TUNICA, Miss. — Drive south from Memphis, Tenn. toward the cradle of American blues, and you come upon a landscape of dusty cotton fields and small towns dotted with yard sales and loan stores.
Just off the legendary Highway 61, where crop-dusters perform acrobatics above billboards for Mississippi Delta casinos, is the place where Virginia gubernatorial candidate Terry McAuliffe pledged to build a $60 million factory for his electric car company. On a recent summer day, a bird was skittering over patches of weedy gravel at the vacant site of what is supposed to be GreenTech Automotive's future plant.
A few miles farther south, in Horn Lake, GreenTech runs a temporary assembly plant in an old elevator factory. There, fewer than 100 workers are producing no more than one car every two or three days, according to current and former company employees.
What is happening in these spots in rural Mississippi has become an issue in the Virginia governor's race.
McAuliffe, a Democrat who has never held elective office, tells voters that they should choose him because of his entrepreneurship and experience creating jobs. His Republican opponent, state Attorney General Ken Cuccinelli II, points to GreenTech and counters that McAuliffe has broken his promises on job creation.
After losing the 2009 Democratic primary for governor, McAuliffe set out to establish a "green" car company in Virginia, using political connections and his well-honed salesmanship skills to get the venture off the ground. In 2010, the former Democratic National Committee chairman spent $20 million to buy EuAuto Technology, a Hong Kong-based company that built the MyCar, and he was already scouting for possible locations — ideally with government incentives — to build a plant in the United States.
While Virginia officials were still scrutinizing GreenTech's business model, the company received millions of dollars in incentives from Mississippi and began operations there. Questions about the company have dogged McAuliffe since his current gubernatorial campaign began.
McAuliffe and company officials defend GreenTech's progress, saying all start-up companies struggle at first.
"I started my first business at 14," McAuliffe said during a brief interview at a recent campaign event. "You have ups and downs in businesses. But I have been in the arena, trying innovative new concepts to create 21st-century jobs, and, generally, I think most people will tell you who start up small businesses, they generally take longer than you'd hope for. But that's part of business."
McAuliffe's co-founder, Xiaolin "Charles" Wang, said in an interview that GreenTech should be judged over a longer period. "This is a small, tiny start-up," Wang said. "It is hard to start a business. It is even harder to start a car business, especially in an economic crisis."
But Cuccinelli seldom misses a chance to razz McAuliffe about GreenTech's troubles. month, right, on the one-year anniversary of the company's celebratory product launch in Mississippi, Cuccinelli held a campaign event on a vacant industrial site in Virginia's Southside, where GreenTech had hoped to build.
Since resigning as company chairman in December, McAuliffe has distanced himself from GreenTech. He denied a request for an interview for this story and asked, through a campaign spokesman, that questions about GreenTech be submitted in writing. In addition, Green Tech denied a request for a tour of the plant.
But a review of hundreds of public records and interviews with former employees and public officials in Virginia and Mississippi indicate that McAuliffe's promises to create thousands of American jobs and millions of American-made cars so far have fallen short.
"Welcome to GreenTech," Barbara Tuchel, a former candidate for Tunica County's Board of Supervisors, said, looking over the vacant site. "Isn't this ridiculous?"
McAuliffe's original pitch to Virginia officials involved establishing a hybrid-car company with its corporate headquarters in Northern Virginia at Tysons Corner and a factory in Southside or another distressed area of the commonwealth. He pledged to build millions of American-made cars and create hundreds, if not thousands, of jobs, according to e-mails obtained from the Virginia Economic Development Partnership, which analyzed the project in 2009 before the company shifted its focus to Mississippi.
Private financing would rely heavily on a U.S. government program, known as EB-5, which allows foreign entrepreneurs to obtain conditional resident status by making substantial investments in the U.S. economy, according to company and government e-mails. The program, which is managed by U.S. Citizenship and Immigration Services, allows foreigners who invest $1 million — or $500,000 in rural or other targeted areas — to receive a conditional visa and apply eventually for a green card or permanent-resident status.
GreenTech's foreign funds are pooled and managed by Gulf Coast Funds Management, which received federal approval to manage EB-5 investments in Mississippi and Louisiana, including those of GreenTech. Gulf Coast Funds Management has headquarters in the same Tysons Corner, Va. complex that houses GreenTech's corporate offices. The financial firm is owned by Wang, and its chief executive is Anthony Rodham, brother of former secretary of state Hillary Rodham Clinton.
The Department of Homeland Security's inspector general and Congress are trying to determine whether the director of the USCIS improperly aided GreenTech in obtaining a visa for a foreign investor after lobbying by McAuliffe and Rodham. The Securities and Exchange Commission is also investigating GreenTech and Gulf Coast Funds Management and their conduct in soliciting foreign investors, according to law enforcement documents and company officials.
The head of USCIS has rejected suggestions that he acted improperly or showed favoritism toward McAuliffe or anyone else.
