Sightings from The Catbird Seat

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Remembering China

By Reed Irvine and Cliff Kincaid

June 19, 2002

Remember when China was the number one strategic challenge facing the U.S., before the war on terrorism? China has nearly dropped out of sight in the national media and one wonders if the same holds true for the Bush administration. What does appear in the elite media is mostly about new entrepreneurs or airline crashes.

So here is some news about China, most of it quite alarming, that you probably haven’t heard.

Amnesty International has released its annual report on human rights violations. The Washington Post, for example, focused on the report’s conclusion that U.S. measures to combat terrorism “undermined U.S. moral authority” and made only one passing reference to China. The media ignored the watchdog’s finding that serious human rights violations increased in 2001 in China.

Amnesty International uncovered China’s increased use of torture, continued suppression of free speech, new restrictions on the media and the Internet, religious persecution, and the use of violence to break up labor and farm protests. About 200 Falun Gong adherents were reported to have been tortured to death while in police custody and thousands remain arbitrarily detained or imprisoned for violating laws on freedom of speech, association, or belief.

But we stopped caring about human rights violations when China dangled the prospect of huge new markets before U.S. companies and the Congress.

On that front, the U.S.-China trade deficit is now up to about ninety one billion dollars. China continues to exploit U.S. capital markets to pay for military-technical development and technology acquisition.

But President Bush seems to have no clearer vision of what constitutes a strategically-sensitive export than did Clinton. For example, Republicans harshly condemned Clinton for exporting high-performance computers to China, but President Bush has more than doubled the control threshold on these computers despite existing intelligence estimates that demonstrate how China’s national security benefits from such acquisitions.

China is also expanding its ability to collect intelligence on the U.S. from locations south of our borders. The China Reform Monitor revealed that China has replaced Russia as Fidel Castro’s main partner in electronic surveillance against the United States. Russia used Cuba to collect vital political and nuclear intelligence, but China will also expand its robust cyber-warfare capability against the U.S. from this site. The Monitor reports that Chinese have already practiced spoofing the U.S. air traffic control system by transmitting false codes to New York.

Finally, the Washington Times reported that China is opening another large-scale military exercise featuring a cross straits invasion of Taiwan.

The last such Chinese exercise was highlighted by Russian long-range bombers attacking U.S. aircraft carriers in the Western Pacific in support of China’s efforts to prevent U.S. intervention. Will Russian President Putin permit a replay so soon after signing a strategic arms accord with us?

Don’t rely on the mainstream media to tell you.

– Reed Irvine can be reached at

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April 11, 2003


Accused woman was prominent Republican activist

By Erica Werner, Associated Press

LOS ANGELES – If the FBI is right, one of its own agents carried on an affair with a prominent Republican activist who happened to be a Chinese double agent.

The affair allegedly gave the spy, nicknamed “Parlor Maid,” access to classified documents while she wined and dined some of California’s top politicians and businessmen.

“Basically you see her everywhere,” said Paul Zee, a businessman and former mayor of South Pasadena who is active in the Chinese-American community.

Authorities said Katrina Leung, 49, was recruited to work for the FBI in the early 1980s and soon began an affair with her handler, former supervisory Special Agent James J. Smith, 59.

She would copy classified documents he left unattended when he came to debrief her at the posh home she shared with her husband and their son in wealthy San Marino, according to a prosecution affidavit.

Attorneys for both have denied the accusations.

The FBI alleges it paid Leung $1.7 million over 20 years to act as an informer, and during that time she allegedly had an affair with a second agent, whom officials did not identify. The second agent learned of Leung’s unauthorized contacts with officials in Beijing and alerted Smith, but Smith continued his relationship with Leung, authorities said.

Leung was charged Wednesday with obtaining a classified national security document for purposes of aiding a foreign nation, Smith was charged with gross negligence for allowing Leung to obtain the documents. They could face up to 10 years in prison if convicted.

Prosecutors said they found FBI documents at Leung’s home, including phone directories and a secret 1997 memorandum about Chinese fugitives that contained “national defense information.” The affidavit said that an FBI agent secretly searched her luggage when she left Los Angeles for China in November and found six photographs of current and former FBI agents. The photos were not found when the luggage was secretly searched again upon her return….

The house Leung and her husband, Kam, own has four stone lions around a fountain, and a pool and guest house. The two worked as consultants, and Katrina Leung brought neighbors cookies and cake at Christmas.

Leung worked with many Chinese-American groups, and her former posts included secretary of the National Association of Chinese Americans.

A naturalized American citizen and a registered Republican, she donated money to Republicans including Rep. David Dreier and failed GOP gubernatorial candidate Bill Simon, as well as some Asian-American Democrats including Chu, records show. She raised money for Simon and former Los Angeles Mayor Richard Riordan.

She accompanied Riordan on a trip to China in 1998 and joined Mayor James Hahn’s delegation when he went to China last year.

Leung and her husband donated about $25,000 last year to candidates for state office, including a $10,000 donation to Riordan.

According to the federal affidavit, Leung has admitted setting up bank accounts in Hong Kong to which she pretended to make mortgage payments on the home she bought about 12 years ago for $1.4 million, though she was actually paying herself.

That enabled her to claim mortgage interest tax deductions after she had actually paid off her mortgage….

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For more on THE FBI, GO TO > > > The Secret Nests – Part II

For more on William Simon, GO TO > > > William Simon Says…

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March 6, 2003


Penalty stems from exchange of rocket, satellite technology

By Jeff Gerth, The New York Times

WASHINGTON – Two top American aerospace companies have agreed to pay a record $32 million in fines to settle civil charges that they unlawfully transferred rocket and satellite data to China in the 1990s.

The agreement, completed on Tuesday and released yesterday, comes two months after the State Department accused the companies, Hughes Electronics Corp., a unit of General Motors, and Boeing Satellite Systems of 123 violations of export laws in connection with the Chinese data transfers.

In a joint statement the companies said they “express regret for not having obtained licenses that should have been obtained” in the 1990s by a Hughes unit, the Hughes Space and Communications Co., which was acquired in 2000 by Boeing.

The companies also said that they “acknowledge the nature and seriousness of the offenses charged by the Department of State, including the harm such offenses could cause to the security and foreign policy interests of the United States.”

The technology used to launch civilian rockets and satellites is similar to that used to launch missiles so there are tight burbs – mostly administered by the State Department – on the export of satellites, aerospace equipment and related defense services.

The Chinese have always insisted that their rocket and missile programs did not need help from American companies. But a string of Chinese rocket failures in the 1990s ended only after American companies transferred data on guidance systems, telemetry, aerodynamics and rocket failures.

In 1998, a congressional panel criticized satellite manufacturers for sometimes subordinating national security to the “bottom line” and concluded that their “illegally transmitted” information had improved the reliability of China’s civilian and military rockets.

The next year the United States stopped permitting the use of American satellites for Chinese aerospace ventures amidst concerns about Chinese aid to missile programs in North Korea and Pakistan.

China agreed in November 2000 not to assist other countries in developing ballistic missiles that could deliver nuclear weapons.

But the Central Intelligence Agency told Congress earlier this year that China has continued to provide missile-related items and/or assistance to North Korea and several other “countries of proliferation concerns.”

The settlement ends a five-year federal investigation into how American satellite and aerospace companies aided China as they competed to have their satellites launched aboard Chinese rockets….

Previously the Lockheed Martin Corp. and Loral Space and Communications Corp. agreed to pay fines – $13 million and $20 million respectively – to settle similar cases.

The Justice Department terminated its criminal investigation of Hughes and Loral last year without taking any action….

Officials said the $32 million civil penalty is the largest fine in an arms export case….

The settlement also calls for the companies to appoint an outsider, a “separate third party,” to monitor the agreement as well as future exports to countries such as China.

The latest agreement seems to disavow previous denials of wrongdoing by Hughes because it states that its “regret for not having obtained licenses that should have been obtained” was “notwithstanding Hughes’ prior public comments to the contrary.”…

For more on Boeing, GO TO > > > Boeing, Boeing, Bong!

For more on Lockheed Martin, GO TO > > > Tarnished Wings

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From The Conspirators: Secrets of an Iran-Contra Insider, by Al Martin:

The Chinese Connection: U.S. Weapons and High Tech Graft

THE FINAL REPORT of the Congressional Select Committee, chaired by Christopher Cox of California, has been released. His co-chairman, Nelson Dix of Washington, is a Democrat but essentially controlled by Republican interests, who’s very close to the defense industry within the State of Washington.

They have released this Cox Report, wherein they mention that illicit transfers of high-technology American weapons in exchange for political money have been going on for over twenty years.

Of course, they just mention it as a matter of state policy.

In their draft report, they mention only two defense contractors – Loral and Hughes Electronics. The only reason these two were mentioned is because they have already been previously exposed vis-a-vis the illicit transfer of high technology to China.

However, no mention was made of political money in exchange for Department of Commerce permits allowing these defense contractors to export weapons and technology. Furthermore, no other defense contractors were mentioned in the draft report of the Select Committee.

This report will now go over to the Defense Intelligence Oversight Committee, which is investigating criminal matters vis-a-vis this very same subject pursuant to subpoenas said committee issued to high-ranking military personnel in and around the Redstone Arsenal in Huntsville, Alabama.

