, Business Week declared that “[m]any of Terry McAuliffe’s business deals are intertwined with his political interests.” According to Leaders Magazine in 2007, McAuliffe “started over two dozen companies in the fields of banking, insurance, marketing, and real estate.  McAuliffe served as Chairman of Federal City National Bank and, most recently, was an owner and Chairman of American Heritage Homes.” These companies and his political fundraising career earned him millions in personal profit, but also brought Department of Justice investigations, accusations of conspiracy and illegal donation schemes, and Department of Labor penalties. What is clear is that political fundraiser and businessman McAuliffe has made a habit of using his connections and favors to rake in profits, and he has continued that pattern with GreenTech. After receiving campaign contributions from Charles Wang in 2008 for his first gubernatorial bid, Terry McAuliffe made his deep political Rolodex available for GreenTech’s benefit.  As Amy Gardner from The Washington Post has observed, many of McAuliffe’s biggest business deals “came in partnership with prominent donors and politicians, creating a portrait over the years of a Washington insider who got rich as he rose to power in the Democratic Party.” He continued that pattern with GreenTech, benefitting the company through his own political connections.

  • In 2008, Charles Wang made a $50,000 donation to Terry McAuliffe’s gubernatorial campaign.  Shortly thereafter, Wang’s company merged with what is now GreenTech and McAuliffe was named Chairman.
  • As GreenTech Chairman, in an email to then-Governor Haley Barbour, McAuliffe cited efforts by U.S. Senators Thad Cochran (R-MS) and Roger Wicker (R-MS) to pressure the United States Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas into fast-tracking EB-5 visa applications that would provide Chinese investments for GreenTech.
  • McAuliffe sent numerous emails to Director Mayorkas and Douglas Smith, Department of Homeland Security’s assistant secretary for the Office of the Private Sector, expressing frustration with USCIS’ slow visa approval process. Smith attended GreenTech’s groundbreaking at its temporary Horn Lake facility, where McAuliffe also privately met with President Bill Clinton and Chinese investors.
  • Anthony Rodham, brother of former Secretary of State Hillary Clinton, is President and CEO of Gulf Coast Funds Management (Gulf Coast) the country’s largest Regional Center for processing EB-5 investments, and the manager of EB-5 investments for GreenTech.

GreenTech utilized the EB-5 visa program as a catalyst for favors and a prop for business deals.

In 2008, Gulf Coast, a sister company of GreenTech, used political pressure to position itself as a powerful Regional Center for managing two states’ EB-5 investments, yielding large profits. GreenTech was financed by Chinese investors with a strong interest in securing visas in exchange for millions of dollars in capital through EB-5.

  • Then-Mississippi Governor Haley Barbour, one of Terry McAuliffe’s current business partners, contacted Barbara Velarde, the head of the USCIS office that oversees the Regional Center program, urging the agency to designate Gulf Coast as the Regional Center for the entire state of Mississippi.
  • Kathleen Blanco, who was Governor of Louisiana at the time that USCIS approved Gulf Coast’s application, is currently a member of Gulf Coast’s board.
  • Between 2009 and 2012, GreenTech raised $67 million from more than one hundred EB-5 investors. Gulf Coast has collected a total of approximately $7.4 million in profits from GreenTech investors.

GreenTech is abusing taxpayer funds.

Under the leadership of Charles Wang and Terry McAuliffe, GreenTech submitted exaggerated projections about its manufacturing output and job creation prospects, convincing Mississippi state officials to award millions of taxpayer dollars in loans and tax incentives to develop a GreenTech plant within the state.

  • In exchange for a promise to build a manufacturing facility in Tunica County, the Mississippi Development Authority (MDA) agreed to provide a $3 million loan to GreenTech from the Mississippi Industry Incentive Financing Revolving Fund to construct an access road to the facility.
  • A $2 million loan was given to the Tunica County Economic Development Foundation to purchase the site on which the facility would be built.  GreenTech received a host of tax breaks and incentives including reduced state income, franchise, property, sales and use taxes and income tax rebates for company employees.
  • GreenTech has claimed that it will create 25,000 direct jobs that will each create 11.86 indirect and induced jobs, or 296,500 jobs in total.  This is problematic both in expectation and legality given that current law provides for no more than 10,000 EB-5 visas per year.

While it is unknown whether GreenTech will meet its own estimate of 25,000 full-time jobs in Mississippi by 2014, according to NBC12 News in Richmond, Va., a former GreenTech employee claims that GreenTech’s “lofty goals were nowhere near reality.”

What follows in this report are these and additional findings from a six-month investigation of the relationships and political deals that allowed GreenTech to entice Mississippi into a misbegotten experiment in green automotive technology. As this report reveals, the real engine driving GreenTech’s business plan appears to be its management’s extraordinary talent for exploiting taxpayers to advance their own interests.


