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Congressional Leaders Seek Investigation Into Russian Investment In KY Aluminum Mill

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Photo: AP

This article was originally published by Ohio Valley ReSource.

A group of Congressional leaders asked the Trump administration to review a Russian company’s investment in a new Kentucky aluminum mill.

The request comes from eight prominent Democratic lawmakers with leadership roles in committees with oversight, banking and national security responsibilities, including Ohio Sen. Sherrod Brown and House Intelligence Committee Chair Rep. Adam Schiff.

The lawmakers asked the Treasury Department to look into an investment into an eastern Kentucky aluminum plant, Braidy Atlas. The $200 million investment came from Rusal, a Russian aluminum company that, until January, was under federal sanctions for what the Treasury Dept. called the “worldwide malign activities” of the company’s primary owner, Oleg Deripaska. Also sanctioned was En+, Rusal’s holding company.

“The proposed investment by En+– a company that is majority-owned by a U.S.-sanctioned Russian national and Russian state bank — in an American aluminum mill, raises serious questions of national security,” lawmakers wrote.

The lawmakers wrote that they were “deeply alarmed” to learn about the investment.

Sanctions were removed when Deripaska stepped down, but lawmakers worry the Russian government may still be involved and may be using the Kentucky investment to curry political favor. Deripaska’s shares in En+, Rusal’s holding company, largely went to the VTB Bank, a Russian firm that, lawmakers said, has been referred to as “Putin’s piggy bank.”

When there’s a perception of foreign money being used to purchase a political quid pro quo, I think that’s a very serious allegation and something that calls for an investigation,” said Jeff Mankoff, a Russia and Eurasia expert at the Center for Strategic and International Studies.

The investment in Kentucky came just months after the state’s senior senator, Majority Leader Mitch McConnell, worked to defeat a House-approved measure to keep the sanctions on the Russian entities in place.

Reports of Braidy Industries’ unspecified sales to defense industries led lawmakers to worry Russia’s involvement could cause “potential risk to the integrity of the American defense supply chain,” lawmakers said.

The Treasury Department did not respond to a request for comment.

Braidy Industries CEO Craig Bouchard told the Ohio Valley ReSource in an earlier interview that his company had signed its letter of intent after the sanctions had been removed.

“We don’t have any discussion with any global party about business transactions without lawyers present helping us craft the right discussions,” Bouchard said. “You should assume that we are perfect in such things because quite frankly, we are.”

Kentucky Matters

The mill is already under some scrutiny over the unusual direct investment of $15 million in taxpayer dollars, which effectively make Kentucky taxpayers part owners in the venture.

A day after the letter to Treasury, a Kentucky court of appeals found in favor of the Louisville Courier-Journal in a years-long suit after the Courier-Journal filed an open records request for full disclosure of all Braidy Industries’ investors. The court ruled that Kentucky’s public investment in the company means the public is entitled to more information about the company’s operations.

Kentucky workers are hopeful that Braidy Industries will bring hundreds of high-paying industrial jobs to a struggling region.

Sydney Boles is the ReSource reporter covering the economic transition in the heart of Appalachia’s coal country.

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From Russia, With Loot: KY Aluminum Company’s New Russian Partner Raises Concerns

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KY Gov. Matt Bevin at the Braidy Industries announcement of its Rusal partnership. Photo: Courtesy MyTownTV streaming of event

This article was originally published by the Ohio Valley ReSource.

A large whiteboard in an Ashland, Kentucky, unemployment office is covered with a list of companies that are currently hiring. Senior career counselor Melissa Sloas said that just a few years ago, that board was a lot emptier.

This corner of eastern Kentucky has long struggled to make up for losses in mining and manufacturing. Unemployment in the Ashland area is still around 6.3 percent, well above the state average. Career center employees said workers are anxious about the closure of longtime employer AK Steel, which announced in January it would close its Ashland plant this year.

Anticipation has been brewing here about a potential new major employer, aluminum processing company Braidy Industries.

The first new aluminum rolling plant in the U.S. in 37 years, Braidy Industries’ Atlas plant promises to be greener and more cost-effective than other rolling mills. Business leaders hope the plant will attract auxiliary businesses to the region.

“For years we’ve seen industry leaving, the workforce leaving the area because there were no jobs,” said Justin Suttles, another career center employee. “And so this is the injection we need to attract more businesses to the area.”