What the Select Committee has claimed in their findings is that the relationship vis-a-vis technology transfers of weapons has existed for approximately twenty years. . . .

They also mention the importance of Pakistan and Israel and a few other nations in this trade. However, they fail to tackle the subject from the very beginning.

So … we will have to consistently digress so that the reader can understand the geopolitics of the relationship between the United States and the People’s Republic of China, particularly from 1977 to 1979, when these illicit technology transfers began to occur.

What the report fails to include is the original importance of Pakistan as a surrogate arms merchant for the United States in 1978 . . .

You may remember that in 1977, President Carter delinked the United States from Taiwan by withdrawing diplomatic relationship with Taiwan, ostensibly to seek an increased trade relationship with China. At the same time he extended, in a confidential protocol, certain military guarantees to Taiwan.

This was walking a fine line, and President Carter knew that it was an immensely unpopular decision, particularly within conservative quarters where Taiwan had been considered a traditional ally of the United States. . . .

At the time, Prime Minister ali Bhutto of Pakistan, whom the United States had initially supported, began to waver vis-a-vis the protocols he had established with Washington in exchange for both economic and military aid.

In late 1977, Bhutto began a rapprochement with India and a rapprochement with the Soviet Union, taking the traditional Pakistani policy . . .

Ali Bhutto, in doing this, perhaps failed to appreciate the power of the CIA in Pakistan at the time – and continuing to this day.

The CIA has substantial assets in Pakistan. At that time, in late 1977 and early 1978, the CIA was very influential and very closely aligned with the Pakistani military.

As Ali Bhutto increasingly began to ignore the wishes of the United States, vis-a-vis U.S. theater policies in the Indian sub-continent, the CIA quietly started to encourage the Pakistani military, then under the command of Chief of Staff, General Zia el Haq to institute a coup d’etat against the Ali Bhutto administration. It would be a coup d’etat that the United States would secretly support. . . .

When Zia el Haq came to power, one of his first official acts at the covert urging of the United States, was to put Ali Bhutto on trial for treason.

Ali Bhutto is history now, as he was promptly hung. . . .

Zia was ensconced in power and, his power not consolidated by the spring of 1978, he proceeded to do his masters’ bidding in Washington, and immediately reversed Ali Bhutto’s rapprochement policies.

He immediately stopped the warming of Pakistani relationships towards India and the Soviet Union. He immediately re-instituted a very hard line, both politically and militarily, against India and the Soviet Union. And he immediately began to thaw out the previously close relationship between Pakistan and China. . . .

Zia contained Muslim fundamentalism by force of arms. He re-adopted an extremely close relationship with the United States for public consumption, but the real underlying truth was that Pakistan was a de facto vassal of the United States in every way possible. It could not survive without United States money.

So, once again, as had been done previously, Pakistan acted as an arms merchant between the United States and the People’s Republic of China. In other words, high technology weapon exports were being sent to Pakistan.

Then Pakistan was essentially re-exporting these exports to China, sometimes by itself, or through using African or Israeli intermediaries.

At the same time, the double impact of this policy was that since Zia was, in Washington’s eyes, the golden-haired boy of Pakistan, and we were able to act in a more overt fashion in terms of arming Pakistan.

Washington did, in fact, sell billions of dollars worth of weapons to Pakistan – all on credit, of course. The same scheme has been used before.

Pakistan didn’t have any money and it never has had any money.

The U.S. government provided credit for large scale purchases of weapons from U.S. defense manufacturers, and issued quiet credit guarantees, disguising these guarantees among various quasi-government agencies, such as OPIC, CCC and the Export-Import Bank.

A little mini-scandal was ultimately created in the 1980s, when the policy once again shifted to the CIA-backed Benazir Bhutto and her People’s Party in a coup d’etat against General Zia. Of course, the first thing Benazir Bhutto did when she took her father’s place after an eight-year gap, was to have Zia hanged.

But, anyway, it’s necessary to skip around to make this thing continuous.

Back to 1978 – the balance had been restored in the sub-continent vis-a-vis our interests, namely that India, although technically a nonaligned state and the second power of the non-aligned association of states, was in fact a Soviet satellite.

India was financed by the Soviet Union. They received all of their arms from the Soviet Union. In the United Nations, they would consistently vote with the Soviet Union. Although they maintained the facade of independence and paid lip service to the west, they were in fact a de facto Soviet state.

Pakistan was very pro-United States. Having been extensively armed by the United States, it resumed its theater political and military position by being hostile towards India and keeping India in check.

It was also hostile toward the Soviet Union and moving once again closer to the People’s Republic of China, particularly the People’s Army and the Public Security Bureau (PSB).

These events relate essentially to earlier doctrines – doctrines that had originally been discussed in 1971 when Nixon first broke the ice with China with his meeting with Zhou Enlai.

These were later consolidated into a CIA policy in 1973, which literally became known as the “Colby China Doctrine.” . . .

Colby’s concept was to contain Soviet expansionism in all spheres simultaneously by supporting opposite factions. . . .

As we go forward to 1979, we again see a shift in theater politics, particularly on the side of the Soviets.

The Soviets had by now invaded Afghanistan, and this was a direct threat to United States interests within the geopolitical balance in the Indian sub-continent.

The Soviets made it known that they were looking for India to move much more openly toward the Soviet camp. In order to entice India to do this, the Soviet Union began giving India thermonuclear weapons technology.

Naturally, when the CIA became aware of this, which was only within a year or so, Pakistan would also have had to have this technology.

The CIA was frightened of even covertly giving this technology to Pakistan. They, in turn, asked China to give thermonuclear weapons technology to Pakistan, which China gladly did.

They saw it in their best interest, since they had traditionally looked at Pakistan as a buffer state between themselves and India.

Now, with the Soviet Union making a bid to expand their influence in the Indian sub-continent and threatening to introduce larger scale weapons systems in Afghanistan, China suddenly became extremely close to Pakistan.

At this time, the United States became increasingly nervous vis-a-vis Soviet expansionism, so in the 1979 to 1981 period, high-technology weapons transfers, as well as shipments of the actual weapons to the People’s Republic of China were stepped up.

It was these high technology transfers that essentially allowed the People’s Republic of China to build a military satellite system as well as a military spy and intelligence gathering satellite system, something they had been unable to do before.

The United States considered this a “stabilizing” factor. . . .

It was feared in the United States that China, on only a perceived provocation, could very readily actually launch thermonuclear weapons at the Soviet Union because they did not have the technological means to enter into any type of a mutual deterrence with the Soviet Union.

Therefore, we looked at it in terms of macro-geopolitical and geomilitary interests to see China have these types of high-technology systems.

The further coincidental benefit to this was that it made billions for the U.S. defense contractors.

This was particularly true in the early 1980s. And the more billions that U.S. defense contractors could make surreptitiously, the more millions of those billions would get donated into Republican coffers….

There are some further connections that go way back and exist to this day that should be mentioned because they are germane to other policies of the 1980s, even to Iran-Contra.

This is the traditional connection between the United States, the South Africans, the Israelis, and the Pakistanis – and later the Iranians. The Iranians didn’t become part of this equation until about 1985.

As I mentioned before, the Chinese had been giving thermonuclear weapons technology to the Pakistanis, but what the Pakistanis wanted was missile technology to go along with that – something the Chinese were sorely lacking.

This was particularly true with the so-called theater nuclear weapons delivery systems. The Pakistanis weren’t interested in strategic systems. They were interested in theater systems. And theater systems were something that the Chinese had not devoted a lot of effort to developing.

The Chinese principal interest had always been the ability to project thermonuclear power within a strategic theater of operation, not a specific regional theater. They didn’t face any real threat in terms of a regional theater.

Therefore, starting about 1981, when Reagan first came to power, with the consent of the United States, the Israelis started to give Pakistan missile technology, particularly short-range and medium-range missile technology, as well as the technology to affix thermonuclear warheads to missiles, which is a much more sophisticated technology than equipping a missile with a conventional or even a chemical warhead.

A thermonuclear warhead on a missile is a whole different ball of wax. And where did it get the missile technology?

Pakistan got the missile technology from Israel.

And Israel got the missile technology as a technology transfer from South Africa.

The South Africans, of course, originally got the technology from the United States….

The United States had previously provided the South Africans with this technology, particularly as it related to artillery shells or extremely short-range thermonuclear weapons systems, such a the Lance Missile System, a very good portable short-range missile system that carries either a five- or ten-kiloton thermonuclear warhead. They are rather accurate, cheap to produce, with a simple guidance system. . . .

This again related to an earlier policy, wherein the United States was extremely concerned about the white South African government’s viability.

The obvious mathematics made South Africa inherently unstable. Four million white people and eighteen million black people – both sides hating each other. These kinds of numbers always frightened the United States because the United States wanted to absolutely ensure that the South African government would remain white, would remain pro-western, and would remain essentially under joint United States-British political control as it did for years.

Also the United States wanted to ensure that its supplies of strategic minerals (all of which it got from South Africa) would remain intact – materials such as rhodium, tritium, and strontium, particularly strontium-90, cesium-230, mercury-240.

