Florida Scheme That Ensnared Jeb Bush Also Made Federal Agency Look Bad

Chuck Ross Investigative Reporter
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Jeb Bush’s business relationship with a Miami-based businessman now in prison for fraud is receiving fresh attention as speculation grows that the former governor of Florida will run for president.

A review of the company at the center of the scheme shows that there is more than enough embarrassment to go around, including for the Overseas Private Investment Corporation, a federal agency that loaned millions to the company, InnoVida Holdings.

Bush first met InnoVida’s founder and CEO, Claudio Osorio, at the businessman’s mansion in 2007. Soon after, Bush, who had recently left office, signed on as a consultant for the company, a gig that paid $15,000 a month.

But InnoVida, which claimed to be in the business of manufacturing inexpensive housing out of a special composite material, was essentially a Ponzi scheme. Osorio pleaded guilty to federal fraud charges in 2013 and is currently serving a twelve-and-a-half year sentence.

Though it appears that Bush was unaware of the fraud itself, he is being criticized heavily now for falling for the fraud. Bush’s involvement also raises questions about what other bad business dealings he may have had.

But while most of the focus from the InnoVida fallout has been on Bush, the company’s scheme also ensnared other high-profile investors and, perhaps more importantly, OPIC, a federal agency that lends taxpayer money to companies that do business overseas.

InnoVida lobbies for — and receives — taxpayer funds

A review of thousands of emails — which The Daily Caller obtained through a Freedom of Information Act request — sent between OPIC, InnoVida and the company’s representatives sheds new light on how the housing manufacturer received approval for a $10 million OPIC loan and suggests that the agency was anxious to approve the deal.

InnoVida was brought to OPIC’s attention through its lobbyist, BGR Group, a Washington D.C.-based firm co-founded by Haley Barbour, then the governor of Mississippi.

“InnoVida is particularly interested in investigating how they can partner with the Obama Administration to help achieve its public policy goals of reducing carbon emissions while increasing low cost housing and job creation,” reads the email sent on Sept. 30, 2009, on behalf of BGR’s Jonathan Mantz to then-OPIC president Lawrence Spinelli.

BGR, which received $300,000 in representation fees in 2009 and 2010 from InnoVida, indicated that the company was looking to build its low-cost houses in Haiti.

Following a Dec. 4, 2009 meeting, OPIC discussed CHS Electronics, a company of Osorio’s that filed for bankruptcy in 2000. The agency noted that it would have “to go in depth” in investigating Osorio’s background.

An OPIC staffer was put in charge of conducting background checks on Osorio and Craig Toll, InnoVida’s chief financial officer.

“Heavy response in US Civil/Criminal for the individuals,” the staffer wrote in a Jan. 14, 2010 email to Lynn Tabernacki, then the senior manager of renewable energy and sustainable development finance at OPIC and the Haiti project’s point person.

While the agency insists now that all due diligence was conducted on Osorio and Toll — the background check found no criminal issues and did flag Osorio’s CHS Electronics venture — emails indicate that the approval process for InnoVida was fast-tracked following a Jan. 12, 2010 earthquake that destroyed large portions of Port-au-Prince, Haiti’s capital.

In a Jan. 28, 2010 email to a colleague, Tabernacki wrote that she “didn’t do any work on the deal” until Osorio called her the day after the earthquake.

“When Claudio called me on the morning after the earthquake [the 13th] to ask for our help, the retainer became irrelevant to me,” Tabernacki also wrote, referencing a $20,000 retainer fee OPIC normally requires companies to pay before the loan process can continue.

“In reality, [the process] was 2 weeks from start [day of the earthquake] to commitment,” Tabernacki wrote.

While OPIC’s handbook states that the agency gives priority to loans that fit the agency’s foreign policy mandate and that review process is typically shorter for corporate financing transactions, it also states that “the time required to review and approve an application…typically varies from two to six months.”

“I hate to sound like a bleeding-heart, but my joy is knowing I played a role in getting a family off the street,” Tabernacki wrote in the message.

In another email sent the same day to Toll, Tabernacki wrote, “I’ve been joking with my colleagues that it’s very true that only an earthquake can move mountains,” she wrote.

Tabernacki wrote in another email later that day that Osorio had appeared as a guest of Rep. Nancy Pelosi at the State of the Union speech.

OPIC approved a $10 million loan to InnoVida on March 9, 2010. The contract called for the construction of 550 “rapid build” homes and the construction of a factory to build housing panels in Haiti.

But when the funds were dispersed the following month, the federal agency provided only $3.3 million of the approved sum, citing InnoVida’s lack of clients and concerns over the support documents the company provided.

OPIC’s concerns grew over that summer as Osorio and Toll failed to provide various financial documents or provide proof that construction of the homes was going as planned.

