Timmerman for U.S. Senate 2000

A new vision for America.

American Spectator - August 1999

New evidence shows the link that Republicans and Democrats have long ignored: between reckless transfers of defense technology to Communist China and campaign donations to Clinton-Gore.



New evidence shows conclusively for the first time that the Chinese government's effort to buy political influence in the United States led to concrete decisions by the Clinton administration that have harmed our national security. Uncovered by U.S. government investigators and aired publicly by Rep. Curt Weldon (R-Penn.), the evidence includes bank transfer documents making it possible to trace specific campaign contributions back to Chinese military intelligence; corporate documents for Chinese front companies; and transcripts of secret conversations between a Chinese intelligence operative and campaign donor Johnny Chung, which detail a cover- up scheme allegedly agreed upon by President Clinton and Chinese President Jiang Zemin. "This is the first time in U.S. history that an American president has been compromised by a foreign intelligence service," one U.S. government official involved in the investigation told TAS.

Weldon, one of five Republicans on the bipartisan Cox Committee that examined the high-tech giveaway to Communist China, charged that Clinton administration efforts to liberalize U.S. export controls led to "the wholesale auction of sensitive American technology to the highest bidder," and that these decisions came about "because people could buy influence and make campaign contributions." Unveiled at a press conference on May 27 that was ignored by the mainstream press, Weldon's charges were buttressed with new documents establishing key linkages between the Chinese companies used to funnel campaign contributions to the Clinton-Gore campaign and China's Central Military Commission, the highest military authority in the PRC.

The Chinese government became so concerned that its campaign contribution scheme would be exposed that it dispatched an undercover operative to Los Angeles last year to threaten Johnny Chung and his family with physical harm if Chung cooperated with federal prosecutors. The FBI wired Chung for the meetings with the Chinese agent, and eventually struck a deal with Chung allowing him to testify publicly this May before the House Committee on Government Reform. Transcripts of Chung's secret meetings with the Chinese agent, recently posted on the Internet, show the extraordinary efforts by the Chinese government to buy Chung's silence. The Chinese agent, Robert Luu, specifically told Chung never to reveal to U.S. investigators that two U.S. companies selling China critical technology--Hughes Electronics and Loral Space Systems--were tied to Liu Chaoying, who was Chung's link back to Chinese military intelligence. In one taped session, aired on the Fox News Network on May 24, the two discussed a cover-up scheme. "So blame it on the Princelings," Chung said, referring to the sons and daughters of top Chinese Communist Party officials. Replied Luu: "Yes. Chairman Jiang agreed to handle it like this. The president over here also agreed."

Senate investigators have also begun looking into a 76-page confidential report, prepared by the Office of the Comptroller of the Currency (OCC), which documents how the Chinese government transferred $92 million to front companies in California through the Far East National Bank in Los Angeles from 1994 to 1996. Government investigators told TAS that the money was used to buy political influence; to finance intelligence gathering and high-tech procurement operations; and more mundanely, to establish overseas investments for various Princelings. The OCC report was sent to the Senate Banking Committee on May 9 by Senate Intelligence Committee Chairman Richard Shelby (R-Ala.). In his letter of referral, Shelby said the money was wired to the California bank "either directly or through front companies, by the People's Bank of China," and wound up in accounts "created for the front companies by bank officers." Shelby noted he was "very concerned that some of the individuals and entities involved are reported to be, or believed to be associated with PRC intelligence activities in some manner."

The China Plan

Ever since Sen. Fred Thompson (R-Tenn.) stunned members of the Senate Governmental Affairs Committee by revealing the existence of a "China Plan" to influence the 1996 U.S. elections through campaign contributions, the administration and its Democratic allies on Capitol Hill have sought to steer the media away from any linkage between illegal campaign donations and administration high-technology export control policies. Similarly, when the Cox Committee began to examine the export of high-technology goods and services to China, it explicitly excluded campaign contributions from its purview. Now, for the first time, these once-separate issues are being linked through documentary evidence, which shows they were part of a concerted effort that can be traced back to the highest echelons of the Chinese government. "This was not some fluke or rogue operation," one U.S. government investigator told TAS. "This leads directly back to Jiang Zemin."

