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He has channeled his connections with the Democratic Party to make millions, sometimes, critics say, at the expense of jobs.
Democratic gubernatorial candidate Terry McAuliffe does a microphone check before the debate at the Omni Homestead Resort in Hot Springs in July.
Sunday, September 1, 2013
Terry McAuliffe’s role in a national controversy over an immigrant investor program to fund GreenTech, the Mississippi electric car company he founded, is only the latest chapter in the Democrat’s long history of mixing politics with his personal business interests.
It is a habit that may have benefited his pocket but could threaten his chances of moving into Virginia’s Executive Mansion next year.
Republicans highlighted McAuliffe’s efforts to obtain EB-5 visas by using a financing company run by a brother of former Secretary of State Hillary Clinton. They circulated a news report that McAuliffe had “repeatedly appealed” to officials in the Department of Homeland Security, including Secretary Janet Napolitano, for help in getting visas for his company’s investors.
“I think it’s time for Terry McAuliffe to come forward and answer questions about this serious matter,” Attorney General Ken Cuccinelli, McAuliffe’s Republican opponent in the governor’s race, said in a statement.
McAuliffe’s campaign declined an interview with the candidate for this story, but responded to questions in writing.
“Terry, like many business and political officials from both parties, was frustrated with the bureaucratic pace of the investment program,” McAuliffe spokesman Josh Schwerin said in an email.
“There has been widespread frustration inside and outside [U.S. Citizenship and Immigration Services] about the bureaucracy there, and Terry was among those who expressed frustration with that bureaucracy when he and some colleagues, including counsel, met with Mr. [Alejandro] Mayorkas, [director of USCIS],” Schwerin said.
President Barack Obama has nominated Mayorkas for the No. 2 spot at the Department of Homeland Security. The Associated Press reported in late July that Mayorkas is under investigation by the Homeland Security Inspector General’s Office for his role in helping Anthony Rodham’s company get approval for an investor visa after it had been turned down.
Schwerin said in August that “the investigation does not involve Terry, and we hope it is completed in a timely manner.”
Mayorkas told a Senate committee in late July that he met with McAuliffe a couple of years ago, but did nothing improper.
“I heard Mr. McAuliffe’s complaints, and I moved on with my work,” Mayorkas said.
The federal EB-5 immigration program allows foreigners who invest $500,000 into new enterprises in rural or struggling regions, or $1 million in new enterprises in any region, to receive U.S. residency if at least 10 full-time jobs are created within two years as a result of the investment.
McAuliffe’s entanglement in the EB-5 visa controversy is only the latest in the career of a man who has made millions as an investor, who raised millions more for Democrats, and who has never considered it wrong to mix business and politics.
“I’ve met all of my business contacts through politics. It’s all interrelated,” he said in a 1999 interview with The New York Times.
Larry Sabato, head of the Center for Politics at the University of Virginia, said that McAuliffe has had enough business controversies “for any 10 regular people.”
“Assuming Cuccinelli gets enough money and isn’t drowned by social issue controversies, [lieutenant governor running mate] E.W. Jackson and Bob McDonnell, his best chance may be in wrapping McAuliffe in seediness,” Sabato said.
McAuliffe, who grew up in Syracuse, was 14 years old and on his way home from the golf course where he worked as a caddy when he decided he would start his own business — McAuliffe Driveway Maintenance — a company that would seal the driveways in the neighborhood before the long winters in upstate New York.
From an early age, he was a prodigious Democratic fundraiser.
But McAuliffe didn’t focus only on raising funds for his party; he aimed at becoming rich.
“I knew that without financial independence, I would be a slave to fate,” he wrote in his autobiography. “I figured I only needed to lock away a few million in my early twenties and then I could do my political work as a volunteer. That would buy me freedom of movement and peace of mind.”
McAuliffe got his first big-money job in 1987, when he was asked to join 17 others on the board of the newly chartered Federal City National Bank in Washington.
A year later, when the bank was in financial trouble, McAuliffe was elected chairman. He later claimed others said he was the only one who could have saved the bank.
McAuliffe was the finance director of then-Rep. Richard “Dick” Gephardt’s 1988 presidential campaign. According to The New York Times, “the committee had millions of dollars in deposits and loans” with the bank.
Charlie Cook, editor and publisher of the Cook Political Report, a nonpartisan Washington-based newsletter, said he first met McAuliffe in the mid-1980s. Cook got the impression that McAuliffe had an unlimited supply of energy and could keep a half-dozen balls in the air simultaneously, even effortlessly.
“To the extent that the business and politics in those days were intertwined, it was that people he got to know on one side were eager to do things with him in the other,” Cook said.
In the 1990s, McAuliffe became a rising star in Washington, owing much of his success to newly elected President Bill Clinton, with whom he had a close relationship. McAuliffe and his staff reportedly raised more than $270 million for the Clintons’ campaigns and causes. In return, Clinton granted him access to the White House and Air Force One.
In 1999, McAuliffe initially put up $1.35 million of his own money to help finance the Clintons’ purchase of their New York home. He later was chairman of Hillary Clinton’s 2008 presidential campaign.
McAuliffe’s close ties to Bill Clinton allowed him to mingle with Democratic Party leaders, labor union bosses, billionaires and lobbyists, adding thousands of numbers to his ever-growing Rolodex.
