What is Romney Hiding?

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4 Pinocchios for an unproven Romney claim of ‘crony capitalism’

“I am ashamed to say that we’re seeing our president hand out money to the businesses of campaign contributors, when he gave money, $500 million in loans to a company called Fisker that makes high end electric cars, and they make the cars now in Finland. That is wrong and it’s got to stop. That kind of crony capitalism does not create jobs and it does not create jobs here.”
— Mitt Romney, Irwin, Pa., July 17, 2012

Hoping to turn attention away from questions about his departure from Bain Capital a decade ago, Mitt Romney this week has sought to focus attention on what he calls President Obama’s “crony capitalism.” We have dealt with this charge before, but this week it seems the Romney campaign has upped the ante, trying to make a connection between the president’s contributors and the president’s policies.

We will deal with some of these claims in more detail at a later date, but today we will look at the question of Fisker Automotive. This case keeps coming up, and it really feels like whack-a-mole. Romney now has raised the stakes by asserting a connection between the loan and campaign contributors. And his campaign was sufficiently proud of his statement that it e-mailed it to reporters.

The Facts

Fisker has developed a luxury plug-in electric sedan called the Karma that retails for $108,000, currently manufactured in Finland. It hopes to develop a $50,000 sedan named the Atlantic that would be manufactured in Delaware.

Earlier this week, Romney aides held a briefing for reporters. Senior adviser Ed Gillespie singled out John Doerr, a wealthy venture capitalist at Kleiner Perkins Caufield & Byers who was instrumental in funding Netscape, Amazon, Google and other Internet companies.

“You know you have John Doerr who raised a lot of money for President Obama, you know, got appointed to an economic recovery advisory board,” Gillespie said. “And, then, his firm had a big investment in Fisker Automotive which got over half a billion dollars in loan guarantees from the Department of Energy, which did not result in jobs being created in America, but actually jobs being created overseas in Finland, but Kleiner Perkins did quite well.”

Gillespie appears to be suggesting that because Doerr raised money for Obama, he was rewarded with a big loan for a company in which his firm invested. But the logic is more the political equivalent of bank shot in pool — and the ball doesn’t quite get in the hole.

First of all, the Kleiner partner mostly closely associated with the Fisker investment is Ray Lane, who features the Fisker logo on his Kleiner Web page. There’s even a YouTube clip of him getting into his Karma sedan.

The contributions database at OpenSecrets.org shows that Lane contributes to some Democrats but mostly Republicans — and he gave money to Rudolph Giuliani and John McCain in 2008, not Barack Obama or other Democrats running for president. He also contributed to George W. Bush in 2003 and Bob Dole in 1995. (However, he has praised the Obama administration for its willingness to back alternative energy ventures, saying it would be “silly” to think an automobile company could be created without government help.)

And speaking of Kleiner partners, a $100,000 contributor to Romney’s SuperPAC Restore Our Future is Meg Whitman, the database shows.

UPDATE: Doerr was not absent from the issue. We should have noted that Doerr is listed on Kleiner’s “Greentech” team, that he testified before Congress in January, 2009, on investing in green technology as a strategy for economic recovery, and Time magazine reported that Obama relied on advice from Doerr and and other green-energy advocates, just as the Bush administration relied on advice from representatives of the oil, natural-gas and coal industries.

Meanwhile, the actual announcement of Kleiner’s investment took place before Obama became president. Here’s part of an Associated Press account, under the headline “E-car startups try to compete with major companies”:

Fisker raised more than $90 million in venture capital in 2008, the company said. Its investors include top venture capital firms such as California-based Kleiner Perkins Caufield & Byers, of which former Vice President Al Gore is a partner, and Palo Alto Investors.

Tesla [a rival auto company] has raised at least $165 million since 2006, according to estimates by analysts, and its top investors include Musk, former eBay Inc. President Jeffrey Skoll, and Google Inc.’s founders Larry Page and Sergey Brin. Tesla announced $40 million in financing in November to expand its powertrain venture and continue development.

Both are seeking significant funding from the Energy Department’s $25 billion loan program to develop advanced vehicles. The outgoing Bush administration has not yet announced any awards.

In other words, Kleiner raised venture capital for Fisker before Obama became president. Moreover, Fisker had applied for a loan under the Bush administration.

The loan was approved by the Obama administration, but unlike the situation with Solyndra that we have previously detailed, Fisker received its loan under the original Bush program. The announcement details how the first part of the loan, $169 million, would be used to work “with primarily U.S. suppliers to complete the company’s first vehicle, the Fisker Karma.” The second part of the loan, $359.36 million, will be used for “the manufacture of a plug-in hybrid in the U.S.”

Fisker spokesman Roger Ormisher said the Energy Department knew from the beginning that the Karma cars would be produced in Finland, by a contract manufacturer, with about 50 percent of the value of the car sourced from American suppliers. He said the entire loan has been used for design and engineering work in the United States, and the actual production in Finland was paid for by private investors.

Still, as The Washington Post has documented, Fisker is a troubled company. The General Accounting Office has also raised questions about the Energy Department’s ability to manage the loans.

But, contrary to Romney’s suggestion, Fisker has not received $500 million because much of the second tranche of its loan was suspended by the Energy Department after the company missed deadlines. Ormisher said the company has drawn down $193 million of the $529 million loan, but has raised $1 billion from private investors. He said that accountants and the Energy Department had independently verified that all of the government loan money was spent in the United States. He also said the company intends to pay back the loan with interest.

The loan suspension did result in a couple dozen layoffs at what is hoped to be a Delaware manufacturing plant. But about 1,000 Karmas have been sold, Ormisher said, resulting in $100 million in revenue. He said hundreds of jobs had been created in the United States as a result of the Energy Department loan.

The Romney campaign did not respond to a request for comment.

The Pinocchio Test

Romney tried to carefully craft his statement.

Romney said the president gave money to “the businesses of campaign contributors.” Doerr is an important partner at Kleiner, and he has been an advocate for green energy, but it is a stretch to say it is his “business.” In fact, Ray Lane, who contributes mostly to Republicans, is an important Kleiner partner on this deal. Moreover, the money was raised before Obama became president.

Romney said Obama gave “$500 million in loans to a company called Fisker” — but it was a loan originally submitted under the Bush administration for a Bush administration program. He also said “they make cars now in Finland” — technically true, but in a way that suggests the taxpayer money went for that purpose, rather than for jobs and work in the United States.

Finally, Romney makes the leap that because of the “crony capitalism” — not proven — no jobs will be created. The company says jobs have been created, though the venture is still highly uncertain.

Romney’s phrasing has too many weasel words. An ordinary listener would believe that Obama paid off a contributor to build cars in Finland with U.S. taxpayer money, with no hope of U.S. jobs being created. That does not appear to be the case, at least as Romney has framed it.

We usually give some credit for a semblance to the truth, but the net effect of Romney’s words is too much.


Four Pinocchios