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Why Is the State of Virginia Spending Millions to Support Israel?


Tazewell County in the Southwest corner of Virginia has been hit hard by declines in formerly vibrant industries such as coal mining and furniture manufacturing.

Since launching in 1988 the Virginia Coalfield Economic Development Authority VCEDA provides grants and low interest loans to diversify the economy. Likewise, Virginia’s Tobacco Region Opportunity Fund, or TROF, has delivered more than a billion dollars in economic development grants from its tobacco liability settlement fund.

Especially if you are an Israeli company bribing the state legislature.

Working in tandem, the American Israel Public Affairs Committee (AIPAC) and the Virginia Israel Advisory Board (VIAB) targeted these state funding pools to benefit an Israeli aquaculture company. The VIAB-led effort to direct growing amounts of Virginia state funds into Israeli corporations mirrors AIPAC’s success in diverting the lion’s share of the U.S. foreign aid budget to Israel’s military. Total US foreign aid to Israel now tops more than a quarter trillion in known transfers when adjusted for inflation. Total Virginia state aid to Israel is unknown because it is scattered across multiple agency budgets and not always traceable.

The fish farm project was spawned by the Virginia Israel Advisory Board, the only taxpayer funded state government agency in the US dedicated solely to bringing in and setting up Israeli companies into a state. VIAB curated the project, shrouding it in secrecy and code naming it "Project Jonah." In its August 1, 2013 board meeting minutes VIAB, clarified the reason behind all the secrecy: "All Board members are asked to refer to the project by this code name [Jonah]. Leaked information could jeopardize funding opportunities from the State."

But Project Jonah didn’t fully hatch until AIPAC sent Tazewell County state delegate James W. "Will" Morefield on a trip to Israel in January 2015. According to Morefield, "the project was first initiated two years ago when he was selected by the American Israel Public Affairs Committee to be part of an official delegation of elected officials and business leaders representing the US to travel to Israel."

Morefield linked up with the director of the Virginia Israel Advisory Board in Israel and, "As a result, we identified aquaculture as one of a few opportunities and from there Project Jonah was born."

The Israeli partner was a tiny company called Aquamaof, which originated in Beit She’an Israel in 1989. While on his AIPAC trip, Morefield outlined the proposed economic benefits of the venture. "The project is projected to create 426 jobs with the potential to grow to nearly 2,000 jobs in the future."

The market opportunity developed by VIAB’s consultant Lala Korall, with help contracted expertise from Virginia Tech, was in raising and selling tilapia. In hindsight, Morefield and Tazewell County could simply have looked 166 miles east to the company Blue Ridge Aquaculture (BRA) for expertise. The older, more established Virginian tilapia grower was already producing four million pounds annually and shipping 10-20 thousand pounds per day. BRA had overcome unique challenges, developing technologies and practices customized to Virginia’s environment and accessible markets.

Instead, VIAB and Korall, who soon became an executive at the Aquamaof Project Jonah subsidiary, continued looking abroad for expertise and capital. Whether AquaMaof ever had anything relevant to Virginia tilapia growing is an open question. Like BRA, Aquamaof’s core technology is recirculating aquaculture. But it may not have any truly Israeli innovations. In 2010 AquaMaof applied for a US patent on a "modular aquaculture system," but its patent expired due to "non-payment of maintenance fees." In 2014 AquaMaof again applied with partner Dakota Fisheries Inc. on behalf of inventor Gary Myers of Sartell, Minnesota. On November 22, 2016, the trio was finally issued recirculating aquaculture US patent number 9497941.

VIAB helped apply for a $10 million Virginia Coalfield Economic Development Authority loan for Project Jonah. On December 19, 2013 VCEDA announced a loan of $10 million had been earmarked, conditioned on Project Jonah raising $137 million in matching funds. VCEDA set December 13, 2014 as the expiration date for the loan offer and stipulated that $25 million in "hard" investment (excluding any design or engineering costs) had to be evident before the low interest loan could be disbursed.

Project Jonah missed the 2014 VCEDA deadline but was granted annual extensions. By 2017, Chief Operations Officer Johan H. Sheiering and Lala Korall were demanding "sweeteners" on the loan, which would delay and reduce repayment to an estimated $6.46 million. The pair also demanded and won a reduction of the required private matching funds to $110 million. But even with these concessions, Project Jonah still failed to meet loan closing deadlines.

Perhaps finally sensing that it would not be very popular in Virginia to put a home town favorite like BRA out of business with a heavily subsidized Israeli operation, in 2017 Project Jonah boosters began to claim that it was going to grow salmon, rather than tilapia, in Tazewell County.

