EDITORIAL: Driving toward bankruptcy

OPINION:

There aren’t many winners in the current economic climate. Most companies are struggling against the burdens of higher taxes, red tape and uncertainty, and there’s no opportunity to expand and prosper. Some companies, however, have found a shortcut through deep political connections to the Obama administration.

This became apparent last week at a hearing by the House Oversight and Government Reform Committee examining the collapse of Fisker Automotive. The Energy Department gave hundreds of millions of dollars to this maker of electric luxury automobiles designed to appeal to liberals who can pay $100,000 for a car. Fisker was backed by the investment firm Kleiner Perkins (where Al Gore is a partner) and actor Leonardo DiCaprio, who scouts for left-wing causes.

Democrats defend the federal green loan program by pointing out that only a few dozen companies that received cash from the $8.4 billion Energy Department slush fund have failed. “There is no evidence the department did anything wrong with this loan,” says Rep. Elijah E. Cummings, Maryland Democrat. “[There is] no evidence that politics played any part in the award to Fisker.”

Companies with that deep political connection to the Obama administration can exploit the system even without taking such loans. An example is GreenTech Automotive, co-founded in 2009 by Terry McAuliffe, the former chairman of the Democratic National Committee who’s now a candidate for governor in Virginia.

GreenTech doesn’t actually make cars that qualify for federal assistance. It sells a glorified golf cart with a top speed of 35 mph. It announced last week that it would import a cheap, Chinese-made sedan chassis on which it will install an electric drivetrain at a factory in Mississippi, which was built with $8 million in state government incentives.

There’s now a controversy over the foreign sources of funding for the factory. The Franklin Center for Government and Public Integrity said it learned that GreenTech raised money through exploiting the EB-5 immigration-visa program, which trades green cards for greenbacks. Wealthy foreign nationals who invest $500,000 in GreenTech can obtain legal-resident status in the United States on grounds they’re “creating jobs.” GreenTech Automotive is suing the Franklin Center, claiming its accusations caused a “loss of investor confidence,” and as a consequence it lost $85 million.

Internal emails show a lack of confidence in GreenTech to build a factory in Virginia by the state commerce secretary in the administration of former Gov. Tim Kaine, a Democrat. A series of memos raised doubts about the project’s viability. “We have legitimate concerns about this startup company’s ability to successfully establish a major auto-assembly operation in North America,” a state economic development team leader wrote in a 2009 email. “Technology that is touted as a competitive advantage is either already available in the marketplace or lacking validation. The management team has no members with industry experience.” The documents suggest Mr. McAuliffe intended to seek Energy Department loans.

Had federal bureaucrats operated with the diligence of Mr. Kaine’s administration, the dubious Fisker business plan might never have received hundreds of millions of dollars in loans. Congress should stop this subsidizing of loans to Obama friends, and pull the plug on the Energy Department’s green slush fund.

The Washington Times