These are strategic minerals that are found in very few places in the world. The two principal places they are found naturally occurring is in South Africa and in the Soviet Union. They are all important components (chromium is another one) for the construction of thermonuclear weapons. . . .

Were there to be a radical black administration, or were the white government to be overthrown and a black left-wing black administration be installed (which might become chummy to the Soviet Union) – this was a real concern in the 1970s. . . .

Therefore, the United States gave South Africa thermonuclear weapons technology, concentrating on what the South Africans needed.

Namely, the South Africans’ internal interest was the ability to eliminate (with the use of low-yield thermonuclear weapons) large numbers of blacks quickly.

If one looks at the demographic situation in South Africa, one sees that those eighteen million blacks aren’t simply spread across the country. They tend to be concentrated in large numbers in small areas.

There are large quasi-cities, or quasi-slums, or camps (whatever you want to call them) and there was the subsequent institution of the South African “Homeland” policy, which essentially set aside small independent states for blacks.

But to make a long story short, the policy of the South African white governments had been traditionally to concentrate as many blacks as possible into the smallest area possible, and to make these areas as far away from the white population (and the white industrial centers) as possible.

This way they would be much easier to contain and much easier to eliminate, particularly if one had thermonuclear weapons….

To conclude on South Africa – a second reason why we provided the South African government with thermonuclear technology was for South Africa as a de facto vassal of the United States to act as a bulwark against potential Soviet expansionism in Africa, particularly in the border states around South Africa – Namibia, Zimbabwe, and Mozambique in particular, and Angola to the northwest.

It was felt that if the South Africans had at least a credible short-range thermonuclear deterrence that it would contain Soviet interests in Africa, which it certainly did.

You can see this vis-a-vis the 1975 situation in Angola when the Soviets put in technical advisers and heavy weapon systems to back one faction, and the South Africans, the Chinese and the Pakistanis covertly backed UNITA, the other faction.

UNITA is still backed by the same combination of powers today as it was more than twenty years ago. Little has changed. However, the policy was successful, and the Soviets were forced to withdraw. . . .

This famous South Africa-to-Israel-to-other-destination military transfer points worked very effectively vis-a-vis getting weapons to Iran in 1985, and later the following year, getting weapons to Iraq.

People tend to forget. They look at Iraqgate as being a 1988-1991 thing, when in fact weapons transfers and weapon sales to Iraq had begun as early as 1986. It was one of the policies of then-interim DCI Chief, Bobby Gates.

To conclude on the South African-Israeli connection, it should be noted that this connection in itself proved profitable to the United States vis-a-vis the mutual military relationship established by Israel and South Africa.

South Africa provided the State of Israel with nuclear weapons technology and also sold Israel artillery pieces, particularly the very high quality Bofors guns and self-propelled 155 and 175 mm artillery pieces.

In exchange for these, Israel began to sell South Africa jet fighters, principally the Israeli Kafit, which was essentially a knock-off of the American F-5 at a time when the South Africans were looking to rebuild their air force, which had become very old.

This was also a time when the United States could no longer either overtly or covertly sell such weapons systems to South Africa due to the various economic, political and military embargos placed on South Africa after 1979 because of their apartheid policies.

Filtering Iran-Contra into this equation for a moment – who was the principal conduit between the US, South Africa and Israel regarding weapons transfers to Iran and Iraq in 1985-1986?

It was the infamous Michael Harari, a senior Mossad agent who operated closely with Manuel Noreiga.

The policy towards arming China began to change in 1986, when relationships between the United States and the Soviet Union began to thaw to some degree. They continued to thaw in the years thereafter. . . .

The Republicans within the Reagan-Bush regime knew as early as 1986 that there was a potential scandal brewing, if the extent of indirect weapon transfers to the People’s Republic of China in exchange for Chinese money ever came out.

This became an increasing detriment due to the shift in global strategic policy from a hardline towards the beginning of a thaw between the US and the Evil Empire of the Soviet Union.

By this time (1986-1987), the Chinese began to be regarded as a destabilizing force geopolitically, whereas before they had been considered a stabilizing force.

The Soviet Union had not been particularly concerned about our weapons transfers to China for twenty years (from 1966 to 1986) insofar as Chinese strategic nuclear weapons had all been concentrated around the facilities where China produced nuclear weapons, namely Lop Not.

By 1986, however, much to our chagrin, Chinese strategic assets had been well dispersed throughout the country in mobile launchers and in silos.

We also became increasingly aware that the bulk of Chines strategic forces was in fact aimed at the United States, not at the Soviet Union, as had been commonly presumed earlier – and as the Chinese had informed us earlier.

Therefore, there was a period from 1986 to 1990 where weapons technology transfers and sales to China via intermediaries were temporarily scaled down, just as the Soviet Union began to convert from a communist country to a capitalist country.

However, when it became apparent in 1990 that the Soviet Union was effectively unraveling, we returned to the situation that we were in previously. This time it was for a different reason. It was that Russia was now a destabilizing factor because of its own internal political chaos.

Therefore, a renewed effort with China to bolster Chinese technology and to bolster the production of strategic systems in China was looked at as a restabilizing influence against Soviet internal instability instead of external adventurism, as it had been ten years prior.

In 1991-1992, at the very end of the Bush administration, technology and weapons transfer to China was ramped up again, which served Mr. Bush well in terms of the amount of Chinese money that come into his 1992 presidential campaign.

However, this is not to say that the Chinese didn’t hedge their bets.

They had traditionally given money to both parties for years through a variety of artifices. Before 1992, the bulk of political campaign contributions had always been given to Republicans.

In 1992, even the Chinese sensed there was a shift coming. They made sure, for the very first time, that the Democratic National Committee started to get six-figure Chinese political money.

Fast forward to today, that amount of money has increased. The policy of covertly arming China has really not changed. As Larry Klayman at Judicial Watch is correct in pointing out, we are “Japanning” China. And I wonder how many Americans really understand what that means. What he’s saying is that by allowing China, ostensibly a hostile nation, to have “most favored nation” status with the United States regarding trade policies, we are allowing China to exercise a $3 to $4 billion a month trade deficit with the United States.

Most of this trade deficit is then used to purchase weapons, which are used to build strategic thermonuclear weapon systems pointed at the United States.

And that is the real nub and the real sizzle of the scandal. . . .

You can imagine that Klayman says this is the biggest potential scandal of the century – a covert policy that has existed for over twenty years. This cannot be disguised or colored for geopolitical or geomilitary purposes because in the public’s mind, it is so much about money.

Even in the politician’s mind, it is now really a relationship about money. There are no longer any geomilitary or geopolitical concerns.

This budding scandal … is now starting to be investigated by the Department of Justice . . .

There have been millions and millions that have come into both political parties’ national committees in exchange for weapons going out the back door.

These are weapons that the American people, both as taxpayers and consumers, have financed to have pinpointed at themselves. . . .

What we have not yet discussed is the money coming through a variety of Chinese agents. The crossover between the Republicans and the Democrats vis-a-vis surreptitious Chinese political money coming into the national committees of both coffers has been worked consistently over twenty years by the same intermediaries.

That is what has already been publicly revealed about Charlie Trie and John Huang, for instance, and the 147 other Chinese that are commonly mentioned in the media as being “The Gang of 147” identified by Congress.

The banks, which are the root of the money, start from the Bank of China and filter out through the Hong Kong branch of the Hong Kong and Shanghai Bank, the Industrial Bank of Indonesia, and the Riady family.

The notion of Clinton’s closeness to the Riady family – this isn’t new. None of this is new. The Riady family was also very close to the Bush people. It’s just that when the money for Republicans left the Industrial Bank of Indonesia, it simply took different routes.

It is Chinese money (and this is little known) that principally caused the formation of the Nugan Hand Bank.

When that fell apart and became exposed and some people in Australia died to make sure it stayed covered up, there was simply a new artifice created for Democrats.

Money from the Riady group was coming directly into Arkansas banks, principally through the Stephens Investment Group. It was simply a different artifice when the money went from the Orient to the United States.

When it got to the Democrats, it was simply a different set of banks and a different set of brokerage firms. In Republican times, the money had often been filtered through Merrill Lynch.

Now the money is filtered through Stephens Investment Group and other smaller brokerage firms close to Clinton or other Democrats.

What has come to light recently is the Democrat side of the equation. This includes the connection of Ron Brown, the DNC, Chinese weapons and licensing by the Commerce Department for export of armaments and high-technology weapons, which were winding up in China being mislabeled and so forth.

You start to understand the role of Ron Brown in all of this. And you start to understand why he had to go.

Ron Brown suddenly died at the very same time the FBI received conclusive information that John Huang and Charlie Trie and a few others were not only just Chinese businessmen, but were in fact reserve officers (not just in the PSB) but of the MSS, the Chinese Ministry of State Security.

If this were to become publicly known (the FBI already knew it and had leaked some of this information, but not the proof to back it up, to Burton’s committee) … FBI Director Freeh has recognized the political implication.

This would constitute treasonable conduct by the Clinton administration! . . .

Chinese money is coming in from Chinese brokers. Some of these Chinese brokers are not only closely connected to the government in China, but in fact they’re Chinese intelligence officers.

