McAuliffe hints at presidential run but GreenTech debacle follows in tow

Register, or to view the article

January 28, 2019 – With former Virginia governor Terry McAuliffe all but declaring his candidacy in the presidential 2020 race on January 24, attention will inevitably turn to the circumstances surrounding the bankruptcy of the government-subsidized electric car company that he helped found.
The latest bankruptcy filings from January 25 show GreenTech Automotive being granted an extension to the period it has an exclusive right to file a Chapter 11 Plan to March 23, 2019. This is the third such request and is based on what the company describes as the intricacies of formulating a plan for the debtors. “While the Debtors are U.S. entities, the Debtors’ most valuable asset is a joint venture interest in Jiangsu Saleen Automotive Technologies, Co., Ltd., a Chinese limited company (‘JSAT’). In order to monetize the JSAT interest, the Debtors must formulate a plan which not only satisfies creditors but also complies with Chinese securities laws,” the motion states.
GreenTech filed for bankruptcy in the US Bankruptcy Court for the Eastern District of Virginia in February 2018 (Case Number: 18-10651). In the declaration in support of the filing, the company claims that its troubles began in 2013 when a mix of malicious publicity and associated lawsuits caused “significant adverse developments that have hindered the successful operations of its automobile business.”
First, the conservative-oriented online news organization Franklin Center for Government and Public Integrity published a series of 76 negative articles containing certain false and defamatory statements targeting GreenTech. The implication was that this attack was connected to the Virginia gubernatorial campaign by McAuliffe, who resigned as GreenTech’s chairman in December 2012. Although a judge in 2014 dismissed McAuliffe’s $85mn defamation suit against the Franklin Center, the company claims that all the adverse publicity had an extremely negative impact on the governmental, investor and public perception of GreenTech, while also causing the Securities Exchange Commission to commence an investigation into GreenTech, which ultimately went nowhere.
GreenTech was also caught up in controversy over the Employment Based Immigration Preference program, known as EB-5, which offers immigrant investors the opportunity to qualify for permanent US residency in return for investing in certain job creating initiatives in economically challenged places. Between 2009 and 2013, GreenTech received investments totalling $141.5mn from a total of approximately 283 individuals in four distinct investment transactions; each of the Chinese investors in these A-1 through A-4 transactions were participants in the EB-5 program. But the negative publicity prompted the Office of the Inspector General of the Department of Homeland Security to conduct an investigation into GreenTech and the involvement of McAuliffe in communications with the DHS’ Citizenship and Immigration Services (USCIS), which the company says impaired “the orientation of USCIS toward the investor petitions for permanent residency under the EB-5 program.”
Then in November 2017 further legal troubles came in the form of a $71mn lawsuit from 32 of those Chinese investors who claimed that McAuliffe and former Democratic presidential candidate Hillary Clinton’s brother Anthony Rodham had swindled them out of about $560,000 apiece as a result of misrepresentations. In September 2018 a federal judge dismissed the case, finding that the allegations were insufficient to allow a jury to even consider the claim. 
 “If the person suing you doesn’t allege facts sufficient to meet all elements of the claim for which you are being sued, it’s the judge’s job to dismiss the case at the outset. That’s what happened here,” says Lee E. Berlik, founder and managing member of BerlikLaw, about the case.  
Together with another (failed) suit in early 2015 by Plastech Holdings Company, these “public events” exhausted GreenTech’s financial resources and forced it to substantially limit operations at a plant it built in Mississippi, even though it says it was successful in buying a share of a new automotive enterprise in China called Jiangsu Saleen Automotive Technologies (JSAT), and had even began limited production of its MyCar vehicle. The company says a successful chapter 11 reorganization would involve a sale of assets, including the ‘MyCar’ assets, the JSAT interest, and the Mississippi land and manufacturing facility. 
The report in The Washington Examiner notes that McAuliffe has yet to officially declare his candidacy and quotes him as saying he “will make a decision by March 31.” Expect to hear a whole lot more about GreenTech if he decides to run.

Read more Bankruptcy News