Sightings from The Catbird Seat
~ o ~
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
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
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
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 email@example.com
* * *
April 11, 2003
FBI SAYS ITS AGENT HAD AFFAIR WITH
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
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....
~ ~ ~
For more on THE FBI, GO TO > > > The Secret Nests - Part II
For more on William Simon, GO TO > > > William Simon Says...
$ $ $
March 6, 2003
HUGHES, BOEING TO PAY MILLIONS
IN FINES FOR SELLING DATA TO
Penalty stems from exchange of rocket, satellite
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
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
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
$ $ $
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
It also represents treasonable conduct by the Bush administration. I
imagine that’s why certain Republicans aren’t all that enthralled about
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
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
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 Rat - How Bill Clinton Compromised U.S. Security
for Chinese Cash, by Edward Timperlake and William C. Triplett II:
THE LOCKHEED-MARTIN AFFAIR
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
>> 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
>> National Security Council documents show that, although at the time of
the February waiver National Security Adviser Sandy Berger knew
Loral's conduct was "criminal, 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
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
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
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
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
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
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
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
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
Published: 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
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
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
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.
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
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
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
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."
* * *
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
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
Scandal at Bank of China highlights questions about China's Big
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
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.
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
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 &
The U.S.-China Business Council - Press Release, June 9, 1999::
US-China Business Council Board Welcomes
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
Carleton S. Fiorina, Group President, Global Service Provider Business,
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,
Patrick J. Martin, Senior Vice President - Developing Markets Operations,
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
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
Defense Waste and Fraud Camouflaged As
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
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
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
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
(For more, GO TO > > > Global Beat Home Page.)
From The Straits Times-Asia, 10/31/00:
Anti-graft Audits to Include Top
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 SENTENCES 14 TO DEATH IN
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
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
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
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
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
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.
“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
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
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
FOR MORE DRAGONS AND RATS
BIRDS ON THE POWER LINES
BIRDS THAT DRINK FROM CESSPOOLS
BOEING, BOEING, BONG
THE BLACKSTONE GROUP
THE KISSINGER OF DEATH
NESTS IN THE PENTAGON
SUKAMTO SIA: THE INDONESIAN CONNECTION
THE HEAVENS AND THE EARTH
THE SECRET NESTS-PART II: THE FBI
THE WORLD TRADE ORGANIZATION
WILLIAM SIMON SAYS
YEAR OF THE DRAGON
~ ~ ~
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