Car company founded by McAuliffe files $85 million suit over articles

Terry McAuliffe, the former chairman of the Democratic National Committee who is running his second campaign for Virginia governor, has built this campaign around the theme of his business prowess.

In his race against Virginia Attorney General Ken Cuccinelli II, McAuliffe has argued that the state needs his entrepreneurial savvy more than Cuccinelli’s interest in social issues. At the center of that pitch has been his founding of GreenTech Automotive, a green-car company that McAuliffe said would create thousands of U.S. jobs.

But since December — when McAuliffe quietly resigned from the company — he has been putting distance between himself and GreenTech, while scrutiny of the company has increased.

This week, McAuliffe’s campaign began referring questions about GreenTech to the company as reports surfaced that the firm had been slow to pay property taxes on the site of a future manufacturing plant in Tunica County, Miss., and that it also had filed a lawsuit against an online news organization.

GreenTech’s $85 million lawsuit accuses Watchdog.org of libeling the company in two online articles, including one that quoted an investment adviser saying the venture was a “fraud investment” because of its use of a federal program that grants visas to foreign entrepreneurs in exchange for making investments in the U.S. that create jobs.


Terry McAuliffe (Evan Agostini/Associated Press)

The lawsuit, filed Monday in U.S. District Court in Mississippi, claims the allegedly false and defamatory articles have led investors to waver in their commitment to provide $25 million in financing. It claims that an attempt to raise an additional $60 million in capital is also in “significant danger” because of the articles.

GreenTech’s suit alleges that Watchdog.org made false statements about the enterprise’s business model, productivity, and funding that makes use of the federal visa program, known as an EB-5.

In response to questions Thursday, Franklin Center’s president, Jason Stverak, issued a statement asserting that GreenTech’s lawsuit was baseless. “We are confident that GreenTech’s claims are without merit and we will continue to report on this important story,” Stverak said.

Josh Schwerin, a spokesman for McAuliffe’s campaign, referred calls to GreenTech. William C. Brabec, an attorney representing the company, did not return a call seeking comment.

McAuliffe, 56, finished second in a three-way Democratic Party primary in the 2009 governor’s race despite spending heavily on the campaign. After his loss, he set up GreenTech as a holding company that purchased a Hong Kong-based electric-car maker in May 2010 for $20 million.

When GreenTech unveiled its plans for Mississippi, local media reports said the company estimated the initial phase of the project would cost $1 billion, generate 1,500 local jobs and produce 150,000 cars a year.

Marianne McInerney, a GreenTech vice president, said the company employs about 10 employees in McLean and 78 in Mississippi. She said the company is in the first $6 million phase of plant construction in Tunica. She didn’t specify how many vehicles have been produced but said until now the company has been building prototypes and redesigned models compatible with U.S. and European markets and placing these with “strategic customers” in Europe and the Middle East. She projected that the company would produce 7,000 vehicles in 2013.

Earlier this week, McInerney said GreenTech’s delay in paying the taxes occurred because the Tunica County tax assessor’s office wasn’t sure that tax abatements applied. It was determined that they do not because cars are not yet being produced at the Tunica site, a company executive said.

In its lawsuit, GreenTech alleges that in an April 1 article, Watchdog improperly characterized the company’s reliance on the EB-5 program for funding as a “fraud.” The lawsuit also says that assertions that the EB-5 program was its “chief source of funding” and capitalization were false.

The article has been changed at the request of GreenTech attorneys and now has a clarification at its beginning.

“To be clear, our articles were not intended to (and did not) accuse GreenTech of committing fraud,” the clarification says. “Instead, the articles pointed out that the federal EB-5 visa program — which trades U.S. green cards for business investments and which GreenTech has used as a source of capital — has lax oversight, is prone to abuse and fraud, and cannot possibly deliver on its promises to taxpayers and investors.”

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