The Department of Commerce, under Ron Brown and continuing to this day, is allowing false bills of lading for exports of forbidden weapons that it knows are going to wind up in China.

Ron Brown had already begun to leak some of this publicly before he died. I imagine this is one of the reasons he did die.

Chinese weapons merchants, who are also Chinese intelligence agents, are being allowed such access to the Redstone Arsenal in Huntsville, Alabama.

Many of the Chinese arms merchants and Chinese people identified as having been at weapons auctions at Redstone, or having been at certain military parties with two- and three-star generals are also the very same people who are on this List of 147.

Perhaps it becomes more obvious why the Klaymans of this world are invoking the word “treason” because if this is all put out the right way, and the dots are all drawn in, it does represent treasonable conduct by the Clinton administration.

It also represents treasonable conduct by the Bush administration. I imagine that’s why certain Republicans aren’t all that enthralled about investigating it.

Look at the Republicans who are the most reticent in supporting a new and expanded probe into Chinese money for Chinese weapons. They are the very same Republicans of the old Bush group who were very close to the defense industry before and continue to derive much money from the defense industry.

It struck me with some humor that the members of the Congressional Select Committee investigating this includes the second most senior Republican member. It’s none other than Congressman Porter Goss, who has the distinction of having received more defense money from Loral and Hughes Electronics than anyone else.

So if anyone is looking for any astounding revelations from the Select Committee, or even the Defense Intelligence Oversight Committee, which is also loaded with Republicans close to the defense industry, I wouldn’t bet on it.

There’s an ancillary point to this, and that is the Chinese hedging their bets.

In a separate probe, there was a gentleman who was revealed to be acting as an intermediary, laundering Chinese government money to both recent Bush gubernatorial campaigns – both in Florida and Texas.

It was also discovered how that money was being used by their campaigns, and then getting laundered back to Republican National Committee, principally through members of GOPAC.

It is exactly the same Chinese money route that existed in the 1980s. Nothing has changed.

The way the Democrats are getting the money is almost exactly the way the Republicans have always gotten it. It just involves a different series of banks, once the money leaves the Orient and gets to the United States. . . .

The Clinton administration had begun to scramble, and you can tell this is getting closer to home. Republicans were also becoming increasingly concerned about previous liability.

Why else would it be that Israeli, South African, and Brazilian so-called “Agriculture Trade Delegations” have all shown up at the Redstone Arsenal in Huntsville, Alabama?

This United States military institution has nothing to do with agriculture. It’s the same old connection. It’s really the South African-Brazilian connection and that’s a separate issue.

You may remember some of the comments in the media and the little scandal that had been created by the revelations of George Sr., and George Jr., and Jeb and Neil’s connections with a certain Brazilian named Amaro Pintos Ramos, who was heavily in the Brazilian nuclear program and how nuclear materials left Brazil and went elsewhere.

That’s a whole different sub-connection.

However, the only reason I happened to mention it is because of all the South Americans that showed up in these trade delegations.

Simply look who the people were from the past. It isn’t hard to understand what the probable text of the discussions was.

This was called a “cover your ass” meeting which involved Israeli, South African and some South Americans, as well as some senior military officers, mostly two- and three-star generals, who got their initial appointments (their initial stars) in the Reagan-Bush administration.

What’s going on in Huntsville now is essentially a Republican effort to cover your ass at the source.

An interesting little double feature of this on the Republican side is how they’re making money three ways to Sunday on this thing.

In 1991, the first people who set up export companies in the Soviet Union were all part of the Old Bush Gang.

Frank Carlucci and Dick Armitage set up an export company, Blackstone Investment Group, operating ostensibly for the CIA to purchase potentially wayward nuclear materials out of the Soviet Union. This also involved some technology that people aren’t aware of.

The stuff was getting repackaged and then surreptitiously sold back to China.

In other words, how can you sell the same nuclear components and technologies five different times in ten years and keep selling them to the same parties back and forth?

It’s incredible. But, as I’ve said before, you could write a separate book on this. . . .

* * *

For more on Frank Carlucci and the Carlyle Group, GO TO > > > Birds that Drink from Cesspools

$ $ $

From Year of the RatHow Bill Clinton Compromised U.S. Security for Chinese Cash, by Edward Timperlake and William C. Triplett II:


In the early morning hours of February 15, 1996, a Chinese Long March 3B space launch rose a short distance off the launch pad and then fell over onto a local village with an incredible explosion. According to an Israeli engineer who witnessed the disaster, thousands of corpses were loaded in dozens of trucks and buried in mass graves.” . . .

Loral Space Systems, the builder of the February 15 satellite, had a problem. So did the Chinese launchers, who had such a poor reputation for reliability that they were uninsurable. Without insurance, Loral and the other U.S. firms could not use Chinese rockets to launch their satellites.

Something had to be done to make the Chinese rockets more reliable if the satellite makers were going to save a dollar or two on launch fees. . . .

On April 14, 1998, the New York Times ran a major story by investigative reporter, Jeff Gerth — Grand Jury Probes Two Firms’ Ties to China Missile Program” — that linked Loral and its partner, Hughes Electronics, to China. . . .

Under pressure from Congress, the National Security Council was forced to release a series of documents it would have preferred to keep secret. The substance of the allegations is as follows:

>> Without obtaining a proper license from the State Department, engineers for Loral and Hughes helped the Chinese make their rockets reliable. Not only did the engineers solve the immediate cause of the February 15 accident, they also recommended improvements to other areas of weakness in the Long March.

>> In May 1966, after the federal government found out about this, the U.S. Air Force did a classified study of the event and concluded that “United States national security has been harmed.”

>> After a number of delays, the Justice Department began a federal grand jury investigation.

>> In February 1998 the Justice Department was closing in on Loral and Hughes when President Clinton approved a waiver allowing the free transfer to China of the same technology that Loral and Hughes were accused of transferring under the table. This severely undercut Justice’s case.

>> National Security Council documents show that, although at the time of the February waiver National Security Adviser Sandy Berger knew Loral’s conduct wascriminal, likely to be indicted, knowing and unlawful, he did not recommend against what amounted to a get-out-of-jail-free card for Loral.

>> Adding to the overall concern, the encoded portion of the Loral satellite was missing when the Chinese returned the debris from the February 1996 explosion. NBC has shown pictures of PLA soldiers picking through the crash site while U.S. officials were kept away for five hours.

>> Finally, after the Loral-Hughes fixes, the Chinese launch program now has a perfect record for reliability.

Then there is the question of the money.

Loral Chairman Bernard Schwartz claims that it is only a “coincidence” that he, his family, and his employees were large donors to the Clinton-Gore cause and subsequently received favorable treatment from the administration . . .

After Clinton and Gore were elected, they had something Schwartz wanted. In the summer of 1994 he wrote a check to the Democrats for $100,000.

Two months later he was on Ron Brown’s trade delegation to China. Brown arranged meetings between Schwartz and Chinese officials.

In the 1993-1994 cycle, Schwartz contributed a total of $112,000 to the Democrats. . . .

Then, in the 1995-1996 cycle, three things came together: (1) Clinton desperately needed money for Dick Morris’s TV advertising blitz, (2) Schwartz needed antitrust approval from the Clinton administration’s Justice Department for his spinoff of some parts of Loral to aerospace giant Lockheed, and (3) Schwartz desperately needed Clinton support (and later, cover) for his China satellite program.

He wanted granting-authority for the export licenses he needed transferred to the user-friendly Commerce Department. He also wanted regular waivers of the Tiananmen sanctions on satellites, and, to avoid the proliferation sanctions, he had to persuade the Clinton administration to ignore Chinese missile sales to Iran. . . .

Everyone got what he wanted.

Bernie wrote a lot of checks. His personal contributions rose to an amazing $586,000 in the Clinton-Gore reelection cycle of 1995-1996. As of May 1998 Schwartz had contributed $421,000 to the Democrats’ 1997-1998 campaign cycle. That makes him the number one contributor to the Democrats in both the 1995-1996 and 1997-1998 campaign cycles.

Between 1992 and 1998 he has given the Democratic Party $1,131,000. His family, his companies, and his executives have given another $881,565 to Democratic candidates. Finally, he has contributed $217,000 to the Democratic Leadership Conference, a Clinton-associated think tank.

Grand total: More than $2.2 million to the Clinton-Gore ticket.

Bernie got his antitrust exemption for Loral.

On March 12, 1996, Clinton overturned an October 1995 decision by Secretary of State Warren Christopher and transferred authority for satellite export licenses to the Commerce Department.

Tiananmen waivers became routine for Clinton. . . .

America’s first line of defense against missile proliferation was dismantled. Loral would have gotten off the hook with the February 1998 Clinton waiver if somebody hadn’t tipped off Jeff Gerth of the New York Times. . . .

Equally important, Clinton and Gore were reelected. . . .

* * *

For more on the Greed at Lockheed, GO TO > > > Tarnished Wings

October 30, 2002

China Makes Spying A Company Policy

By Scott Wheeler, Insight Magazine

Bill Clinton’s eagerness to do business with China enabled the PRC to acquire technologies such as rare-earth magnets, which are vital components of guided missiles.