Weldon says he had been helped in his investigation by individuals he calls "patriots," who continue to work inside the U.S. government bureaucracy despite attempts by the administration to destroy their careers. (Five such individuals testified before the House Armed Services Committee on June 24.) These officials have provided unclassified documents tying the campaign contributions to the high-technology giveaway, and provided insight as to how the technology transfers to Communist China have been organized. (Documents provided to TAS included corporate registry information acquired in Hong Kong, and unclassified U.S. government cables detailing the ownership of Chinese government front companies operating in Hong Kong and the United States.)

At his press conference, and during a June 7 floor statement televised by C- SPAN, Weldon presented two color-coded charts describing his findings based on these documents and a series of background briefings from U.S. government officials. A flow chart entitled "The China Connection" shows a welter of Chinese government entities, banks, and front companies engaged in high-tech espionage and illegal campaign contributions in the U.S. Another "Timeline" chart graphically demonstrates how the campaign donations were linked to Clinton administration decisions to liberalize national security export controls, decisions which the Cox Committee report has shown to have seriously compromised U.S. national security.

According to Weldon, the two charts reveal:

• a systematic effort by the Chinese military at the highest levels to target and acquire technology for military modernization;

• that this effort was planned and implemented by Chinese military intelligence through the second department of the Central Military Commission's General Staff Department;

• that despite efforts going back more than a quarter-century, the Chinese military only succeeded in acquiring many of these targeted technologies after 1993;

• that the Chinese military set up a series of front companies and intermediaries to mask its technology targeting efforts and to launder money to hide its origin. As part of this effort, it enlisted the infamous Macao and Hong Kong Chinese Triad;

• that even after the U.S. government learned of the diversion of the W-88 nuclear warhead design in late 1995 and 1996, the Clinton administration continued to liberalize export controls on such sensitive technologies as computers, encryption, machine tools, telecommunications, stealth technologies, space launch technologies, satellites, gas turbine engines, and high temperature furnaces.

In some respects, Weldon's argument is not novel. Congressional aides William C. Triplett II and Edward Timperlake, in their best-selling account of the DNC fund-raising caper, Year of the Rat, alleged that DNC fund-raiser John Huang was a spy for Beijing (See "The DNC's Chinese Money Laundry," TAS, November 1998). A good friend of Bill and Hillary Clinton, Huang used his influence to obtain a Top Secret security clearance on January 31, 1994, five months before he was officially appointed to a Department of Commerce job, thanks to Hillary Clinton's insistent lobbying. Year of the Rat alleged that Huang's purpose was to gain access to classified U.S. intelligence information of use to the Riady family and their Chinese intelligence service masters. This thesis was given additional weight by Senator Thompson, who acknowledged classified information detailing "a long-term relationship between the Riadys and a Chinese intelligence agency." That agency is known as Er Bu, the Second Department of the People's Liberation Army's General Staff Department, and is the Chinese equivalent of the Defense Intelligence Agency. It is headed by General Ji Shengde, a close political ally of President Jiang Zemin.

Huang's troubling relationship with China continues to preoccupy the Clinton White House, which has been protecting him from the media, federal prosecutors, and congressional investigators. On May 25 the Justice Department announced a plea agreement with Huang, exonerating him on all charges relating to the 1996 campaign, provided he plead guilty to a single count of conspiracy for fund-raising activity between 1992 and June 1994. The plea bargain exonerated Huang of all allegations of espionage. One explanation for the Justice Department's position could stem from heavy reliance on classified information. Government intelligence officers briefing the Thompson committee in 1997 suggested that they were reluctant to bring their evidence of Huang's intelligence connections to an open court, because a public hearing would jeopardize intelligence sources and methods.