Wang, a Great Falls, Va. resident who owns Gulf Coast Funds Management and a substantial stake in GreenTech, defended the companies' business practices. Wang also said that although McAuliffe's enthusiasm and vision have benefited GreenTech, the former DNC chairman's political stature has also subjected the company to intense and sometimes unfair scrutiny.
"I'm a serious businessman. I put my own money into this thing," Wang said.
McAuliffe said in a statement this month, "I never asked for any preferential treatment, nor did I ever expect to receive any."
GreenTech went to Mississippi to make two products, both marketed as neighborhood vehicles that are intended for use only on streets with speed limits of 35 mph or less. MyCar is a battery-powered two-seat micro-car that the company says can go 115 miles without recharging. It sells for about $10,000. The second is a four-door sedan that starts at $20,000.The company sells directly to individual consumers, but fleet owners make up its primary market.
To get started, the Mississippi Development Authority gave Tunica County a $2 million loan to buy the land and turn it over to GreenTech. The authority also agreed to provide other incentives, including a $3 million loan to help build a plant, according to authority documents obtained through a public records request.
The county sweetened the deal. If GreenTech's investment exceeds $100 million, the company could pay as little as one-third the usual property tax rate.
In return, GreenTech agreed to build a $60 million plant and create at least 350 jobs either by Dec. 31, 2014, or within three years of beginning production, whichever comes first — a target the company says it will meet. The new jobs must provide average pay of at least $35,000 a year. If the company fails to meet its goals, it would have to repay the loan with interest within 60 days. Only a handful of people attended the meeting at which the Tunica Board of Supervisors approved the agreement.
But Mississippi is one of the nation's poorest states, and Tunica County is one of its most forlorn corners. Local officials acknowledge the hunger for industrial development in a county whose per-capita income is $14,963. More than 27 percent of the population lives below the poverty line, and unemployment tops 15 percent.
The Rev. McKinley Daley, who serves on Tunica County's Board of Supervisors, said company officials have blamed GreenTech's lack of progress on delays in the EB-5 program that have held up the company's financing. But he, too, has been frustrated by the apparent lack of progress.
"We want more answers and more details about what's going on," Daley said.
Clifton Johnson, the Tunica County administrator, said he remains confident that the plant will be built, and he said that even if GreenTech went bust, the county would be able to sell the property and recover its costs. "One way or the other, the county's going to be made whole," Johnson said.
Wang said that substantial site preparation had been done at the Tunica property but that because of unstable soil in the Mississippi Delta region, construction on the building was delayed until last month. "By the end of this year, the whole state-of-the-art facility will be done," he said.
In July 2012, the company threw a grand bash attended by former president Bill Clinton and former Mississippi governor Hailey Barbour, a Republican, to celebrate the production launch of GreenTech's golf-cart-size vehicle, the MyCar.
"[N]ow we start full factory production, and at full capacity, we can make about a car an hour," McAuliffe told a local TV news station. McAuliffe told The New York Times at the time that his company would create 900 jobs by the end of 2012 and 10,000 cars in 2013.
But the reality has been different. Instead of hundreds of workers, GreenTech employs about 90 in Mississippi and 10 in Virginia, company spokeswoman Marianne McInerney said. On two successive days in June, a visitor to the Horn Lake plant's front parking lot counted about 40 cars.
Melvin Griffen, 53, a former GM employee who worked at GreenTech for 2 1/2 years until February, said that what he saw inside Horn Lake facility was like no other automobile plant he had seen, and the dysfunction was frustrating to him.
Building vehicles involved adding pieces one day and removing them the next, and modular sections called superforms were fastened together with glue and rivets in a way that failed to keep out dust and water, Griffen said. The plant lacked an automated assembly line that moved vehicles from stage to stage; workers pushed or pulled the machines along a track, he said.
And after pushing several stalled cars back to the plant because of unsuccessful test drives, Griffen said he felt that the company's claims about its battery's performance were exaggerated.
"Basically, they hired a lot of people who had no experience in the automotive field, including the managers," said Griffen, who spent 16 years on GM assembly lines. "To me, the plant was designed to fail."
When Griffen heard McAuliffe on a TV news report saying that the plant would produce a car an hour, Griffen laughed. He said the company produced perhaps one car every three days, although the process involved fastening together pre-assembled modules.
"When I say one every three days, that's just putting them together," Griffen said.
McInerney denied several requests to visit the Horn Lake plant, and she would not release exact production figures. She said the firm expects to produce about 7,000 cars in 2013 and to "distribute" more than 30,000 vehicles over three years.
Company officials also denied that the cars were assembled poorly or that their batteries failed to live up to their performance claims.
"As a senior manager of this company, any report of that nature would have come immediately to my attention, and I can tell you that I have no reports, nor does my senior management, of such testing results," McInerney said.
Wang said the company has enhanced its battery range from 70 miles to 115 miles while completely reengineering the MyCar model purchased from Hong Kong.