A U.S. high-tech firm bought in 1995 with Clinton-administration approval by a consortium that included two Chinese companies is proving to be a threat to U.S. national security, according to senior government analysts.

The Anderson, Ind., based Magnequench Inc. was bought by the San Huan New Materials and Hi-Tech Co. of the People’s Republic of China (PRC), which was started and still is partially owned by the Chinese Academy of Sciences in Beijing. It teamed in this venture with a Hong Kong investment house and a U.S. firm to form Magnequench International, which since has bought out at least one U.S. national laboratory spin-off company and has been project partner with another lab.

“The company is little more than a front for the PRC,” a senior government analyst tells Insight.

The official insists that the PRC owners of Magnequench are using its status as a U.S. company to obtain “state-of-the-art and emerging technology and transfer it to the PRC �It’s just another form of espionage.”

Magnequench itself is a General Motors (GM) spin-off company that produces rare-earth permanent magnets that have practical uses in electric motors. But these magnets also are used in advanced military equipment such as magnetic bearings in high-performance gas-turbine engines and in permanent-magnet submarine-propulsion systems, and are a key component in missile-guidance systems.

The concerns expressed by the senior government analyst are that the technology and equipment used to produce the permanent magnets here in the United States would not be allowed for export to the PRC. But, because Magnequench supposedly is a U.S. company owned partly by a Chinese company, there is no control over how the technology is used. And the source indicates the technology is being used to enhance the PRC’s production capabilities. “They have already duplicated the existing manufacturing line in China,” the source tells Insight.

The chairman of Magnequench is Hong Zhang, who also is chairman of San Huan. The company’s president and chief executive officer, Archibald Cox Jr., tells Insight that he did not believe his Chinese partners posed a threat. “There is no story about China stealing technology,” he says. Cox points out that since a recent realignment of the corporate structure, “San Huan’s stake is only 20 percent now.” He also acknowledges, though, that there was no wall of security protecting U.S.-developed technology from Magnequench’s Chinese partners.

The senior government official says that the activities of Magnequench since the 1995 buyout by the Chinese companies point to an aggressive pursuit of U.S. high-technology in rare-earth permanent magnets. In 1998 Magnequench acquired a small company formed by the Idaho National Engineering and Environmental Laboratory (INEEL), a U.S. national laboratory.

This company, GA Powders, was put together by two scientists who had developed an atomization process to aid in the production of high-tech neodymium-iron-boron permanent magnets while they worked at INEEL.

The U.S. national labs have been identified by U.S. counterintelligence as targets of PRC espionage attempts – especially the Los Alamos National Laboratory where the government says the theft of the nuclear W-88 warhead design occurred through a series of espionage efforts by the PRC.

The senior government analyst who is monitoring Magnequench says that by acquiring GA Powders the company has gained new technology developed at one of the nation’s most important labs. “The Idaho lab is where some of the most exotic work is done on new materials, including ordnance and other materials used in advanced manufacturing. �� It is a tremendous security issue.”

Indeed, in an internal newsletter the Sandia National Laboratory also has reported working on a joint project with Magnequench involving rare-earth magnets. The newsletter quotes a Sandia scientist involved in the project as saying, “Enabling aspects include advanced electrical controls [and] new magnet technology.” The senior government analyst calls the project “a disturbing partnership.”

In March 2000, Magnequench International announced that it would open “Magnequench Tianjin Co. Ltd., a new neodymium-powder plant, in Tianjin, China. This plant opening will locate the production of neodymium-iron-boron permanent magnetic powder close to the source of raw materials.”

The senior government analyst says this fits a pattern for the PRC: “They seem to be cloning whatever they do at Magnequench USA in China.”

When the consortium composed of two PRC companies and one U.S. company teamed up to buy Magnequench in 1995, the deal had to be approved by the Committee on Foreign Investment in the United States (CFIUS).

Chaired by the secretary of the Treasury, CFIUS is an interagency committee responsible for conducting thorough reviews of foreign companies attempting to purchase stakes in U.S. companies. Once notified of a foreign interest in a U.S. company, CFIUS determines whether the foreign interest would pose a threat to national security. The 1988 Exon-Florio provision to the Defense Production Act gives the president the authority to restrict a foreign company from investing in a U.S. company if it poses a national-security risk….

Another U.S. official tells Insight that the servos and actuators are used for “missiles, rockets and precision-guided bombs.”

The senior government analyst tells Insight that the Magnequench technology being transferred to China has a bifurcated risk: “It enables them to produce super-high-quality rare-earth magnets/ring magnets for use in gas centrifuges to produce nuclear-weapons material. And in addition to enhancing their own nuclear-weapons program we know that China has already proliferated ring magnets to Pakistan, which played a critical role in developing Pakistan’s nuclear weapons.”

In February 1996 the Washington Times reported that the CIA “has uncovered new evidence China has violated U.S. antiproliferation laws by exporting nuclear-weapons technology to Pakistan.”

It later was confirmed by Congress that military-industrial companies in China had sold 5,000 ring magnets to Pakistan.

Proponents of even more-liberalized trade with China often point to economic successes in joint projects which they say have pried open the bamboo curtain and promoted better relations with the PRC.

Defense experts, on the other hand, point to China’s nuclear-weapons program and related proliferation of weapons technology and say these relations may come at a higher cost to national security – and, in time, even of millions of lives.

Scott L. Wheeler is a reporter for Insight.

Posted on Free Republic:


Source: The New Republic
3/10/1997 Author: John B. Judis
Posted on
01/25/2000 by John Huang Is A Chinese Agent

“Much of the American foreign policy establishment, including three former secretaries of state and other former senior officials of both parties, turned a collective thumbs down yesterday on the Clinton administration’s policy of linking trade with China to Beijing’s human rights performance,” The Washington Post reported on March 16, 1994.

Anyone who read the Post’s account, which described a Council on Foreign Relations meeting chaired by former Secretaries of State Henry Kissinger, Cyrus Vance and Lawrence Eagleburger, would have come away knowing that a quorum of foreign policy luminaries had offered a grave indictment of U.S. China policy.

What they wouldn’t know was one particularly relevant fact about those luminaries: namely, that Kissinger, Vance and Eagleburger each have business ties to China. Kissinger is the founder of a firm, Kissinger Associates, which helps its corporate clients secure business in China; Vance is a corporate lawyer who chaperones clients seeking outlets in China; and Eagleburger, once the president of Kissinger Associates, now works for a Washington law firm where he has also helped businessmen secure contracts in China.

Yet this gathering was not in the least unusual. Increasingly, many of our most distinguished and, in theory, disinterested, experts on U.S. China policy are selling their reputations and knowledge to clients with very particular business interests in China.

Almost every prominent former government official who speaks out on this subject has direct or indirect financial ties to China.

Most of them are Republicans, because a Republican administration first re- established ties with China in 1972, and because Republicans controlled the White House for most of the next twenty years. Besides Kissinger and Eagleburger, they include: former Secretaries of State Alexander Haig and George Shultz, former Secretary of Defense Dick Cheney, former National Security Adviser Brent Scowcroft, former U.S. Trade Representatives Carla Hills and Bill Brock, and former Senate Majority Leader Howard Baker.

But Democrats have also gotten in on the China game. Besides Vance, there is, for example, former Secretaries of State Edmund Muskie and Warren Christopher, former Ambassador to China Leonard Woodcock, former U.S. Trade Representative Robert Strauss and former Senator Gary Hart.

Unlike the ex-officials who have lobbied for Japan and Japanese corporations, these former officials don’t work directly for China or for Chinese businesses, and most have no personal investments in China. The relationship is more subtle and indirect. They are employed by, or serve as, lawyers, advisers or consultants to American companies that have invested, or want to invest, in China.

Some, like Kissinger, Hills, Scowcroft and Haig, are high- priced consultants who run their own firms. Others, like Cheney, formerly a director of Morgan Stanley and now the chairman of Halliburton Oil, and Shultz, a director of Bechtel, work for the businesses they seek to help.

And still others, like Vance and Howard Baker, are senior or managing partners in law firms that represent companies with an interest in China. What all of them have to offer is not so much knowledge of China as clout with its government– clout based in part on the statements they have made about U.S. policy toward China.

American businesses use these former officials to gain access to high Chinese officials who would otherwise be reluctant to entertain visits from businessmen or bankers. Explains Roger Sullivan, the former president of the National Council for U.S.-China Trade, “The Chinese have all the traditional views toward business. It’s crass, lower-class. Higher-level officials don’t like businessmen that much. You have to have someone else with you if you want to see them.”

James Lilley, who was ambassador to China in the Bush administration and is now a professor at the University of Maryland, concurs. “There is a standard procedure that, if you want to do business in China and get the contracts, you have to have someone to open doors, and people who were in prominent positions are often very good door openers.”

But having been friendly toward China while in office is not enough to guarantee access, even for the most exalted former officials. They must also be seen as ongoing friends and defenders of China’s rulers.

Explains Lilley, “If you want to deal in China, you will sing their tune. This can take a number of forms. It can take the form of bringing congressional visitors over, it can take the form of an op-ed piece in The New York Times, it can take the form of a speech, it can take the form of lobbying Congress. There are many, many ways you can influence things.”

