Re: If you went to a VA state school you should vote against Cuccinelli
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Terry McHypocrite
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Date: June 29, 2013 02:24PM
Terry McAuliffe used loophole to avoid key SEC oversight of his car company
By Watchdog Staff / June 26, 2013 / 2 Comments
Part 24 of 24 in the series Terry McAuliffe, gubernatorial candidate and carmogul
Virginia gubernatorial candidate Terry McAuliffe says everybody should do business in Virginia — except for Terry McAuliffe, who says he’ll build his own car manufacturing company in Mississippi. And though he blasted Republican presidential candidate Mitt Romney for offshore banking, McAuliffe’s own car company is incorporated in a British Virgin Islands tax shelter.
And like any former chairman of the Democratic National Committee, he’s all for unions — except where his own car company is concerned.
So it’s hardly surprising that though McAuliffe called for more government regulation of the financial industry when Republicans ran the White House, he wants less federal oversight of his car company’s efforts to solicit investments.
In a 2002 email to reporters, McAuliffe, then chairman of the Democratic National Committee, wrote, “The reality is that Bush and his Administration have given the green light to unscrupulous CEOs by helping to foster a business environment that says ‘if it feels good, do it,’ and, when confronted with the crisis, they offer toothless reforms.”
So why did GreenTech Automotive, the car company Terry McAuliffe says he created, file for an exemption from some federal securities regulation?
To answer that question, you have to understand the 1933 Securities Act requiring companies of all sizes to share key financial information with the Securities and Exchange Commission when they solicit money from investors.
The regulatory philosophy behind the new law — and the Securities and Exchange Commission created in 1934 — was clear: managed by the SEC, accurate financial information “enables investors, not the government, to make informed judgments about whether to purchase a company’s securities,” the SEC explains on its website. “In general, all securities offered in the U.S. must be registered with the SEC or must qualify for an exemption from the registration requirements.”
According to documents reviewed by Watchdog.org, GreenTech claimed it qualified for one of those disclosure exemptions because it solicited investments exclusively outside the United States. The first page of a 2009 private placement memorandum issued by the firm’s investor-relations arm, Gulf Coast Funds Management, states that the purchaser must be “a foreign national, acquiring the unit outside of the United States in reliance upon Regulation S under the Act.”
What exactly is Regulation S and how did it legally exempt GreenTech from the landmark “truth in securities” law?
“Regulation S was intended to help U.S. and foreign companies raise capital overseas quickly and inexpensively without having to comply with the expensive and lengthy registration process required under Section 5 of the 1933 Act,” securities expert Jerold N. Siegan wrote in a 2009 compliance manual, “Securities Law and Compliance Manual for Regulation S Offerings.”
Under Regulation S, the “safe harbor” exemption cited by Gulf Coast, companies are not required to comply with the SEC’s disclosure requirements as long as they comply with two requirements. According to the compliance manual, the investment (1) must be an “offshore transaction” and (2) cannot involve any “directed selling efforts” in the United States by the company or its representatives.
All available evidence suggests that GreenTech complied with both requirements, thereby legally circumventing the SEC.
Securities regulators also note that Regulation S does not exempt a company from all securities regulations. Companies that win the exemption can avoid filing registration forms with the SEC that “provide essential facts,” including “a description of the company’s properties and business; a description of the security to be offered for sale; information about the management of the company; and financial statements certified by independent accountants.”
Once upon a time, Terry McAuliffe might have called that “a business environment that says ‘if it feels good, do it.’”