In separate interviews, Griffen and another former employee, Charles Overstreet, said that management sometimes asked workers to pretend that they were assembling cars when potential investors visited, usually from China, and that employees would remove parts from previously assembled cars and reattach them. A third former employee, who spoke on the condition of anonymity, said he observed the same.
"We would just be standing there acting like we were doing something. But it was pre-planned what we were going to do. It was like a show," Overstreet said.
Griffen said company officials and investors seemed more interested in the EB-5 program than in whether the cars would be successful.
"It just seemed like they were more interested in getting green cards than in making an investment. They emphasized that a lot," Griffen said.
Griffen and Overstreet were dismissed early this year from their nonunion jobs, along with several other employees, Both said they received no severance pay and were not given an adequate explanation for their being dissmissed.
McInerney said that the company had not laid off any employees and that those who were dismissed were let go for performance reasons. McInerney and Wang also said no EB-5 investors had toured the plant since the launch last year and that the employees mistook foreign suppliers and business partners for investors. Company officials and McAuliffe's campaign staff also denied employees' claims that they were asked to simulate work.
"Generally, what it sounds like you're referring to is the training process in auto-manufacturing — employees routinely assemble, take apart, and re-assemble components of vehicles," McAuliffe campaign spokesman Josh Schwerin wrote.
At the start, as GreenTech's founder and chairman, McAuliffe was also its biggest salesman. His stature as a former DNC chairman and chief fundraiser for Bill and Hillary Clinton opened doors at the highest levels.
In late 2009, McAuliffe met with then-Gov. Timothy Kaine, a Democrat, and his Republican successor, Robert McDonnell, according to Virginia Economic Development Partnership e-mails obtained through a Freedom of Information Act request.
In meetings with VEDP staff members, McAuliffe told state officials that he had spoken with then-U.S. Energy Secretary Steven Chu about the project, and some VEDP officials wondered whether Bill Clinton was involved, according to agency e-mails. Chu, who is now a professor at Stanford University, did not respond to several requests for comment.
"We have great doubts that it is a legitimate project, but because of the players involved are being responsive," wrote Paul Grossman, Jr., director of international trade and investment at the VEDP.
McAuliffe's political ambitions were also driving the venture, the e-mails indicate. At a November 2009 meeting, McAuliffe alerted VEDP staff that Mississippi was in the hunt for GreenTech, although he was quoted as saying he preferred Virginia "for political reasons," a VEDP staff member wrote.
While performing due diligence on the project, VEDP staff members expressed concern that GreenTech's business model relied on inadequate, exaggerated or inaccurate information. "Bottom line, we have no reason at this point to believe there's validity to the job creation numbers," one official wrote.
GreenTech also asserted that car sales would reach 100 percent of production capacity - a prediction that state officials said was unrealistic for a start-up, especially one without brand-recognition.
VEDP staff members also expressed doubts about the lack of automotive industry experience among GreenTech's top management and unproven assertions about battery performance.
"Technology that is touted as a competitive advantage is either already available in the marketplace or lacking validation," wrote Mike Lehmkuhler, VEDP vice president for business attraction..
VEDP officials were also uneasy about GreenTech's heavy reliance on EB-5 financing. A top GreenTech executive told the VEDP that each year, 20,000 Chinese entrepreneurs immigrate using the EB-5 program.
"If we obtain a fraction of that market alone, the funding will be substantial," Yi "Gary" Tang, a former mortgage-backed securities trader who is now executive vice president of finance at GreenTech, told VEDP officials in an e-mail.
Yet the maximum number of foreign entrepreneurs authorized by Congress is 10,000 a year, and the General Accounting Office found that many fewer participated. Even after a surge of interest in recent years, a USCIS ombudsman said about 7,400 visas were issued in 2012.
"The biggest concern we have at the moment is the possibility that their [GreenTech's] access to the investors' money is more important than the viability of the project," wrote Lehmkuhler, the VEDP vice president.
McInerney denied that GreenTech exaggerated the number of possible investors the venture might attract.
"Our financial officer never told anyone that he believe[d] he can get a fraction of 20,000 EB-5 investors every year. At the time, we planned to recruit 200 [to] 400 investors per year," McInerney said in an e-mail.
Despite their doubts, VEDP officials arranged a tour of possible Virginia factory sites in Martinsville, Danville and Waverly, and they booked deluxe hotel rooms for GreenTech officials for several nights at the elegant Jefferson Hotel in the state capital, Richmond.
But even as Virginia officials finalized arrangements for the tour in October 2009, GreenTech announced plans to build its plant and begin production in Mississippi, agency memos show.
The development took Virginia officials by surprise. Tang, the GreenTech vice president of finance, assured the VEDP that same month that the company still had plans to open a "bigger" plant in Virginia. But as Virginia economic officials pressed for answers, the talks fell apart, the e-mails indicate.