The Complicated Legal Backstory of Terry McAuliffe's Former Car Company

GreenTech has sought to rely on funding from Chinese investors, who could obtain conditional U.S. visas in exchange for $500,000 investments under a federal program known as EB-5, designed to attract foreign investments in the U.S. economy. The SEC is investigating GreenTech, Gulf Coast, and (in part) whether investors were "guarantee[d]" returns, according to Dept. of Homeland Security (DHS) documents obtained and posted online by Sen. Charles Grassley, R-Iowa. GreenTech could not be reached for comment about the SEC investigation, but Wang told The New York Times this month that GreenTech is cooperating with the investigation and that it would reveal nothing illegal.

Grassley has asked DHS about potential national security risks of the EB-5 visa program, after a high-ranking DHS official and nominee, Alejandro Mayorkas, fell under investigation from the department's inspector-general office over his possible role in the approval of Gulf Coast's application for visas with U.S. Customs and Immigration Services. Mayorkas has denied "unequivocally" that he exerted undue influence on Gulf Coast's application. The DHS Office of the Inspector General has not commented on that investigation and did not respond to a request for comment from ABC News, and Grassley's office told ABC News this month that it has not received an update on its status.

Grassley submitted a series of questions to DHS, Mayorkas, Gulf Coast, and GreenTech seeking more information on the businesses and the application as an approved visa conduit. So far, Grassley has not heard back, according to a spokeswoman.

The nonpartisan government-watchdog group Cause of Action, meanwhile, is asking whether McAuliffe's political influence helped GreenTech avoid another kind of government oversight.

The Committee on Foreign Investment in the United States (CFIUS) reviews foreign business transactions in the U.S. when red flags suggest potential national-security concerns. In early 2013, CFIUS was reviewing the separate Hybrid Kinetic Motors that continued to operate as a competing company after GreenTech's executives left the project, according to documents obtained by Grassley, and Cause of Action suggests CFIUS should have taken a look at GreenTech as well. CFIUS does not comment on specific companies and declined to say whether or not it's reviewed GreenTech, and GreenTech did not respond to ABC News's attempts to ask.

"Was GreenTech somehow able to circumvent the typical loopholes a foreign-owned company has to run through to do business?" the group's executive director, former Republican House Oversight and Government Reform Committee counsel Dan Epstein, asked in a statement to ABC News. He also alluded to the incentives GreenTech was offered to help build its plant in Mississippi. Cause of Action has received at least $644,000 from the conservative Franklin Center (according to a 2011 Franklin Center tax return); the Franklin Center is the parent organization of Watchdog.org, being sued by GreenTech, which has accused the organization of libel.

In an online statement, watchdog.org says it published a clarification in connection with the articles at issue, but otherwise stands by its reporting.

In a statement, Cause of Action said its work speaks for itself: "Cause of Action is an independent organization and does not disclose its donors. All CoA funds are used for general operating expenses, not specific activities."

Cause of Action said it is mainly concerned that all foreign businesses are scrutinized equally by the federal government. GreenTech, the group said, should be reviewed because a majority of its shares are foreign owned (by a British Virgin Islands holding company), and its business activity of building cars in Mississippi should fall under CFIUS's purview.

GreenTech, for its part, says it has received no federal money to date.

In an overwhelmingly negative race for governor, GreenTech's troubles have figured prominently in Republicans' attacks against McAuliffe. A new ad from the Republican Governors Association this week slams GreenTech and highlights Virginia officials' skepticism with the project.

GreenTech does not seem to be enjoying all the scrutiny, brought on by McAuliffe's run for governor, even if McAuliffe's connections brought good press and gained the attention of government officials in GreenTech's earlier stages.

"In a short four years, we have not only one, but two products designed and being build [sic]," GreenTech told ABC News last month in an e-mail. "All this without any federal money. An American job is an American job. It is not a democratic job or republican job. This company should not be the victim of a political battle."

McAuliffe responded to critics in a recent Washington Post op-ed on Aug. 16, writing that he has not been contacted by the SEC and that like any business launched in the last few years, GreenTech faced economic "headwinds." Creating nearly 100 jobs in Mississippi isn't something to criticize, McAuliffe contended; nor, he wrote, is taking a risk by investing in new technology.

"[R]isk-taking and investing in our No. 1 asset — our workforce — are what drive our economy in a global marketplace. Virginia needs a governor who understands that," McAuliffe wrote.

EDITOR'S NOTE: This article has been updated to include additional information about Cause of Action and Watchdog. It was also updated to reflect the content of McAuliffe's letter to Napolitano.

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