The Money Trail

When Senator Fred Thompson revealed the outlines of what the U.S. intelligence community knew of the "China Plan," he traced the beginning of the Chinese effort to buy political influence in the United States to 1995. But some of the entities listed in Weldon's "China Connection" chart have been financially involved with Bill Clinton since 1984-1985. That was when the Riady family first invested in the Worthen Bank in Little Rock and bailed out an Arkansas state government investment firm whose collapse was hanging like a political millstone around then-Governor Clinton's neck, jeopardizing his re-election. The Riadys became major donors to the first Clinton-Gore campaign, contributing $786,000 to Democratic causes in the closing months of the campaign. The Riadys consolidated their ties to Chinese military intelligence on November 7, 1992, just two days after Clinton's election to the White House, by entering into a partnership with China Resources (Holding) Ltd. to jointly own and control the Hong Kong Chinese Bank. China Resources has long been identified by U.S. intelligence as a vehicle for Chinese military intelligence. U.S. government investigators say the bank was later used to funnel Er Bu money to intermediaries in the U.S. for campaign donations.

TAS has learned of a separate joint venture between the Riadys and China Aerospace International (CASIL), known as the Shanghai Commercial Investment Fund. Until now, U.S. government investigators were not able to tie the Riadys to CASIL, a key player in several satellite ventures involving U.S. companies. A CASIL vice president, Liu Chaoying, set up a joint venture with Johnny Chung in California known as Marswell Investment that was financed through a $300,000 wire transfer (some of which Chung donated to the DNC) from the head of Chinese military intelligence. TAS first revealed the Chung- Liu connection two years ago ("While America Sleeps," June 1997). Liu's Hong Kong company, Marswell Investment Ltd., was created in 1995 using subscriber shares from two PLA front companies, Chearfit and Timeway Ltd., which operate out of the same office as a third front company, Silver Faith Holdings, which U.S. government investigators have tied back to the Chinese Triads. Liu Chaoying controls numerous other Hong Kong front companies as well, including Cheung Tai Hong Holdings Ltd., Giant Enterprises, and CASIL Import & Export Company Ltd.

The Lippo-CASIL connection provides new insight into what the Chinese were hoping to get from the Clinton-Gore White House: waivers of U.S. sanctions to give them access to U.S. missile and satellite technology. In April 1993 Clinton waived the Tiananmen sanctions to allow Motorola to launch up to 12 satellites in China for its Iridium global wireless communications network. As part of that deal, the Chinese got help from U.S. companies in designing a "smart dispenser" that enabled them for the first time to launch multiple satellites from a single rocket. According to a December 1996 report from the Air Force National Air Intelligence Center, first revealed by Washington Times reporter Bill Gertz, the Iridium smart dispenser "could be developed into a credible PBV (post-boost vehicle) with a few relatively minor changes." Post-boost vehicles are used to deliver multiple nuclear warheads to separate orbits, so they can strike different targets independently. Multiple warhead technology was a key priority for the Commission of Science Technology and Industry for National Defense (COSTIND) collectors, and was a capability the Chinese had previously lacked.

In October 1997, CASIL acquired a 14.71-percent interest in Asia Pacific Telecommunications Satellite Holdings Ltd., a listed company in Hong Kong and New York. APT was founded in 1992, with investors from Hong Kong and Thailand, to own and operate a network of telecommunications satellites. The company now operates two Hughes HS 376 satellites (Apstar-1 and Apstar-1A), and one Space Systems Loral FS-1300 satellite (Apstar IIR), launched between 1994 and October 1997. "The powerful APT...has the largest synchronous satellite transponder capacity available in the Asia-Pacific region," according to a U. S. government cable from Hong Kong obtained by TAS.

But APT served another purpose, according to a recent Pentagon report first revealed in these pages ("Red Star Over Washington," May 1999). Following the failure of the People's Liberation Army's (PLA) own network of military communications satellites in 1996, "the Chinese were desperate to find a substitute for military communications. They had no choice but to resort to the use of previously purchased U.S. satellites for their encrypted communications," the report states. Those satellites were owned and operated by APT. "This decision was just a step in the continuing process to integrate Hughes equipment for its military--a decision which goes back to at least 1992. Various munitions license applications during 1995 and 1996 reveal an export pattern of Hughes satellite-related equipment through PLA front companies. They include SCL, CESEC (China Electronic Systems Engineering Company), and Huaying," the DOD memo states. "Ironically, many of these exports did not identify these front companies as being associated with the PLA. From what we now know, Hughes employees in China were knowledgeable that they were PLA-associated entities." None of the licenses were vetted for the PLA association, the memo went on, since a military end-user would have been grounds for denying exports.