The pressure to make favorable statements about China mounts as a visit nears, or as contracts are under consideration. Even when a delegation arrives, the Chinese will often keep them in suspense about how high-ranking an official they’ll get to see. Says Sullivan, “It is always put to you that here is your schedule, and at such and such a date you are going to see a high-level official, but they won’t tell you who it is going to be.” . . .

The classic new China hand is, of course, Kissinger. Kissinger has won access to China’s markets for a number of his firm’s clients. In 1995, for instance, he helped GTE sign a memorandum with China’s United Telecommunications Corporation to jointly develop China’s massive telecommunications system. At the same time, he is the Chinese government’s most prestigious defender.

In 1987, at the behest of China’s ambassador to the U.S., Kissinger even founded his own lobby, the American China Society, which he ran out of Kissinger Associates. Most recently, he is credited with weaning House Speaker Newt Gingrich from his support for Taiwan–in July 1995, Kissinger called Gingrich after the Speaker advocated recognizing Taiwan as an independent nation–and with persuading the Clinton administration to decouple trade from human rights.

Other former statesmen have followed closely in his footsteps. The most egregious example is probably Haig, who was Kissinger’s aide during the opening of China in 1971-72. After resigning from the Reagan administration as Secretary of State in 1982, Haig established Worldwide Associates, a Washington consulting group.

One of his main clients has been United Technologies, of which he is a former chief operating officer and president. Haig has helped the Connecticut conglomerate win billions of dollars in contracts in China for everything from airplanes to air conditioners. Haig has maintained his access to high Chinese officials through unflagging defense of their actions. Sullivan calls him the “classic patsy of the Chinese.”

In October 1989, for instance, four months after Chinese troops crushed pro-democracy demonstrators, Haig was the only prominent American to join Deng Xiaoping in Tiananmen Square for the celebration of the fortieth anniversary of the People’s Republic.

Lilley and the ambassadors from Japan and Western Europe boycotted the celebration, as did American businessmen. Afterwards, Deng praised Haig for his “courage.”

Haig has also consistently opposed any American policy that displeases the Chinese. Last year, he even criticized then-U.S. Trade Representative Mickey Kantor for trying to crack down on Chinese software piracy. “I think Mr. Kantor lets domestic American politics play too heavy a sway in his outspoken criticism of our trading partners, whether it be in Tokyo or Beijing,” Haig declared.

Haig has also done his bit in Washington. Last year, he called Representative Christopher Cox and other Republican congressmen to demand they back Most Favored Nation trading status (MFN) for China. Haig berated Cox for opposing MFN and championing Taiwan, prompting Cox to inquire with the House office whether Haig was a registered lobbyist. He’s not.

When I interviewed Haig, I wanted to ask him why, but I never got that far. My first question–whether there was any problem with having business interests in China while making public pronouncements on U.S. China policy–made him too indignant. “I don’t see any conflict there at all. I have business dealings all over the world, including my own country, and I don’t think that deprives me of the ability to make judgments on international affairs, which I spent a good part of my life involved in. Who has planted these nasty questions in your craw?” When I tried to rephrase the question, he hung up on me.

Haig is revered by China’s leaders, but disliked and even scorned in Washington, particularly by Republicans who remember his trying to take charge after the Reagan assassination attempt. Scowcroft, by contrast, is widely respected in both Beijing and Washington, though the former national security adviser has mixed public policy pronouncements on China with private business just as freely.

Scowcroft, like Eagleburger, also served as president of Kissinger Associates before joining the Bush administration. After leaving the White House, he founded the Scowcroft Group, to consult for businesses, and a nonprofit policy group, the Forum for International Policy, which operates out of the same suite of K Street offices. Like Haig and Kissinger, he helped clients win contracts in China. Last October, for instance, he helped secure a meeting between Chinese Premier Li Peng and Dean O’Hare, the chairman of the Chubb insurance company.

And Scowcroft, too, defends China against its critics. Last year, he gave speeches and briefings on China and MFN at the Heritage Foundation for Republican House members. His Forum for International Policy faxed “issue briefs” on China to congressional offices.

Some of these briefs seemed to betray the same sort of “blame America first” logic that old Leftists used to resort to when they spoke of the Soviet Union. In one, published on June 12 last year, Scowcroft and former Bush State Department official Arnold Kanter blamed the U.S. for Chinese sales of nuclear technology to Pakistan, arguing that “an accretion of non-proliferation legislation” had led us into strategic blunders.

Though other members of the informal China lobby are more discreet than Kissinger, Haig and Scowcroft, they, too, get themselves into situations in which they appear to be abusing their roles as members of the foreign policy establishment.

One such incident involving former Defense Secretary Cheney stirred the wrath of some of his fellow Republicans on Capitol Hill.

In February 1995, the Chinese Navy entered the waters around the disputed Spratly Islands and erected structures on Mischief Reef, which is also claimed by the Philippines. Philippine President Fidel Ramos ordered the Philippine Navy to the area, and the Philippine ambassador complained to Washington.

In March, Cheney, who had joined the board of directors of Morgan Stanley, visited China with representatives from the bank and secured meetings with high-ranking Chinese officials, including Defense Minister Chi Haotian.

In Beijing on March 10, after three days of meetings, Cheney told Xinhua News Agency: “I do not really perceive any threat from China to the world or to the region.”

After leaving China, Cheney attended a business meeting in Singapore, where he made further public statements suggesting that he believed the Philippines had no cause for concern. According to Reuters, Cheney said he did not think China had embarked upon a “hostile course” in the area.

Afterwards, one Republican China expert on Capitol Hill told me, “Cheney’s statement [on Mischief Reef] was very mischievous. Saying China is not a threat sent a message to Southeast Asian countries who were backing the Philippines that major parts of the U.S. establishment weren’t going along.”

In the months after Cheney’s visit, the People’s Construction Bank of China, a joint venture between the government and Morgan Stanley, announced a major expansion of its services.

Kissinger, Haig, Scowcroft, Cheney, Hills, Vance and Shultz stand atop a pyramid of numerous former officials who are involved in U.S. China policy and who share the same conflict of interest. Kanter and former NSC staff member Eric Melby work for Scowcroft. Former ustr official Erin Endean works for Carla Hills at Hills & Co. in Washington, D.C., where she advises firms about investing in China.

In January 1996, former Clinton Commerce Department official David Rothkopf joined Kissinger Associates as its managing director. As Ron Brown’s deputy undersecretary for international trade, Rothkopf had supervised Deputy Assistant Secretary John Huang.

These lower-ranking officials don’t have the same influence on Capitol Hill as Kissinger or Scowcroft, but they can function more plausibly as impartial experts, particularly for the media. The same reporters who would hesitate before quoting Kissinger or Haig as impartial experts on China are happy to rely on Rothkopf or Kanter.

Last November, for example, Business Week blithely invoked Rothkopf’s expert opinion about the “importance of cultivating the relationship with China.” In August, Reuters, citing Rothkopf’s opinion that China should be made “a full member of the global trading system,” left out his affiliation with Kissinger Associates, identifying him only as a former Commerce Department official.

Rothkopf or Kanter can argue that their opinions are independent of their employers, but the Chinese don’t see it that way. The Chinese government closely monitors what researchers and policy wonks in this country say and write about China. One head of a policy group, who didn’t want his name or organization revealed for fear of further reprisal, told me what happened when one of his researchers, writing in an obscure academic journal, described China’s trade policy as “mercantilist.”

The Chinese Embassy in Washington immediately protested to the businesses that funded the policy group.

Until now, the new China hands and their minions have had the best of both worlds. Not only have they gained contracts for their clients; they have shaped opinion in Washington, too.

Says one aide to a Republican congressman, “They are respected voices on foreign affairs. Congress is especially susceptible to authoritative statements from Kissinger and Vance because so few members have any experience or knowledge about foreign affairs. Between [Richard] Armey, [Thomas] DeLay and [John] Boehner, you’ve got zero knowledge of foreign affairs.”

A Senate Republican aide who has advocated a harder line toward China told a similar story. “I can deal with the Motorolas of the world,” he said. “The problem I have is the George Shultzes, where these guys show up and they are not directly on the payroll. You get overwhelmed as a staff guy. You get a discussion going, and then someone gets a call from Scowcroft and he is off the reservation again.”

And the work of the former officials nicely complements that of the corporate lobbyists. While the lobbyists appeal to the politicians’ instincts for electoral survival, the former officials seem to offer an intellectual rationale for obeying those instincts. Explained one House aide, “I have been in meetings and heard members say that they have to vote for MFN, but they need some way to cover their own rear ends. That just tells me right there, they are not making the vote on any intellectual or moral grounds. They are making the vote because of their campaigns. The role of Scowcroft or Kissinger is to provide cover.”

But in the long run, the new China hands’ success may prove to be the country’s failure. Some of the policies they promote may have been justifiable on their merits. It made a certain sense for the Clinton administration not to base its trade negotiations on China’s human rights record. But many of the former officials have not simply argued for pursuing negotiations on different tracks, but for virtually abandoning any effort to influence either China’s highly protectionist trade policies at the root of last year’s record $39.5 billion deficit or its support for tyranny at home and abroad.

