Terry McAuliffe’s crony capitalism mess
We’re used to political races revolving around pointless slogans, but sometimes an important race focuses the public’s attention on a meaningful and relevant issue. For instance, the Virginia governorship may hinge on voters’ increasing distaste for those dubious insider-enrichment deals known as “crony capitalism.”
Democratic gubernatorial candidate Terry McAuliffe has touted his efforts to start a “green car” company in Mississippi as a prime example of his American entrepreneurial know-how as he battles against Republican Ken Cuccinelli, currently the state attorney general.
The politically well-connected McAuliffe – a former Democratic National Committee chairman described this month by the Washington Post as someone who “made a fortune in an array of businesses, often by using his political contacts” – apparently purchased GreenTech Automotive in 2009 from the Chinese government, which seems like a match made in heaven given that the Chinese “capitalist” model is based heavily on political favoritism.
McAuliffe quietly resigned as chairman of the company in December — so quietly the public only learned about it on April 5 —but was still championing his role with the company as recently as this month, when one of its funding sources turned into a campaign disaster. That financing mechanism is the EB-5 program, whereby foreigners are offered green cards in exchange for investments in U.S. companies.
In short, McAuliffe, who helped Bill Clinton raise campaign cash by selling $100,000 sleepovers at the White House, was building a car company based on $500,000 “investments” from foreigners seeking to live in the United States. “GTA counts among its allies Hillary Clinton’s brother, Anthony Rodham, who shares an office with GTA and is CEO of Gulf Coast Funds Management, an EB-5 center that raises visa-investor money for GTA,” according to a Watchdog.org story.
The Associated Press featured a photograph of Bill Clinton at the unveiling of the MyCar at the Horn Lake, Miss., facility where thousands of cars would supposedly be produced in its first year of production. Crony capitalism is bipartisan, of course, and Mississippi’s former governor, Haley Barbour, a former Republican National Committee chairman, was in on the action, too. His development authority pledged more than $8 million in taxpayer-funded freebies so that GTA could build a plant on a still-vacant parcel in Tunica County.
It’s hard to envision a huge market for $18,000“neighborhood electric vehicles” with a top speed of 35 miles per hour and the appearance of a circus car. For perspective, that’s roughly the same price as my new V8 pickup truck that could probably – and accidentally, I note – drive over a few of these mini cars without even noticing.
McAuliffe and his fellow GreenTech executives went to job-desperate Mississippi after Virginia officials scoffed at the plan. In 2009, a Virginia economic development official, Jeffrey Anderson, reviewed the project for then-Gov. Tim Kaine’s administration. His conclusions were devastating.
“Since GTA will need the funds to develop the plant, it will need the funds largely upfront,” he wrote. “The EB-5 program requires that the jobs be created within about 2.5 years. … Even with a significant multiplier, it is unlikely that GTA will put enough folks to work quickly enough to satisfy the requirements of the EB-5 program.” He also questioned its cronyism: “We believe that having the principals of the regional center be the same as the principals of the company benefiting from the investment creates a conflict of interest.”
Not that much is happening in Mississippi, as was confirmed by my recent trip there. GTA was late on its property tax bill in Mississippi because it hadn’t started construction of its permanent plant. A Memphis Business Journal reporter visited the leased facility and noted that there were only six cars on an assembly line.
Sadly, GreenTech even is echoing Chinese-style tactics to shut down dissent. After Watchdog.org, produced investigative reports about the project – and quoted analysts who made the same points as those made in the media and by Virginia officials – GreenTech slapped Watchdog’s parent company (the Franklin Center for Government and Public Integrity, where I am vice president) with a massive lawsuit, for $85 million.
The goal is to stop us from writing our stories. It’s pure intimidation, but it hasn’t worked. Instead of shutting down talk of the GreenTech project, it has made it the focus of the campaign.
In China, the children and grandchildren of Communist China’s revolutionary leaders, called “princelings,” used their family and political connections to become the country’s new robber barons and use political force to shut down critics. In America, political princelings such as McAuliffe are trying to copy that strategy.
Fortunately, Virginia voters ultimately will decide whether they believe that good jobs come from these political deals or whether they are created in the market economy. Let’s hope a backlash against crony capitalism spreads elsewhere.
(Steven Greenhut is vice president of journalism at the Franklin Center for Government and Public Integrity. Write to him at firstname.lastname@example.org.)