But he also filled his own pockets in those years. McAuliffe made more than $16 million developing a shopping center in Florida after a top labor executive he knew through the Democratic Party invested about $40 million from the union’s pension fund.
Schwerin said that the pension fund made a decision to invest — and ended up making a profit of several million dollars.
Also in the 1990s, McAuliffe partnered with Carl Lindner, who headed Chiquita Brands International and the insurance company American Financial Group, in the purchase of American Heritage Homes, a Florida builder.
McAuliffe has said he helped turn a struggling company into a success that built 800 homes a year.
An even bigger opportunity presented itself in the late 1990s, when Gary Winnick, a California investor, offered McAuliffe the opportunity to invest in Global Crossing Holdings, a new venture seeking to operate undersea fiber-optic cables connecting the United States and Europe.
McAuliffe said he put up $100,000. In his book, he wrote that the company went public 17 months later in August 1999, “and the value of my stock skyrocketed. No one ever knew how much of the stock I sold.”
When he cashed out, he walked away with millions. The company later filed for bankruptcy.
McAuliffe’s campaign notes that the company’s stock rose in the months after he sold 122,000 of his shares in November 1999. They also note that in July 2002, Marc Racicot, then head of the Republican National Committee, told CNN that there was “no proof whatsoever to suggest anything inappropriate” in McAuliffe’s dealings with Global Crossing.
Some Republicans did criticize McAuliffe for his role in Global Crossing, but McAuliffe said they were just bothered that a Democrat was rewarded for a smart investment.
“They tried to make it seem like a crime for a Democrat to earn a living or make money. If it had been a Republican, he would have been hailed as a hero,” he said in his book.
The Global Crossing controversy resurfaced in 2009, when McAuliffe first ran for governor of Virginia in a three-way Democratic primary.
In an April 2009 debate in Danville, one of his rivals, Brian Moran, confronted McAuliffe.
“You made $18 million from Global Crossing, one of the largest corporate failures in American history, and thousands — thousands! — of people lost their jobs,” Moran said. “Why didn’t you give the money back?”
McAuliffe says he made $8 million from Global Crossing, not $18 million.
“Well, if you’d have your facts correct,” McAuliffe told Moran, “I was a venture capitalist investor. I was never in their headquarters. I never worked for them.”
In 1999, McAuliffe joined the board of directors of Telergy, a Syracuse company that he reportedly had been working with for several years.
At McAuliffe’s urging, Global Crossing invested $40 million in Telergy, according to reports. Telergy paid McAuliffe $1.2 million for his help in raising money for the company.
Two years later, in August 2001, Telergy was forced to lay off 150 employees without giving them any severance pay. McAuliffe had resigned from the board two weeks earlier; he later claimed that he was not aware of the company’s financial troubles. By the end of the year, Telergy was bankrupt — leaving hundreds more without a job.
“Terry helped Telergy raise capital,” Schwerin said. “He called several potential sources of capital as part of the effort. It is also important to note that Global Crossing’s decision to invest in Telergy fit an ongoing effort by Global Crossing to expand access to fiber-optic networks around the country. Outside financial analysts praised the investment at the time, saying that there was a ‘real market’ for it.”
After his failed gubernatorial bid in 2009, McAuliffe set up GreenTech Automotive as a holding company that purchased a Hong Kong-based electric carmaker in May 2010 for $20 million.
When GreenTech unveiled its plans for a Mississippi manufacturing plant, media reports said the company estimated that the initial phase of the project would cost $1 billion, generate 1,500 local jobs and produce 150,000 vehicles a year.
McAuliffe has come under scrutiny for his disputed claim that Virginia was not interested in the car plant that he took to Mississippi.
In December, McAuliffe quietly stepped down as GreenTech’s chairman. But he remains a major shareholder, holding a minimum of $250,000 in the company’s stock, according to his statement of economic interests.
Whether his experience as a venture capitalist and his money in politics will help or hurt him in November isn’t clear.
“This is a mixed bag for McAuliffe,” Sabato said. “A business occupation can be attractive to voters since it suggests management experience, and the governorship is an executive role.”
But McAuliffe is not exactly Bill Gates or Steve Jobs, Sabato said. “His business ventures seem always to be interwoven with political influence — who you know rather than what you know. Nor have his businesses been roaring successes, beyond benefiting McAuliffe’s personal bank account.”
The GreenTech story took another turn last month when The Washington Post reported that the federal Securities and Exchange Commission is investigating the company over “its conduct in soliciting foreign investors,” particularly on alleged claims that GreenTech “guarantees returns” to those investors.
Meanwhile, the controversy over Gov. Bob McDonnell and Star Scientific CEO Jonnie Williams Sr. has been a godsend to McAuliffe, especially because it involves Cuccinelli, said Sabato.
“To some degree, the GOP scandal neutralizes the political effects of McAuliffe’s various shady dealings. Both candidates are wrestling with their own pigs, and they both appear dirty to the voters,” he said.
Time will tell whether McAuliffe survives his own scrutiny.
What he learned about his first big job — the repaving of all the Syracuse Savings Bank parking lots — was almost prophetic.
“When you start your own business, you have to clean up your own messes. No one else can do that for you.”