But the final blow for OPIC appears to have come in an Oct. 19, 2010 email from BGR’s Mantz.

“Effective immediately, I have made the decision to no longer represent Claudio Osorio and his company InnoVida with any of their business or political activities,” Mantz wrote.

The lobbyist then informed OPIC that InnoVida investors had filed lawsuits alleging fraud against the company.

OPIC continued working with InnoVida, but the agency became increasingly frustrated.

“It is extremely disappointing to learn that you are unable to make yet again our long scheduled meeting. Why Craig [Toll] is unable to attend in Claudio’s absence? Certainly the CFO has the primary relationship to the financial data we are requesting,” Tabernacki wrote in a Jan 12, 2011 to Osorio.

OPIC insists that the case of InnoVida is an outlier.

“This is an extremely rare instance, and OPIC operates an exemplary lending portfolio in some of the world’s most challenging economic markets, and it still operates with less than one percent default rate, which is a ratio that any private lender would strive towards,” OPIC spokesman Charles Stadtlander told TheDC.

“The due diligence conducted for this project was just as thorough and no different than any other OPIC development project,” he continued.

And when asked whether Bush was involved at all in relationship between OPIC and InnoVida, Stadtlander said, “absolutely not.”

Likewise, Mantz told TheDC that Bush had nothing to do with BGR Group’s relationship with either InnoVida or OPIC.

Bush’s deal

According to documents obtained by The Washington Post, Bush was not only paid $15,000 a month to consult for InnoVida, he also had the opportunity to earn commission for brokering deals for the company. Bush stood to receive an 8 percent finders fee on the value of any deal to build new housing panel factories. He also could have earned a 3 percent finders fee on the value of any contracts he secured with new customers.

Bush was never paid a commission, but he was paid a total of $469,000 in consulting fees. In 2013 he paid back $270,000 of that to a trustee for numerous plaintiffs who had sued Osorio.

He did not admit to any wrongdoing and kept the remaining $199,000 for services he rendered “in good faith.”

According to a 2012 SEC court filing, Bush was brought on “to add an air of legitimacy to InnoVida.”

While there is no indication that Bush had any knowledge that Osorio was perpetuating a fraud, one of the attorneys for some of the swindled investors said that Bush should have had an idea that the CEO was up to no good.

“Now I can’t imagine someone who has been in government, in the public sector, then in the private sector, having performed any kind of due diligence and concluded that this company was legitimate,” the attorney, David Nunez, told The Washington Spectator in an interview last year.

Bush parted ways with InnoVida on Sept. 19, 2010, several days after attending a company board meeting. According to The Post, an InnoVida investor and board member, Chris Korge, contacted Bush the month before and claimed that he had caught Osorio in a lie. Korge said that Osorio had been spotted at a steakhouse in South Beach on the same day he claimed he was in China conducting business.

When Bush attended the meeting the next month, he jotted down a few notes on a meeting itinerary — which The Post obtained — but resigned from the board three days later.

Osorio uses Obama to sell company

Bush wasn’t the only big name Osorio used to induce investments in his company — investments that appear to have been used to finance the millionaire’s lavish lifestyle: a Maserati and a mansion in Switzerland.

In a complaint filed by NBA star Carlos Boozer, who invested $1 million in InnoVida and was represented by Nunez, in 2008, Osorio held a fundraiser for then-Sen. Barack Obama at his South Florida mansion.

Obama was not in attendance, but Osorio — a big-time Democratic donor who, along with his now-ex-wife Amarilis donated nearly $240,000 between 2008 and 2010 to Democrats, including Obama and Hillary Clinton — hoped to bolster his credibility by holding campaign fundraisers.

“However, they saved their best prop for last: inviting Plaintiffs and other guests and their other guests to a fundraiser for then-presidential candidate Barak [sic] Obama – an invitation intended to cement their standing as a legitimate, respectable power couple before the eyes of their guests,” reads Boozer’s complaint.

And after Obama won the election — and after Osorio had convinced Boozer to invest in the company through misrepresentation about the health of the company and promises of glorious returns — the swindler secured a White House meeting by leveraging a connection Boozer had to the White House.

“In early 2009, Osorio contacted Carlos Boozer to ask that he arrange a meeting with President Obama, as the President’s assistant, Reggie Love, attended Duke University with Carlos Boozer and the two shared a close friendship,” Boozer’s suit reads.

“The purpose of the proposed meeting was for InnoVida to obtain government contracts,” the complaint continues. In May 2009, “Mr. Love met with the group [at the White House] and introduced them to employees that worked for a government agency which had approximately $100,000,000…to fund projects that were environmentally friendly.”

It is unclear who was involved in the meeting.

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