Braidy Industries was such an attractive project that Kentucky’s Republican Gov. Matt Bevin offered significant tax breaks and invested $15 million in taxpayer dollars through Kentucky’s private investment company, Commonwealth Seed Capital. Effectively, Kentucky taxpayers are part-owners of Braidy alongside CEO Craig Bouchard.

But even with that public cash infusion, Bouchard and Braidy needed more capital investment. They found it from an unusual source.

At an event with Gov. Bevin at the New York Stock Exchange in April, Bouchard announced a $200 million investment from Russian aluminum giant Rusal, the world’s second-largest producer of that commodity. In exchange for its investment, according to a Rusal press release, the company would have a 40-percent share in the company.

“We are going to lead the world in highest quality, lowest cost, and the least use of carbon from start to finish in the manufacturing process,” Bouchard said at the NYSE.

Up until four months ago, Rusal and its owner, Oleg Deripaska, were under federal sanctions for what U.S government officials called “worldwide malign activity.”

The rapid change in Rusal’s legal status, going from a U.S.-sanctioned company to a Kentucky investor in just over three months, is raising eyebrows among some national security experts. And the unusual public investment means that all Kentuckians now have a stake in a company tied to a Russian entity with a checkered past.

Who Is Deripaska?

In a telephone interview with the ReSource Bouchard said he isn’t worried about the sanctions.

“Dereg Olipaska [sic] is someone I’ve never met, never talked with, don’t know at all,” he said, mispronouncing the oligarch’s name. “Ten thousand families are relying on me and my company to secure a future that’s much better for them than the last 30 years that they’ve had.”

Russian oligarch Oleg Deripaska at a World Economic Forum Event. Photo: Michael Wuertenberg / World Economic Forum

Oleg Deripaska was the victor in a bloody 1990s battle over the former Soviet aluminum industry and is known to be close with Vladimir Putin. U.S. foreign policy establishment considers him to be an extension of the Kremlin. In its decision last year to impose sanctions, U.S. Treasury officials outlined evidence that Deripaska has been accused of money laundering, fraud, and even ordering a business rival killed.

Treasury sanctioned Rusal and Deripaska in April 2018, over the oligarch’s Kremlin connections and Russia’s role in interfering with the 2016 presidential election, Russia experts said.

“The U.S. government theory of the case is to show this oligarch class, which may be used as extensions of the Kremlin, that they’re not insulated from that conduct,” said Michael Dobson, a private attorney who, in 2018, was on the team at Treasury that imposed the sanctions.

According to Dobson, the Treasury Department thought deeply about the implications the sanctions would have on the global aluminum market, but decided it was more important to show that no company was too big to face sanctions when they were warranted.

But as soon as the sanctions went into effect, a big-money effort began to get them lifted.

The Barker Plan

The sanctions caused the price of aluminum to soar, worrying market watchers. Almost immediately, Rusal launched a comprehensive maneuver to get the sanctions removed. The effort was so extensive that it got its own name: The Barker Plan.

Named for British MP and new Rusal chairman Lord Gregory Barker, the Barker Plan entailed months of lobbying and countless trips between London, Moscow, and Washington D.C. for the British lord.

Dobson said the scope and politicization of the lobbying campaign were unprecedented. “How many other delisting processes can you talk about in terms of somebody’s name?” Dobson said. “If you can name one other delisting process, I’ll be shocked.”

Barker successfully negotiated for Deripaska to reduce his ownership stake in the company from 70 percent to less than 50 percent. On December 19, 2018, Treasury notified Congress of its intent to remove the sanctions.

Deripaska has alleged his net worth has been cut in half as a result of sanctions, Dobson said. “He’s struggling to find business partners now, and he had to divest from significant portions of [his company].”

Dobson said the Treasury conducted a “hard scrub” to make sure Lord Barker and other leaders within Rusal were not simply stand-ins for Deripaska, but others remain skeptical.

“I haven’t heard any indications that [Deripaska] is genuinely out of the loop,” said Jeffrey Mankoff, a scholar of national security at the Center for Strategic and International Studies. “The commentary at the time was, this was kind of dubious, this was a bit of legal fiction, that effectively he would still be in charge.”

The Treasury Department could re-apply sanctions if it determines that Deripaska is more involved in practice than he is on paper, Dobson said. In that case, Braidy Industries would need permission from the Treasury to continue dealing with Rusal.

Barker is set to act as co-chair of the Ashland-area plant alongside Bouchard.