Hughes's failure to disclose the PLA involvement in APT, and in a related cell-phone venture known as APMT, may have violated U.S. export control laws. "In seeking approval of APMT," the Pentagon report states, "Hughes provided only the Singapore address of the APMT joint venture between China and Singapore. This had the deceptive effect of attempting to disassociate the APMT project from the Chinese military and make it look benign, even though the Chinese sought configurations on the APMT satellite that would allow for eavesdropping." The Pentagon discovered that many of the Chinese technicians being trained by Hughes in California were in fact members of the PLA.

Meet General Ji

In public testimony before the House Committee on Government Reform on May 11, Johnny Chung described his meetings with Chinese Military Intelligence director General Ji Shengde. "On August 11 (1996), we were in Zhuhai, which is across the border from Macau and in China, when I received a phone call from Liu Chaoying and she invited me to dinner with someone who she said was a very important man from Beijing," Chung told the Burton committee. The man she introduced Chung to at dinner was General Ji Shengde, a close ally of Chinese president Jiang Zemin who assumed his post in 1992 on Jiang's personal intervention.

"The key information relayed to me at this dinner from Ji was the following, " Chung said:

"We really like your president."

"We hope he will be re-elected."

"I will give you 300,000 U.S. dollars."

"You can give it to your president and Democratic Party."

Two days later, on August 13, Chung and Liu met again with General Ji, this time in a Hong Kong hotel. General Ji confirmed that he would wire $300,000 to Liu's account, for transfer to Chung. "Ji said he needed a receipt or a report to give 'to the organization,'" Chung said. Chung also testified that Liu told him that the Chinese were using several other intermediaries to buy influence with the Clinton administration, including Mark Middleton, Charlie Trie, and Boeing Aircraft. Later, Liu told Chung he could use the money to set up their joint business in California, for campaign contributions, and to take care of the general's son, Alex, who was then a college student in California. Chung arranged with the DNC to get Alex and his mother, who was on a visit, to meet President Clinton at the DNC's "Back to the Future" fund- raiser on October 17, 1996--surely the first time that the president of the United States has hobnobbed with the wife of a potential adversary's top spy.

What Chung didn't know, however, was where General Ji got the $300,000. Documents obtained by the U.S. Department of Justice in late 1997, which were only turned over to Burton's committee the day that Chung testified in May, show that Chung received a transfer of HKD 2,318,850 ($300,000) from Liu Chaoying's Citibank account in Hong Kong on August 14, 1996. According to one of the U.S. government officials who helped Weldon compile his charts, that money and other contributions to the DNC sent by General Ji to other conduit donors were siphoned off from the Hong Kong accounts of J&A Securities (Hong Kong) Ltd., a subsidiary of the largest securities trading company in Communist China. J&A Securities, based in Shenzhen, was set up in 1992 by the PLA, corporate records examined by TAS show. Its original name, Jun An Securities, conflates the Mandarin characters for "Military" (Jun) and " Security" (An). If these investigators are right, then it is the PLA's secret money tree.

Justice Department investigators quizzed Chung on June 12, 1998, about his ties to General Ji and to J&A Securities, whose involvement in the money transfers Chung appears to have ignored. Unbeknownst to Chung, the Justice Department had been contacted by the Chinese government through Interpol, the international police liaison agency in France, in connection with the alleged embezzlement of COSTIND funds by J&A Securities Chairman Zhang Guoqing, a U.S. official said. Zhang was arrested in July 1998 in Hong Kong and taken to Beijing for questioning, according to press reports in Hong Kong and Singapore.