In 2019, the Singapore based 8f Asset Management, which has been attempting to raise private equity for Project Jonah, publicly announced that it planned to annually produce 20,000 metric tons of salmon "using $20 million of financial assistance from local development agencies." According to industry metrics, even with the heavy markups between salmon fisherman or fish farm operator and retailers, a farm of this proposed size could generate $50 million in revenues per year.

8f Asset Management’s founders and partners are all alumni from the failed investment bank Bear Sterns which imploded in the 2008 financial crisis. In secret reports filed with VCEDA in 2018, 8F claimed to have raised $70 million for the project. In 2019, in yet another "proprietary and confidential" report, 8F claimed it had raised $147 million for the fish farm and was well on the way to having a $320 million aquaculture investment fund by year end. These claims of overflowing investment coffers make US executive Lala Korall’s 2018 request to the Virginia Coalfield Economic Development Authority all the more puzzling.

In June of 2018, confidential VCEDA internal notes reported

“Project Jonah – wants an amendment to the loan approval to allow the closing of the loan (but not the disbursement) before they have spent $2SM. Have postponed the real estate closing with SWCC [Southwest Virginia Community College] and said no announcement or construction this calendar year…No documentation provided yet of any actual cash in the bank. Do we allow them to request the loan amendment?”

VCEDA ultimately did not proceed with Project Jonah’s "unconditional" loan closing idea. But the job creation promised has shrunk. The Tazewell County Board of Supervisors, which had cosigned for $1.5 million in Project Jonah TROF funds, met in April 2020 agreeing to cut their demand for job creation nearly in half to only 218 jobs, while reaffirming a million dollar tax abatement. Project Jonah has purchased 120 acres surrounding the Richlands wastewater treatment plant to build and operate the site.

At present, the success or failure of Project Jonah seems to hinge on three major factors. The first is 8F visibly investing significant capital in the project through actual engineering works on the Richlands site. The second is Project Jonah successfully entwining the large nearby community college mentioned in the "loan with no milestones" proposal. The current reset deadline on the VCEDA loan is December 31, 2020.

Southwest Virginia Community College is a picturesque campus perched on high bluffs overlooking scenic river valleys. In 2018, Project Jonah attempted to compel SWCC to sign a memorandum of understanding to provide training facilities and a curriculum for Project Jonah’s workforce. When the college balked, Project Jonah went into overdrive, seeking to sweeten the deal by offering to buy up some of SWCC foundation’s abundant real estate from its $4 million in holdings for the project. No sale has yet been announced.

The third factor is competition. As Project Jonah pivoted from tilapia to salmon while looking for funding, other enormous land-based salmon farm projects began sprouting across the United States in Maryland, Maine, Florida and CaliforniaSince 2014 both wild caught and farm raised salmon prices have softened as farm raised supply increases. It remains to be seen whether a project originally conceived and designed to benefit Israel by tapping Virginia state funding can become a viable market competitor. But a project supported by Israel’s US lobby (AIPAC) and Virginia state agency promoter (VIAB) may not depend entirely on market forces.

AIPAC – one of the original promoters of Project Jonah – over its decades of lobbying slowly transformed US aid to Israel from loans to mostly unconditional grants. Project Jonah and VIAB face stiffer opposition but have already demonstrated an ability to repeatedly reset loan closing deadlines, make the loan more favorable to Israel and put the idea of a "no conditions" loan on the table. VIAB also has a history of making sure its projects transfer any losses back to state investment pools.

If the Virginia fish farm project ultimately does not work out, under existing rules Project Jonah would repay millions in grants already received from the Tobacco Commission. In recent meeting minutes, TROF has documented $3.2 million in "claw backs" the fund has attempted to recover from various other projects that never became viable.

However – like AIPAC – VIAB plays by a different set of rules. In a 2019 sweetheart deal, VIAB Vice Chairman Charles Lessin and Tobacco Commission Executive Director Evan Feinman quietly agreed to forgive hundreds of thousands in claw backs owed on a failed refinery involving the Israeli company TransBioDiesel. Out of the public spotlight, with ever more deadline extensions and lobbying, and relentless promotion by VIAB and AIPAC, Project Jonah may yet unconditionally close on its $10 million loan and other state subsidies.

Note: For files released under the Virginia Freedom of Information Act about Project Jonah, see https://IsraelLobby.org/ProjectJonah

Grant F. Smith is the director of the Institute for Research: Middle Eastern Policy in Washington and the author of the book, The Israel Lobby Enters State Government: Rise of the Virginia Israel Advisory BoardIRmep is co-sponsor of the annual Transcending the Israel Lobby at Home and Abroad conference at the National Press Club.

Originally appeared at: Anti-War