Kentucky Connections

The Barker Plan rested in part on the work of a Trump-connected lobbying firmcalled Mercury Public Affairs. Mercury Senior Vice President Michael Crittendendeclined to confirm which lawmakers the lobbying firm had contacted on behalf of the Barker Plan, but publicly available Foreign Agents Registration Act filingsshow Mercury lobbyists were in contact with Senate Majority Leader Mitch McConnell’s team, as well as other lawmakers, on separate projects.

When the Treasury Department alerted Congress to its decision to lift sanctions against Rusal in December 2018, Democrats in the House of Representatives worried the move would be seen as a favor to Vladimir Putin, particularly in light of concerns about the Trump campaign’s connections with Russia.

Deripaska had a long business relationship with Paul Manafort, who would later become Trump’s campaign chair. The recently released report of special counsel Robert Mueller shows that Manafort intended to use his position on the Trump campaign to pay Deripaska back for some outstanding debt. Manafort is now serving a 7-year sentence after pleading guilty to conspiracy and fraud charges.

The House voted 362 to 53 to overrule Treasury’s decision and keep sanctions. But in the Senate, McConnell marshaled opposition to the resolution, and sanctions on Rusal were lifted.

Mankoff at CSIS said McConnell’s behavior raises concerns.

“Given the inroads that various Russian operatives, including people like Manafort made into the campaign, I think it’s worth at least asking the question what the game people like McConnell are playing, is,” he said.

A spokesperson for McConnell declined to answer specific questions about the sanctions, but pointed instead to McConnell’s floor speech at the time of the delisting.

“Career civil servants at the Treasury Department simply applied and implemented the law Congress itself wrote,” McConnell said. “Treasury’s agreement maintains sanctions on corrupt Russian oligarch Oleg Deripaska. It would continue limiting his influence over companies subject to the agreement.”

While Rusal was lobbying Congress for sanctions relief, Braidy CEO Bouchard was also building a personal relationship with McConnell. Industry paper Automotive News reported in March that Bouchard spent months in early 2019 courting Kentucky’s powerful senior senator in an attempt to avoid tariffs, which would raise the cost of foreign aluminum. Bouchard told Automotive News that Braidy would be importing raw aluminum from a foreign company.

The site near Ashland, Kentucky, where Braidy plans a new aluminum facility. Photo: Sydney Boles/OVR

Market Forces

“Rusal’s decision to invest in a Kentucky facility is certainly somewhat unusual, considering the company was under sanctions until just a few months ago,” said Christopher Clemence, editor in chief of the industry trade site Aluminum Insider. In his written response to ReSource questions Clemence added, “Given the deficit of US-produced auto body sheet, the plant is likely to emerge as a central production hub for the domestic car industry.”

Braidy and Rusal’s deal allows both entities to split tariffs imposed by the Trump administration on imported aluminum, lessening the burden on Braidy.

“You could look at the move as a clever way on Rusal’s part to claw itself back to pre-sanctions strength,” Clemence said.

Craig Bouchard speaks at a Braidy Industries launch event as KY Gov. Matt Bevin (right) looks on. Photo: Courtesy of Braidy Industries

Automobile manufacturers looking to meet federal fuel efficiency requirements have driven demand for lightweight material like aluminum, creating a market gap that Kentucky has sought to fill, according to state economic development officials.

“Since the beginning of 2014, aluminum-related companies announced about 100 new facility or expansion projects in Kentucky,” Economic Development Cabinet spokesperson Jack Mazurak said. “Those projects, announced in five years, total more than $3.4 billion in corporate investment.”

Mazurak added that Kentucky has a lot riding on the Braidy project.

“Kentucky taxpayers have an additional interest in seeing Braidy Industries succeed,” he said.

Braidy expects its Atlas aluminum facility to be operational by 2021.


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Airbnb Brings Renters and Regulations to Southwest Virginia

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A sampling of Airbnb offerings in Konnarock, in heart of Southwest Virginia. Photo: Airbnb

EDITOR’S NOTE: Jacob Stump grew up in rural Southwest Virginia as the region was developing its tourism industry, which today generates nearly $1 billion in spending each year. Stump  teaches international studies at DePaul University in Chicago.

Tourist-cabin rentals in Southwest Virginia began long before Airbnb arrived. But the online service is part of the market now and may be one reason for increased regulation of the cabin-rental market.