As part of his plea bargain with the Justice Department, Chung agreed to wear a body wire in meetings with an emissary sent by General Ji, who went by the name of Robert Luu. Chung first met Luu in China in 1996. Luu resurfaced two years later in California, and warned Chung not to tell U.S. prosecutors about the involvement of General Ji or China Aerospace in the campaign donation scheme. "Luu said they would give me money to take care of my legal expenses and my family and I could retire," but only on condition that Chung keep his mouth shut, Chung told the Burton committee. Luu also suggested that if Chung went to jail without talking, the Chinese government might be able to convince President Clinton to pardon him before leaving office. Chung's FBI handlers took Luu's offer--and the implied threat to Chung's safety-- seriously enough that they moved Chung and his family into a series of hotel suites for 21 days in the summer of 1998. FBI agents provided protection to Chung's children, and accompanied his daughter to her high school graduation.

In a conversation with Luu on June 11, Chung tried to draw him out on the subject of Zhang Guoqing. "Who is Mr. Zhang--mysterious person Mr. Zhang! I never met Mr. Zhang. I don't know who he is. I was well aware of whom I had meals with"--a reference to General Ji. "I'm very clear about where the facts are. Ji Shengde is Mr. Zhang," Chung said.

In fact, what Chung meant is that Ji Shengde's money came from Zhang, the elusive head of J&A Securities in Hong Kong. The same Zhang had recently been arrested by Chinese authorities in Hong Kong, because he knew too much. He disappeared last summer and has not been seen since. Indeed, in one account in a Hong Kong daily, Zhang reportedly told the Ministry of State Security officers who had come to arrest him that they had better consult Beijing before mistreating him. "I have a laser disk in the United States, and the disk data will affect the national image," he reportedly said. Perhaps Zhang was referring to money transferred to U.S. accounts by Jiang and others, for campaign contributions to the DNC and for corrupt personal ends.

South Pacific Base

J&A Securities grew from a single brokerage house in Shenzhen in 1992, to more than 3,000 branches throughout China by 1998. It began as a classic PLA operation, with nominees sent to Hong Kong to buy up a shell company with a listing on the Hong Kong stock exchange--Massique Limited--then infusing it with mainland Chinese assets to attract foreign investment. J&A Securities took off with the booming Pacific Rim economy, floating bonds in Chinese state companies and making instruments available for foreign investors to gain a foothold in Chinese state industries. But by July 1995 another, more unusual plan for J&A Securities began to emerge when the Shenzhen parent company, which owned the majority share, transferred its stock to a new front company set up in the tiny South Pacific Island nation of West Samoa. The new company was called J&A Holdings, Ltd.

Not known as a financial center, the two islands of West Samoa (now called the Independent State of Samoa) comprise some 170,000 inhabitants who live primarily from fishing and subsistence farming. Major cash crops--coca, coconut, and taro--were largely wiped out in the early 1990's when cyclones devastated the islands. Family clans dominate West Samoa's parliamentary democracy, with frequent complaints of corruption. Fresh fish accounts for 37 percent of the islands' yearly exports, which total around $12 million.

So if PLA military intelligence was not attracted to Samoa by its booming international economy, why did it set up a holding company there to own a prime Hong Kong Red-Chip listing? A look at the map may provide the key. West Samoa, which borders the America Pacific territory of Samoa, is the closest non-Western state to the United States, lying some 2,400 miles south of Hawaii. "West Samoa would provide the PLA with a perfect missile base," said former Deputy Undersecretary of Defense Dr. Stephen Bryen. "By basing missiles on West Samoa, they could effectively neutralize U.S. naval forces on Pearl Harbor, and prevent us from patrolling the Taiwan Strait. This would allow them to successfully blackmail Taiwan with radiation-enhanced warheads (neutron bombs). It's called 'checkmate.'"

A senior U.S. intelligence official told TAS that the U.S. had detected a Chinese nuclear test over the weekend of June 12-13, which may have been designed to validate a newly-designed neutron bomb. No mainstream media has reported the test, which was briefly mentioned in Bill Gertz's "Inside the Ring" column in the June 18 edition of the Washington Times. A "sub-critical" test of neutron bomb components would not violate China's commitment under the Comprehensive Test Ban Treaty, which it signed in 1996. However, the intelligence official said, China may have conducted a full-scale test of a small warhead, employing exceptional acoustic dampening measures aimed at preventing international seismic monitoring stations from effectively measuring the strength of the blast. A CIA spokesman confirmed that the U.S. had detected "evidence of activity that could have been a test" at China's Lop Nor nuclear test site in Eastern Turkestan (Sinkiang Province), but that it was "below the threshold of detectability."