They identify the interests of American corporations abroad with the interests of Americans at home, many of whom could see their jobs shifted from Seattle to Shanghai. They overlook the fact that China could pose a far greater threat to international security than rogue states like North Korea or Iraq. And, as they did in Iran, they cast America’s lot with an unpopular autocracy.

Perhaps more important, the new China hands could have a corrosive effect on American democracy. In foreign policy debates, average Americans, as well as many of their political representatives, often defer to prominent former officials whom they believe speak disinterestedly for the national interest. When the public becomes aware that they are also speaking for the interests of their business clients, the cynicism about how important policy decisions are made will deepen.

This, together with revelations about the Clinton Commerce Department and presidential campaign, and a growing anxiety about the role of money, especially foreign money, in American politics, could precipitate a crisis of political confidence as profound as that caused by Watergate. Those who understand what has happened to the foreign policy establishment can’t conceal their concern.

Says Lilley, “Who are the real objective observers? It’s like Diogenes looking for an honest man. It is very, very hard to find one.”

* * *

Inside Traders

MORE THAN 80 HIGH-RANKING OFFICIALS of the U.S. government have left federal service since 1986 to represent or lobby for foreign trade or security interests, according to a March 1992 General Accounting Office (GAO) report.

The report, “Foreign Agent Registration: Former Officials Representing Foreign Interests Before the U.S. Government,” identifies two senators, one congressperson, seven White House officials, 33 senior congressional staff and 39 executive agency officials who have gone on to represent public or private interests from 43 countries.

“These people are using their training and access to privileged and sensitive economic information … to sell out to the highest bidder at a later date,” said Representative Marcy Kaptur, D-Ohio, in releasing the GAO report.

Officials who have left through the revolving door include: William E. Brock, former Secretary of Labor and United States Trade Representative from 1981 to 1985, who has represented the governments of Taiwan and Panama, as well as the Mexican Ministry of Commerce during the debate over “fast-track authority” for trade agreements; former Senator Mark Andrews, who has represented over 17 Japanese businesses since he left the Senate in 1986; and Michael Smith, former deputy trade representative at the State Department, who is currently serving as a consultant to the governments of Mexico and Canada , and to the Canadian Sugar Institute.

The revolving door is a two-way problem, with individuals who previously represented foreign interests occupying top positions in the U.S. trade bureaucracy, according to a recent report from the Washington, D.C.-based Center for Public Integrity.

Current U.S. Trade Representative Carla Hills, for example, was registered in 1985 as a representative for Daewoo Industrial Co., Ltd, a Korean conglomerate, and has also worked for the foreign companies Panasonic Industries and Reuter.

Several House members have proposed legislation to curtail government officials’ revolving door activities. Kaptur and other legislators are proposing legislation that would restrict trade officials and senior members of the executive and legislative branches from lobbying after leaving government service. The bill will probably be introduced in May, according to Kaptur’s office. . . .

Holley Knaus

For more on Carla Hills, GO TO > > > HUD; The Biotech Birds

For more on Henry Kissinger, GO TO > > > The Kissinger of Death!

* * *

JANUARY 28, 2002

China’s Banks under a Cloud

Business Week

Scandal at Bank of China highlights questions about China’s Big Four

For more than a decade, Wang Xuebing shone as one of the brightest stars in the often dark sky of the Chinese financial world. In 1993, he took over as head of Bank of China, the country’s second-largest, and two years ago began running another of the Big Four banks, China Construction Bank (CCB). He was part of an elite cadre of officials singled out by Premier Zhu Rongji and given the task of restructuring China’s tottering state-owned banks. Indeed, as an official with Cabinet-level rank and as an alternate member of the Central Committee of the Communist Party, Wang stood at the pinnacle of power in Chinese financial circles.

Now, in a case that is roiling Chinese finance, Wang has been fired from his post and detained on suspicion of corruption – a charge that could result in the death penalty. On Jan. 11, after repeated denials from China Construction Bank officials that anything was amiss, the Chinese government confirmed rumors that Wang had been removed as head of the bank.

People in China and Hong Kong familiar with the situation say that Wang is being investigated in connection with a questionable $23 million loan linked to his wife. The loan, say sources, was arranged through Bank of China’s Hong Kong office in 1994, when Wang was in charge. The loan was secured by vastly insufficient collateral, and was not repaid–until the bank itself covered the cost of the credit through its New York office. Because of the American connection, the affair is also being investigated by U.S. authorities.

BusinessWeek has learned that Bank of China may soon sign off on a deal to settle the matter by paying a fine of more than $10 million to the U.S. and to the People’s Bank of China (PBOC), the central bank. . . .

The case promises to have repercussions well beyond the fate of Wang. Bank of China had planned to list its highly profitable Hong Kong and Macao operations on the New York and Hong Kong stock exchanges by the middle of the year, and could now face a more difficult job finding investors. “This will heighten investor skepticism and raise questions,” says a financial-industry executive in Hong Kong. “The IPO will not be successful unless these questions are answered.”

The landmark deal, expected to raise between $2 billion and $5 billion, would mark the first time one of China’s Big Four banks–the other two are Industrial & Commercial Bank of China and Agricultural Bank of China–has tapped international equity markets.

Goldman, Sachs & Co., UBS Warburg, and Bank of China International–BoC’s Hong Kong-based investment-banking arm–are the lead underwriters.

The Wang case is the latest in a series of scandals that underscore the banking sector’s weak controls. The PBOC said early this month that it was censuring all of the Big Four banks, which control two-thirds of the country’s banking assets, and punishing 686 members of their staffs. The move is part of a seemingly never-ending effort to root out bank corruption by conducting sweeping investigations and crackdowns. The central bank said it found “a serious breach of rules” at more than 100 bank branches. It also closed 1,585 post-office bank branches for various infractions.

At the Bank of China, Wang’s reputed offense pales in monetary terms beside another recent scandal. Chinese and Canadian authorities are hunting for a number of ex-Bank of China managers who they believe stole a staggering $480 million from a Guangdong branch between 1992 and last year. Hong Kong police say three of these suspects have fled to Canada. Court documents filed in Vancouver indicate that Chinese authorities suspect that at least $75 million was transferred out of China. The most recent transfer, of $6.27 million, was made to three different banks in Canada in mid-October. No arrests have been made.

Meanwhile, in September, 2000, Cheng Kejie, a powerful provincial politician and a vice-chairman of the Standing Committee of the National People’s Congress, was executed for taking $5 million in bribes to help arrange loans from Bank of China and China Construction Bank. Another official in charge of Bank of China foreign-exchange operations committed suicide in May, 2000. . . .

For more, see Xiamen International Bank in: Dirty Money, Dirty Politics & Bishop Estate

The U.S.-China Business Council – Press Release, June 9, 1999::

US-China Business Council Board Welcomes Eleven

WASHINGTON – The United States-China Business Council today announced the election of eleven senior U.S. business figures to the organization’s Board of Directors.

At its Annual Membership Meeting in Washington, June 9, members of the Council approved a slate of new directors forwarded to the membership by the Council’s Board of Directors at their meeting on June 8.

Council Directors on June 8 also named Michael R. Bonsignore, Chairman and CEO of Honeywell Inc., as the organization’s chairman for 1999-2000.

Executives joining the Council’s Board include the following:

Roger G. Ackerman, Chairman and Chief Executive Officer, Corning Incorporated

Carleton S. Fiorina, Group President, Global Service Provider Business, Lucent Technologies

Durk I. Jager, President and CEO, The Procter & Gamble Company

L. Oakley Johnson, Senior Vice President, Corporate and International Affairs, American International Group, Inc.

J. Bennett Johnston, Chairman, Johnston Development Co., LLC

Sean Maloney, Senior Vice President and Director, Sales & Marketing Group, Intel Corporation

Patrick J. Martin, Senior Vice President – Developing Markets Operations, Xerox Corporation

Terence H. Thorn, International Government Relations and Environmental Affairs, Enron International

Morton L. Topfer, Vice Chairman, Dell Computer Corporation

Henry Wallace, Group Vice President, Ford Motor Company

Lawrence B. Zahner, President, GM China Operations, General Motors Overseas Corporation

In addition to Mr. Bonsignore, the Council’s officers for the coming year include Ambassador Carla A. Hills (Hills & Co.) and Frederick W. Smith (FDX Corporation) as vice chairmen; Edgar Hotard (Praxair, Inc.) as Secretary-Treasurer; Larry L. Simms (Gibson, Dunn & Crutcher LLP) as Counsel, and Robert A. Kapp as president.

The US-China Business Council, headquartered in Washington, D.C. serves the business needs of more than 250 major US companies and firms. The Council maintains service offices in Beijing, Shanghai and Hong Kong. . . .

Honeywell International – From AFL-CIO Executive Pay Watch: . . . AlliedSignal changed its name to Honeywell International after it acquired its manufacturing rival in Dec 1999.

“Back at old Honeywell, there was a culture that took care of the employees and the community,” explains stock analyst Nicholas Heymann . . . After the merger, the new Honeywell announced it would increase job cuts from 3,500 to 8,000 in the year 2000.

