Value of McAuliffe GreenTech Stock Could Play Role in SEC investigation
Last week, the Washington Post reported that the SEC was investigating Terry McAuliffe's GreenTech automotive company over the manner in which it solicited foreign investors. The paper reported that the SEC investigation centers "on alleged claims that the company 'guarantees returns' to the investors, according to government documents." A key part of this investigation will be to determine how McAuliffe valued his stock in the company.
In 2009, an investment prospectus that sought to raise $50 million exclusively for the purpose of investing in GreenTech Automotive was circulated to foreign nationals, taking advantage of the EB-5 visa program, which grants green cards to investors of at least $500,000 in US companies.
According to the 2009 prospectus, Gulf Coast Funds Management, a sister company of GreenTech, invested "all of the proceeds of this offering in a newly formed Mississippi automotive manufacturer, GreenTech Automotive Inc." EB-5 investors were told that Gulf Coast Funds Management "will receive, on your behalf, a preferred stock or debt interest in GreenTech Automotive. Five years from the date of your investment in this offering, the preferred stock or debt we purchase on your behalf will be converted into GreenTech Automotive common stock with an estimated fair market value of $555,000."
GreenTech stock is not publicly traded. So, what is the "fair market value" of its stock? Determining that is central to understanding how Gulf Coast and GreenTech were going to provide a return on an investor's money.
In 2012, Virginia Democratic gubernatorial candidate Terry McAuliffe filed a Statement of Economic Interests with the Virginia State Board of Elections that showed the value of his stock in GreenTech Automotive exceeded $250,000.
Records at the Virginia State Corporation Commision's office indicate that McAuliffe founded WM GreenTech Automotive in October 2009. Initially, McAuliffe was the company's sole shareholder. A total of 25 million shares of common stock were issued to him at an unknown price. It is unclear what cash investment McAuliffe made in the company at the time.
In March, 2010, in a complex tax-free stock transaction, McAuliffe authorized and issued an additional 75 million shares of common stock in WM GreenTech Automotive to Capital Wealth Management Holdings, a British Virgin Islands company controlled by Charles Wang. In return for those 75 million shares in WM GreenTech Automotive, Capital Wealth Management Holdings contributed its 100% ownership interest in GreenTech Automotive, a Mississippi corporation has been the recipient of a $5 million loan from the state of Mississippi.
It is unclear how much cash Gulf Coast Automotive Investment Fund A-1 had invested in GreenTech Automotive when Terry McAuliffe became chairman and 25% owner of parent corporation WM GreenTech Automotive in March 2010. Breitbart News reported on July 28, "[a]ccording to United States Citizenship and Immigration Services (USCIS) documents recently released in a FOIA request, the first foreign national who invested at least $500,000 in The Gulf Coast Automotive Fund A-1 through the EB-5 program submitted an I-526 petition for a temporary green card visa in June 2009, and was approved to receive that temporary visa by the USCIS in July 2009."
A total of five I-526 petitions for foreign nationals who invested at least $500,000 in the Gulf Coast Automotive Fund A-1 were granted by the USCIS before McAuliffe became chairman of WM GreenTech Automotive in March 2010, and an additional ten petitions were approved between March 2010 and July 2010.
This would suggest that Gulf Coast Automotive Fund A-1 invested approximately $7.5 million in GreenTech, all from foreign national EB-5 investors. Under terms of the prospectus, Gulf Coast will be required to turn over to these investors GreenTech stock worth $8.25 million after 5 years.
Cash invested in Gulf Coast Automotive Investment Fund A-1 is managed by Gulf Coast Funds Management, an EB-5 Regional Center operating in Mississippi and Louisiana, whose president is Anthony Rodham, brother of former Secretary of State Hillary Clinton. The headquarters of GreenTech Automotive and Gulf Coast Funds Management are located in adjacent office buildings in McLean, Virginia.
Which brings us back to why the Securities and Exchange Commission may ask Terry McAuliffe to provide the basis on which he claimed his stock in GreenTech Automotive is worth more than $250,000.
Since investors in the first fund--Gulf Coast Automotive Fund A-1--were apparently promised they would receive common stock in GreenTech Automotive with an "estimated fair market value of $555,000" within 5 years of their investment, and the first investment of $500,000 was made, apparently in June, 2009, under the terms of the offering, GreenTech will have to begin issuing common stock with "fair market value" at least equal to the amount of the original investment to Chinese national EB-5 investors beginning as early as June 2014.
That seems unlikely, since more than four years later the company appears to have little revenue, is selling few electric vehicles, and apparently has only one discernible asset--a 100 acre industrial site in Tunica County, Mississippi. GreenTech Automotive claims to have invested more than $6 million in the site, and recently declared it to be construction ready. Photographs of the site show an empty field with a construction trailer and sign on it.
It appears to be entirely possible that foreign national EB-5 investors who begin to receive their promised GreenTech Automotive common stock in 2014 might have questions about the valuation of the stock they are issued. They likely will want to know how their valuation compares to the valuation Terry McAuliffe declared in his 2012 Statement of Economic Interests.