China first tested a radiation-enhanced warhead on September 29, 1988. According to Nicholas Efftimiades, who published a book on Chinese Intelligence Operations in 1994, the FBI launched a counter-intelligence investigation after that first test, and determined that Chinese agents had succeeded in stealing critical design information from the Lawrence Livermore Nuclear Lab for the W-70 (neutron bomb) warhead, by coopting U.S. scientists during visits to the lab by Chinese officials. Energy Secretary Bill Richardson has used the neutron bomb case to support his assertion that Republican administrations were equally guilty of allowing Chinese nuclear spies to penetrate U.S. nuclear labs, and did nothing about it. But the Cox report states (page 87) that a more recent theft of classified neutron bomb- related design information was reported by the intelligence community in 1996. Until now, neither Richardson nor the FBI has acknowledged taking any corrective measures relating to that theft.

What China Got in Return

The money trail shows there were two driving forces behind the Chinese government's campaign contributions in the United States: the PLA's Military Intelligence Department (Er Bu), and COSTIND, the State Commission of Science Technology and Industry for National Defense. Er Bu reports directly to the General Staff Department, which is controlled by the Central Military Commission, chaired by Chinese President Jiang Zemin. COSTIND reports to the State Council, which is chaired by Prime Minister Zhu Rongji. COSTIND sets the technology requirements for the Chinese military; Er Bu collectors acquire those technologies from foreign sources. The two may be rivals in some ways, but they also work hand-in-hand.

The key role played by Liu Chaoying shows how this works. Liu's father, General Liu Huaqing, was vice chairman of the Central Military Commission before his retirement in October 1997. This gave Ms. Liu the Er Bu connection she so forcefully demonstrated to Johnny Chung by introducing him to Er Bu Director General Ji. But Ms. Liu also worked for CASIL, which was a subsidiary of the China Aerospace Corporation, which is controlled by COSTIND. Another China Aerospace Corporation with which Ms. Liu was associated, China Great Wall Industries Group, manufactures China's liquid fuel strategic rockets and space-launch vehicles. They have also become the main partner for U.S. aerospace firms seeking to launch satellites in China.

The Chinese Communist government got its first big break in gaining access to U.S. technology previously denied for export when former Carter administration official William Perry returned to government as deputy secretary of defense in 1993. As TAS revealed three years ago ("Peking Pentagon. Bill Perry: Too Tight with the Enemy?" April 1996), Perry personally overruled the objections of the National Security Agency (NSA) and the Joint Chiefs of Staff in approving the export of a buried fiber-optics Asynchronous Transfer Mode (ATM) telecommunications network to Hua Mei (Galaxy New Technology), and China Milky Way, front companies owned and controlled by COSTIND.

"The Hua Mei deal was where it all began," said a former U.S. intelligence officer who spoke to TAS on condition of anonymity for himself and his company. "When one of our clients asked us to check Hua Mei out and we discovered COSTIND was behind it, we told them there was no way they would ever get U.S. government or CoCom (Coordinating Committe on Export Controls) approval to export. The technology was extremely sensitive, and the Chinese end-user was a known government collection agency. COSTIND has always been on the watch list."

Despite this initial reaction, the former intelligence officer met with Chinese officials in Hong Kong in October 1993 to learn more. "When I brought up the problem of export approvals, they just laughed," he recalls. "They boasted of their relationship to Perry and to John Lewis," a colleague of Perry's from Stanford who became the point man for the project once Perry joined the Clinton administration. The consultant recommended that his client decline the deal because of the sensitive nature of the technology. But that didn't deter the Chinese, who simply turned to other suppliers. In the end, Bill Perry was true to his word, and the Chinese were able to get U.S. export approval. "If they had gone ahead with their original plan, which was to wire 54 Chinese cities with this type of network and interconnect them," the former intelligence officer said, "they would have shut the NSA out of China."