As head of the USA-NAFTA corporate coalition, CEO Lawrence Bossidy stated on national television that if NAFTA passed he did not anticipate the export of additional American jobs to Mexico.

Two years after passage of the free trade agreement, AlliedSignal had the largest number of petitions at the U.S. Dept of Labor from workers displaced by NAFTA. . . .

* * *

From The Project On Government Oversight, Executive Summary, Sept 1999:

Defense Waste and Fraud Camouflaged As Reinventing Government

Overpriced spare parts horror stories from the 1980s taught us how to prevent fraud, and led to useful reforms. By the 1990s, however, defense industry interests dovetailed with Vice President Gore’s Reinventing Government campaign, and new policies bypassed some of the earlier reforms.

In the name of adopting “commercial” practices, the Administration’s defense Acquisition Reform effort has gone beyond cutting red tape into throwing out important protections against contractor abuse that are needed even in a more commercial environment. For example, a new greatly expanded definition for a “commercial” product has exempted many more purchases from normal oversight.

The problem has predictably begun to appear in the form of more overpriced parts stories:

AlliedSignal corporation was found to have overcharged the government for spare parts by as much as 618%. The government overpaid on the overall contract with AlliedSignal by 54.5%.

Prices were inflated by more than 1,000 percent on a variety of spare parts.

For example, the Boeing price for a commercially-available $24.72 “spoiler actuator sleeve” was $403.39 – a markup of 1,532 percent. Another contractor charged $714 for an electric bell worth $46.68.

The cause – Acquisition Reform’s new policies, including drastic staff cuts to oversight agencies:

The AlliedSignal cases provide examples of the government paying more for spare parts under the new “commercial” rules than it paid under the earlier reforms. As the Defense Department’s Office of the Inspector General has noted, the loose definition of commercial items “qualifies most items that DoD procures as commercial items” [Emphasis added].

A Defense Department Inspector General’s report indicates how adopting commercial practices has come to mean subservience to contractors and blind acceptance of their claimed costs and prices: “contracting officers shall require information … when necessary to determine price reasonableness for commercial items, but there is a strong DoD [Department of Defense] preference not to use that mechanism and the Government has not asserted its right to have the data.”

Despite highly favorable dollar returns on taxpayer investment in oversight agencies, many of them have been gutted by personnel cuts. For example, the Defense Contract Audit Agency saves almost $10 for each dollar invested, but staff positions have been cut by 19% from Fiscal Year (FY) 1993 to FY 1997. As of 1998 the Administration scheduled it to suffer a total loss of more than 3,000 staffers – a 44% cut – over the period FY 1990 to FY 2002.

The Administration has pushed defense corporate mergers, at a time when Acquisition Reform has failed to create adequate competition, a key requirement for the government to benefit from commercial markets.

As a Department of Defense Inspector General noted, If anything, the risks may be greater today because there is such market dominance by a few very large suppliers. In this environment, getting cost information and maintaining audit rights is a prudent business practice. Failure to do so will be very costly for the Department and ultimately the taxpayer.”

(For more, GO TO > > > Global Beat Home Page.)

From The Straits Times-Asia, 10/31/00:

Anti-graft Audits to Include Top Leaders

China’s chief auditor plans to take his fight against corruption to almost the top of the country’s political system, according to state media.

This follows the discovery of US$11 billion in mismanaged funds at Chinese government offices and businesses.

The astounding sum, reported by Mr. Li Jinhua, Auditor-General of China’s National Audit Office, is one of the strongest indications of how mismanagement is in China. . . .

“Corruption thrives under a lack of efficient supervision,” the paper said . . .

According to earlier official reports, the auditing led to the discovery of misuse of funds at the Industrial and Commercial Bank of China, and the Construction Bank of China, causing losses worth more than 10 billion yuan (S$2 billion). . . .

Mr. Li’s auditors found that individual officials and managers had misappropriated 590 million yuan. But this marked only a fraction of the 96.17 billion yuan mismanaged, if not embezzled, by offices and firms, the China Daily said.

The reports did not give details of how the funds were misused . . . But in previous reports over the past 18 months, Mr. Li has criticised officials for diverting government subsidies and spending lavishly on offices. There has also been talk of speculation in stocks. . . .

For more, GO TO > > > Broken Trust

* * *

Asia 2000, 11/8/00, by Jeremy Page:


China sentenced 14 people to death on Wednesday, including senior police and customs officials, in the first verdicts of a multi-billion dollar smuggling scandal, the biggest corruption case of the Communist era.

Those sentenced to death included the former customs chief and deputy mayor of the southern port of Xiamen, and the former deputy police chief of southern Fujian province . . .

But state media said the mastermind of the smuggling scam, businessman Lai Changxing had fled overseas after being tipped off by police….

Lai’s Yuanhua Group smuggled more that $6 billion worth of cars, luxury goods, oil and raw materials in the early 1990s, paying off city and provincial officials to facilitate and cover up duty evasion, Xinhua said.

“The group also used money and women to seduce a number of government officials for the convenience of their smuggling activities,” Xinhua said.

The smuggling “caused serious damage to the normal economic order, brought huge financial losses to the state, led to rampant corruption, and impaired the social, political and economic life in China,” it said. . . .

The death sentences included Xiamen’s former customs chief Yang Qianxian and former vice mayor Lan Pu, and former Fujian deputy police chief Zhuang Rushun, Xinhua said.

Ye Jichen, head of the Industrial and Commercial Bank of China in Xiamen, was also given a death sentence

* * *

From American City Business Journals, March 27, 2001:

Chinese corruption probe targets Sinopec executive

DALLAS — Six months after China-based oil company Sinopec made a $3.5 billion offering to foreign investors, a top executive has been suspended and is under investigation on corruption allegations related to “economic problems,” The Wall Street Journal reported Tuesday.

Among the key investors in the company, also known as China Petroleum & Chemical Corp., is Irving-based ExxonMobil Corp., BP Amoco P.L.C. and Royal Dutch Shell Group.

The Journal said their combined investment in the IPO of the Chinese oil venture exceeded $1.8 billion.

The Journal quoted a spokesman with Sinopec as saying 59-year-old Han Qingzhi, the general manager of wholly owned subsidiary Sinopec Sales Co., was relieved of his duties more than a week ago.

The company official did not elaborate on the focus of the investigation, which reportedly has drawn the attention of Chinese government graft inspectors.

The top official of Hubei Xinghua Co., another Sinopec subsidiary, was given a suspended death sentence last year for embezzling $600,000 from the oil company, The Journal reported. . . .

* * *

China Enters World Trade Organization

By Naomi Koppel/AP

China reached an agreement on Sept. 14, 2001 on the terms of its membership in the World Trade Organization, setting the stage for it to become a full member early next year.

Wrapping up 15 years of tough negotiations, a compromise was reached over the remaining obstacle a dispute over insurance companies.

The agreement opens the way for China to be formally approved at the WTO’s meeting of trade ministers scheduled to be held in Doha, Qatar, in November.

If the accord passes through China’s own legislature, the world’s most populous nation could become a full WTO member early 2002.

Membership will open China’s economy to imports and lead to an upsurge in Chinese exports to the rest of the world. China will also be required to adhere to global trading rules.

“The decision to bring China into the WTO will commit China to adhering to the rules-based global trading system,” said Jeffrey Bader, chief U.S. negotiator.

“It will open markets and contribute greatly” to encouraging reform in China.

China applied to join the WTO and its predecessor, the General Agreement on Tariffs and Trade, 15 years ago. The application process was caught up in political problems over Beijing’s crackdown on the pro-democracy movement and economic fears that China would use its vast labor market to undercut competing products.

The agreement must be rubber-stamped by negotiators at another meeting before it can be sent to trade ministers in Doha.

One of the final stumbling blocks was removed Sept. 13 when Mexico and China reached a bilateral accord. Mexico was the last WTO member to hold out against Beijing.

That left just one remaining hurdle —- a complicated insurance dispute with the United States and the 15-nation European Union —- which accounted for just one paragraph in a treaty of more than 1,000 pages.

U.S. insurer American International Group (AIG), which has operated in China since 1994, wants guarantees that it can continue to expand without having to find Chinese partners.

The draft WTO text states that new companies joining the life insurance market must be 50 percent Chinese owned.

European companies, which operate as joint ventures with Chinese partners, insist that AIG must play by the same rules as they do.

The share of North American imports coming from China rose from 0.8 percent in 1983 to 7.3 percent by 1999, and in European stores “Made in China” labels are widespread.

Chinese sales abroad are expected to soar further once Beijing joins the WTO and thus gains easier access to other markets.

China has already started reducing some import tariffs —- for example on automobiles, whetting foreign appetites at potentially enormous sales.

As a sign of its supreme confidence, China has built a new mission to the WTO, a high-tech building on the lake shore with stunning views of the Alps —- a far cry from the modest U.S. and EU trade missions.

But amid the celebrations, China’s chief negotiator Long Yongtu injected a note of caution.

“It is only the end of the beginning,” he said. “It is a long process for China to implement and to enforce and to be a good member of the WTO.”

* * *

For more on the American International Group, GO TO > > > The Un-American Insurance Group



















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Last update March 27, 2003 by The Catbird