In Southwest Virginia, a nearly $1 billion annual tourist economy has brought increased demand for lodging – and a call for tighter regulations of those accommodations. 

Airbnb is a multibillion-dollar American-based company established in 2008. The company was late in arriving in the rural parts of southwest Virginia. But Airbnb recently reported that use in rural areas is expanding rapidly. Growth of rural rentals increased 18 fold since 2012, according to a company report. The same report says rural hosts earn on average more than hosts in U.S. cities, with rural hosts around the country earning $494 million during the report period.  

It’s unclear how much of that income reached Southwest Virginia. The region’s tourist-cabin market predates Airbnb by more than a decade. Nonetheless, southwest Virginia has seen rapid growth in the number of Airbnb hosts recently, particularly in tourist-heavy areas along Route 58 between the towns of Abingdon and Damascus and in less developed mountain communities farther from town.  

Rental Cabins in Southwest Virginia 

Konnarock, Whitetop, and Green Cove are Virginia mountain communities located near the easternmost county in Tennessee. Rental cabins have been part of the local economy here for decades. Visitors are drawn by the region’s natural beauty and by outdoor recreational opportunities, like parks and trails. While Airbnb has facilitated rental-cabin growth in recent years, the market took off long before Airbnb was established. And many cabin owners still don’t use it. By my count, from knowing the area and keeping my ears open, there are about 20 rental cabins in Konnarock, Whitetop, and Green Cove. Only about half of those use Airbnb to book renters.  

(I should note for purposes of transparency, my wife, Shiera, and I own one of the 10 Airbnb cabins in the area. It became clear to us several years ago that the number of tourists in the area indicated a demand for lodging that was not being met. We saw the opportunity and took the small business plunge in 2016. This is our second full year in business, with 95 percent of renters connecting with us through Airbnb.) 

One owner in the area who doesn’t use Airbnb is Mary Blevins. Along with husband, John Blevins, they have operated The Green Cove Getaway for 19 years. That makes them one of the oldest private accommodations in the area. 

Mary has never used Airbnb and has no plan to start. The Getaway is open from April to November and Mary said that usually she has “back-to-back” weeklong rentals, without having to pay a fee to a service like Airbnb.  This year has been slower due to rainy and severe weather, like Hurricane Florence.  

Mary and John’s cabin sits directly across a small country road from the Virginia Creeper Trail, the popular National Recreation Trail used by roughly a quarter-million visitors each year. Mary said that the Creeper and Grayson Highlands State Park are major draws for cabin renters. With no commercial lodgings in the area, cabin rentals are the only option for tourists who don’t want to camp at state or federal facilities. 

Konnarock, Whitetop, and Green Cove sit at an elevation of about 3,000 feet. They are about 2,500 feet below the state’s second-highest peak, Whitetop Mountain. Whitetop treats visitors to beautiful Blue Ridge vistas that are easily accessible via the highest navigable road in the state. The Appalachian Trail winds through the communities, as do scenic rural routes, like the Route 58 “Crooked Road” and Virginia scenic byways. Craft and traditional music festivals also dot the annual calendar and draw tourists. 

Whitetop Mountain, a tourist attraction in Southwest Virginia. Photo: Eli Christman, Flickr, Creative Commons

Until very recently, rural rental cabins were largely unregulated and untaxed. Without the cabin owner voluntarily alerting the county tax commissioner, rental cabins could easily glide under the county government’s radar. This is one of the factors that might explain why not all cabin owners use Airbnb. (That’s not the case for Mary, because she voluntarily reports her rental income to the county.)  

The Expansion of Airbnb into Southwest Virginia 

Airbnb quickly became controversial after the company’s 2008 formation, particularly in large cities like New York, Chicago, and San Francisco.  

Critics pointed out that Airbnb had an unfair advantage because they were untaxed and unregulated compared to traditional hotels, motels and B&Bs. Others argued that Airbnb had driven up residential rents, decreased housing supplies for long-term renters, and exacerbated problems of displacement and homelessness for the elderly and poor who survive on limited and fixed incomes. 

Airbnb in rural areas has not sparked the same kinds of criticisms that the company did in densely populated and expensive urban housing markets. Research on Airbnb’s impact on rural housing markets is also scant.   

Taxing and Regulating Rental Cabins in Southwest Virginia 

But some criticisms of Airbnb have echoed in our region. 