Abolishing CoCom

The key to allowing the massive transfer of strategic technologies to China was the administration's decision in 1993 to abolish CoCom, the multilateral export control regime based in Paris. That paved the way for a host of less public regulatory changes enacted by the Commerce Department, which eliminated controls on specific technologies.

President Clinton laid out this strategy in a letter, released last month by Weldon, to Silicon Graphics President Edward McCracken dated September 15, 1993. "By some estimates, unnecessary export controls cost U.S. companies $9 billion a year in lost sales," Clinton wrote. "One reason I ran for President was to tailor export controls to the realities of a post-Cold War world."

After this novel reinterpretation of his own 1992 campaign (if anything, candidate Clinton had chastised the Bush administration for having been too lax on export controls, not too strict), the president went on to describe a major policy shift which he claimed "will help liberalize controls on tens of billions of dollars worth of U.S. exports. I can help unleash our companies to compete successfully in the global market."

As the ATM project with Hua Mei showed, the first foreign market Clinton had in mind was Communist China. Over the next year, according to Weldon's chart, the administration formally removed controls on encrypted telecommunications equipment, approved the sale of advanced machine-tools from a B-1 bomber plant, liberalized controls on stealth technologies, exempted U.S. satellites from sanctions imposed on China because of China's sale of M-11 missiles to Pakistan, abandoned the security review previously required on foreign nationals working for U.S. companies and the national nuclear laboratories, and took delegations of high-tech firms on official trade missions to China, officially blessing their efforts to offer China the latest in U.S. military technology.

Once the U.S. learned in mid-1995 that the Chinese had stolen classified nuclear weapons design information from U.S national nuclear labs, the high- tech giveaway actually accelerated, Weldon says. In January 1996, controls on supercomputer sales to the PRC were dramatically liberalized, allowing U.S. companies to sell directly to Chinese military entities without a license for the first time. The new regulations allowed license-free sales of even faster machines to "civilian" entities, with no safeguards to ensure the machines were not used for military purposes. (As the Pentagon later discovered, a large number of supercomputers were sold to Chinese state-run telephone companies run by the Military Districts, and may have been used in the effort to devise new encryption codes for military communications.) In April 1996, the administration transferred licensing authority for jet-engine production technology from the Munitions List, which is administered by the State Department, to the "dual-use" list at Commerce; gaining access to hot section technology was another top COSTIND priority, Pentagon officials say. Also in 1996, the administration agreed to shift satellite licensing to Commerce, a move which allowed far greater technical cooperation between U.S. manufacturers and the Chinese, the crux of the Hughes-Loral scandal.

The administration contends that the export liberalization was inevitable, and would have occurred anyway. But this administration bent the rules repeatedly, and brazenly, to favor the Chinese. An unclassified review conducted by the Congressional Research Service shows some 20 cases in which Chinese state-owned entities have been caught since 1993 selling missile and nuclear weapons technology in violation of their own international commitments and U.S. law. Despite the overwhelming evidence, the administration imposed sanctions on Chinese firms only twice, and lifted them in both cases before their term expired. Had the laws been applied as Congress intended, Loral, Hughes, and Motorola could not have launched satellites in China, nor could hundreds of other sales--now seen to have damaged U.S. national security--have taken place.

Divide and conquer. By that simple principle, Rome expanded its empire and enforced its rule for three centuries. In today's Washington, that principle has been revitalized with a media-spinning twist: Divide and Confuse. Admit to a small crime so the larger crimes go unpunished; fix media attention on one small aspect of a scandal, so the big picture gets totally ignored. The Republican majority in Congress has done many favors for Bill Clinton, but none so significant or ultimately so far-reaching for our national security as its willingness to split the campaign fundraising investigations from the inquiry into the administration's high-technology giveaway. The Chinese government has always known the two were intimately related; now comes Curt Weldon insisting that Congress wake up and realize that the China Plan was more intricate, far-reaching, and better organized than anyone had imagined.