April 15, 2013

BEFORE HE first ran for governor of Virginia, in 2009, Terry McAuliffe launched a company whose purpose, at least ostensibly, was to manufacture small, low-speed, battery-powered cars. Think of golf carts suitable for puttering around the neighborhood or to the grocery store. Now that venture has made Mr. McAuliffe, the Democratic candidate for governor this year, the target of questions, some specious, some not.

Mr. McAuliffe formed the company, GreenTech Automotive, as the recession hit. Part of his strategy was to seek financing from deep-pocketed foreigners who would pony up $500,000 each through a federal program designed to attract investors by offering them U.S. visas in return for their money.

There is nothing illegal in that 20-year-old program. Although it has been subject to periodic abuse, the so-called EB-5 visa program enjoys bipartisan support as a way to attract capital from overseas. To qualify for visas, EB-5 investors must show that their money will help create at least 10 jobs.

Hoping for state support, GreenTech courted economic development officials in Virginia. They were skeptical, noting that the company didn’t seem to have much experience in the automobile business; some wondered if it was mainly a scheme to sell visas. Facing those doubts, GreenTech took its business to Mississippi, which in 2009 promised $5 million in state support.

GreenTech has since produced a few hundred vehicles at a temporary plant; with an investment of $34 million, it says it is building a permanent factory, set to open next year in Tunica, Miss. The firm says it has contracts to produce 30,000 cars over three years.

Republicans first attacked Mr. McAuliffe for doing business outside Virginia. Horrors! That dovetailed with their portrayal of him as a carpetbagger — even though he’s lived in Virginia for more than 20 years — but otherwise was absurd.

It’s equally ridiculous to compare GreenTech to Solyndra, the federally subsidized solar-cell maker that went bust, triggering a torrent of criticism from Republicans. Solyndra received $535 million in loan guarantees from the Energy Department. With the exception of a $3 million loan and land for the plant in Mississippi, GreenTech is relying on private capital, much of it from Chinese investors (including visa-seekers).

Questions about Mr. McAuliffe’s use of the EB-5 program are more substantive. There is no shame in leveraging the program, as many legitimate businesses (including hotel chains) have done. And it’s xenophobia to suggest, as some have, that the program poses a national security risk.

Although Mr. McAuliffe resigned as GreenTech’s chairman late last year, it would produce a stench if it turns out that GreenTech’s raison d’etre turns out to be little more than a magnet for cheap foreign capital, without realistic prospects of producing cars, jobs or profit. Suspicions have been further raised by the fact that GreenTech, with federal approval, set up its own EB-5 regional investment center in Mississippi to attract foreign capital — for itself and possibly other firms. The management of that center includes several of Mr. McAuliffe’s political allies.

On the basic question of GreenTech’s legitimacy as a manufacturing enterprise, the jury is out. It can take years for car companies to gear up; by industry standards, GreenTech remains in its infancy. If it does produce 10,000 or more cars next year, as its executives say they will, mainly for markets in Europe, then the fuss about GreenTech will turn out to be political hot air.

Mr. McAuliffe has made a fortune in an array of businesses, often by using his political contacts. Those ventures are a fair target for scrutiny, just as was Mitt Romney’s business background. But the skepticism of Virginia officials and the participation of foreign investors under a legitimate federal program do not, by themselves, constitute a scandal. The proof will be in GreenTech’s viability.