In Richmond, Virginia, Governor Terry McAuliffe signed legislation in 2017 that empowered counties and municipalities to regulate Airbnb.  

The Virginia Business magazine used Airbnb data about Virginia to criticize the legislature as “taking aim at short-term rentals industries.”  

Abingdon, a small historic town in Southwest Virginia with nearly 60 untaxed and unregulated Airbnb hosts inside town limits, passed a 2017 “Homestay Ordinance” that went into effect with the New Year.  

The Abingdon town council used the Airbnb website (and other “homestay” websites) to identify hosts within city limits. They contacted individual hosts to alert them of the new regulations. Abingdon town ordinances require Airbnb hosts to register with the town, pay a fee of $25, and pay taxes for each booked night, or face a $250-500 fine for each infraction. Abingdon is the seat of Washington County.  

I spoke with David Henry, the Washington County Commissioner of Revenue. He told me that the county had 40 tax-paying Airbnb hosts. Henry said that the county Board of Supervisors expanded the already existent 5 percent Transient Occupancy Tax that applied to hotels, motels, campgrounds, and B&Bs, to include Airbnb hosts. 

Commissioner Henry said that his office does not keep lists of Airbnb hosts in Washington County, and he has fielded no complaints about the county tax from Airbnb hosts.  

None of the tax commissioners in the Virginia counties of Smyth, Grayson, and Wise responded to my requests for comment. 

Speaking from my own experience with Smyth County: We voluntarily contacted the tax commissioner’s office when we opened the rental cabin, which was before the 2017 Virginia legislation had been passed. The Smyth County policy toward Airbnbs seems to have evolved, based on the commissioner’s 2018 request for additional information about our rental cabin. 

Conclusion 

Like Mary said, the Getaway had been a “success” for nearly two decades, long before Airbnb ever existed. That success will likely continue as long as people have money to spend on outdoor recreation. 

But, because of Airbnb, the rural cabin rental business now enjoys the tighter regulatory hand of county governments.      

Mary made it clear. She would prefer to see those increased county tax revenues put back into rural parts of the county, “which pay plenty of taxes, but don’t get much for it.”

This article was originally published by Daily Yonder.  

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Fact-check: Business Registrations Are Up in WV, But Closures High Too

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Heavy equipment and trucks move coal in the Sun Coal Co. coal yard along the Kanawha River in Dickenson, W.Va., on Jan. 19, 2018. Photo: AP

Has there been an increase in new businesses in West Virginia? The West Virginia Republican Party says so.

On Sept. 4, the West Virginia GOP tweeted “In 2017, the number of new business registrations in West Virginia grew nearly 11 percent (8,318 new businesses registered for the year). This comes off the heels of a 12 percent increase in new business registrations during 2016.”


The tweet cited a news article in the Herald-Dispatch of Huntington, W.Va., that includes this information almost verbatim.

The data comes from the Business Statistics Database maintained by the West Virginia Secretary of State’s office, and the office confirmed to PolitiFact the accuracy of the numbers in the tweet.

Erin Timony, the office’s assistant communications director, said the numbers focus on limited liability companies and corporate business license registrations by county. Since other types of businesses are not included, the data does not encompass all new businesses in the state.

Another point to note: The tweet cites business registrations, but not business closings.

“The number of businesses that are ‘born’ and ‘die’ in a given year (would) provide a more accurate portrayal of business conditions overall,” said Brian Lego, a research assistant professor of economic forecasting at West Virginia University.

This data is compiled by the federal Bureau of Labor Statistics, though data for both births and deaths is available only through the first quarter of 2017.

Here’s a chart showing trends on business births and deaths in West Virginia. Quarters that saw more births than deaths are marked in blue, while quarters that saw deaths exceed births are marked in red:

So, looked at from this perspective, 15 out of 17 of the last quarters have seen more business deaths than births in West Virginia.

This doesn’t mean that the business registration data is wrong; rather, it just says that the tweet paints an incomplete picture.

Our ruling

The West Virginia Republican Party tweeted, “In 2017, the number of new business registrations in West Virginia grew nearly 11 percent (8,318 new businesses registered for the year). This comes off the heels of a 12 percent increase in new business registrations during 2016.”

The data cited in the tweet is solid. However, it looks only at certain types of business births. Looking at data for both business births and deaths shows a less rosy picture for business creation in the state.

The statement is accurate but needs additional information, so we rate it Mostly True.

This article was originally published by PolitiFact.

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