PDFGreenTech Automotive: A Venture Capitalized by Cronyism

Exhibits:Exhibits 1-32

Wang Emails: 1 & 2

GTA Exhibit 6 (here) was the Document used in a Washington Post story

Cleveland Plain Dealer: Watchdog group accuses Forest City Enterprises of profiteering at taxpayer expense

Read the full story here: Cleveland Plain Dealer

Cause of Action released a report today that claims the Cleveland-based developer used “highly paid lobbyists, political connections, campaign contributions and strategic hiring of government officials” to obtain “lavish public subsidies, tax exempt financing and the seizure of private land from eminent domain condemnations.”


Its review of lobbying and political contribution records indicates that the company and its employees spent $23 million on campaign contributions and lobbying at the federal state  and local level over the past decade while receiving “fifty two direct and indirect government subsidies or financial benefits with a total value of at least $2.6 billion.”

Wall Street Journal: Watchdog Group Accuses Developer of Massive Pay-to-Play Scheme

Read the full story here: Wall Street Journal

Cause of Action, a Washington, D.C. non-profit accountability group, said in a reportthat Forest City Enterprises, one of the largest publicly traded U.S. developers, spent $23 million in the last decade on campaign contributions and lobbying expenses while receiving $2.6 billion in government subsidies, comprising nearly a quarter of the firm’s revenue during that time span.


The group accuses the firm of using its political clout to get massive benefits as it, and its subsidiaries, built massive projects including Atlantic Yards, the site of the Barclays Center, where the Brooklyn Nets play their home games.

Cause of Action Report Exposes Profiteering Scheme Using Taxpayer Funds

FOR IMMEDIATE RELEASE                                                                                                 

August 6, 2013


Cause of Action Report Exposes Profiteering Scheme Using Taxpayer Funds

 “Political Profiteering” Shows How Forest City Enterprises

Makes Private Profits at the Expense of American Taxpayers


WASHINGTON – Today, Cause of Action (CoA), a government accountability organization, released “Political Profiteering: How Forest City Enterprises Makes Private Profits at the Expense of American Taxpayers,” the first installment in a three-part investigation examining how real estate development giant Forest City Enterprises (FCE) uses politics for profit.  The report exposes how between 2002 and 2012, FCE secured more than $2.6 billion in direct and indirect government subsidies by spending millions of dollars on campaign contributions. Two of the most high-profile examples of FCE using politics for profit include the Atlantic Yards development in Brooklyn, NY and The Yards project in Washington, D.C.

“We are exposing an enterprise of corruption within one of the largest private real estate developers in the country,” said Dan Epstein, Cause of Action’s executive director.  “For far too long, Forest City Enterprises has operated on the model of political profiteering, essentially rigging the marketplace by paying off government officials with lavish campaign contributions and gambling with taxpayer funds for its private profit.”

“Unless there is effective oversight of how government subsidies are granted to companies like Forest City Enterprises, businesses will continue to use American taxpayer dollars to bolster their own private profits.”

CoA’s nearly two-year investigation uncovers how Forest City Enterprises, one of the largest publicly-traded real estate development companies in the United States, runs on the practice of using public money and government influence to reap millions in profit and finance its net worth of nearly $10.6 billion. In its pursuit of land development projects, FCE regularly uses highly paid lobbyists, political connections, campaign contributions, and strategic hiring of government officials to obtain lavish public subsidies, tax-exempt financing and the seizure of private land from eminent domain condemnations.

 Among the most blatant examples of FCE’s political profiteering CoA uncovered:

  • From 2002 to 2012, FCE and its subsidiaries received or signed agreements for fifty-two direct and indirect subsidies or financial benefits with a total value of at least $2.6 billion.
  • FCE, its subsidiaries, and its employees spent $23 million on political spending such as campaign contributions and lobbying at the federal, state, and local level from 2002 to 2012.
  • In key election years, eighty-five percent of FCE’s eighty-one federal political contributions were given to candidates in areas where FCE had real estate projects.
  • Forest City Washington (FCW) in the District of Columbia (D.C.) used campaign contributions to extract favors from the politicians on the D.C. City Council, the D.C. Mayor, and D.C. Delegate Eleanor Holmes Norton for its Yards project. FCW also hired an employee from the Mayor’s office dealing with development to assist in pushing its project.

In the reports that follow, CoA will show how FCE took public benefits under the premise of providing jobs for minority workers but failed to deliver, as well as how FCE enriched itself through bribery and political graft, without ever being subjected to investigation or oversight.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visit

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Mary Beth Hutchins,  202-400-2721 or Jamie Morris,