GreenTech Automotive (GTA), a company founded by Virginia’s Democratic gubernatorial candidate Terry McAuliffe, is suing the Franklin Centerfor Government and Public Integrity, a nonprofit investigative-journalism organization, and its web site, Watchdog.org, for libel.
In 2009, GreenTech sought the assistance of the state of Virginia in attracting investors under the EB-5 program. This program grants visas to foreigners who invest a substantial amount of money (half a million to a million dollars, depending on circumstances) so as to create or preserve jobs for at least ten Americans. GreenTech claimed that it qualified as a worthwhile job-creating investment. State officials reacted with considerable skepticism; the director of business development at the Virginia Economic Development Partnership sent an e-mail to his colleagues saying that he “still can’t get my head around this being anything other than a visa-for-sale scheme with potential national security implications that we have no way to confirm or discount.” The VEDP’s official assessment, sent to a member of the cabinet of outgoing governor Tim Kaine, a Democrat, did not mention the fears of visa-selling but focused on various business obstacles facing the new electric-car firm.
GreenTech ultimately set up shop in Mississippi, and the Mississippi Development Authority, a state agency, loaned the firm $5 million.
Watchdog.org wrote an eight-part series on GreenTech, its relationship with the Virginia and Mississippi state governments, and McAuliffe.
The lawsuit asserts that this series has materially injured GreenTech’s ability to raise capital: “Specifically, as a direct and express result of the articles published by Defendants . . . investors are wavering in their commitment to provide $25 million in investments already promised to GTA. GTA . . . intended to raise $60 million in capital, [and] is now in significant danger as a direct result of the loss of investor confidence in GTA arising from the publication of Defendants’ articles.”
GreenTech’s suit cites several points in Watchdog.org’s reporting that it contends are libelous, including a description of the company’s headquarters as a “broom closet.” The lawsuit also cites as libelous
• quotes from investment advisor Michael Gibson criticizing GTA’s business model “despite the fact Gibson has never seen nor reviewed GTA’s business model”;
• “statements from Gibson calling GTA’S EB-5 funding project a ‘fraud’”;
• “false assertions that EB-5 funding is GTA’s chief source of funding and its long-term plan for continuing capital”;
• allegations that GTA’s plant in Tunica, Miss., is behind schedule in its building and hiring, when both construction and employment goals are on pace to be met; and
• statements contending and/or insinuating that federal agencies are investigating or taking “a closer look” at the sources of GTA’s funding.
The suit claims that GTA is not and has never been under any federal investigation.
Will Swaim, managing editor of Watchdog.org, called the claims “frivolous” and pledged, “If it proceeds to a court case, you can be sure that one of the first people we’re going to depose is Terry McAuliffe.”
In addition to $85 million in compensatory damages and additional punitive damages, GreenTech hopes that a judge will permanently restrain Watchdog.org from “continued false and defamatory statements regarding GTA.”
Swaim said in a conference call Monday that Watchdog.org had received a demand for a retraction from GreenTech Automotive on the evening of Thursday, April 4. “It was Friday morning, within hours of that retraction demand being issued, that Politico [reported], [and] the world learned, that McAuliffe was no longer chairman of GreenTech. I don’t think the timing is purely coincidental.”
Politico reported that the firm’s CEO accepted McAuliffe’s resignation as chairman in a letter dated December 1, 2012. However, after his resignation, McAuliffe continued to use first-person pronouns when talking about the company — “we wanted to,” “our headquarters are here,” “we had meetings,” “I have to go where the incentives are.”
Swaim said he doubted that McAuliffe, in the middle of a gubernatorial campaign, really wanted to be associated with a company that might be headed to court to argue over a claim of fraud, and he suggested the resignation was an effort to distance himself from the news of the lawsuit.
Several other publications, including the Wall Street Journal and National Review, have written about GreenTech’s efforts to get assistance from Virginia and the concerns about the company’s interest in EB-5 visas. The Journal’s Kimberley Strassel declared, “GreenTech looks to be a lemon,” citing the limited production from the company’s Mississippi plant.
It is likely that, if the case does go to court, a judge will rule that the comments by the Virginia officials are covered against libel claims by the “privilege defense,” a legal concept that the public’s interest in the official communications of government officials provides sufficient reason for a publication to report them, whether or not the information in those communications is accurate.
Another key factor in libel cases is whether the subject of the story is a public figure or not; it will be difficult for GreenTech, a company profiled many times and mentioned in dozens of news articles, to argue that it is not a public figure. Libel cases since the 1964 U.S. Supreme Court ruling Times v. Sullivan have broadened the definition of “public figure” to cover almost anyone who is in the public eye.
As a public entity, GreenTech will need to prove that the Franklin Center acted with “actual malice” — i.e., either that the group deliberately attempted to ruin the firm’s reputation, or that it ran the story with a “reckless disregard” of whether it was true or not.
The Franklin Center is represented by Alonzo Wickers, a lawyer specializing in media at Davis Wright Tremaine, a Los Angeles firm. The Center is currently seeking counsel in Mississippi.
“It appears that because our stories don’t fit the narrative that a certain candidate or company wants, instead of commenting or talking to us after our numerous, numerous attempts to reach them, to put their side of the story in our story, they chose the route to try to sue us for $85 million,” Jason Stverak, president of the Franklin Center, said in a conference call. “That is an incredibly large amount of money. That should have a chilling effect on any media organization, whether you sit left or right, free market or whatever. If they can do this to us as a smaller news organization, then who’s to say you guys or any other blogger or any other small newspaper, radio station, TV station — that if a company doesn’t like the story that you do, they’re going to sue you out of existence. That kind of intimidation tactic is not the sort of thing that anybody in this country should support.”