The revelation of a substantial financial transaction between an American diplomat and a prominent citizen of the host country in which he was serving…
When Gary Locke arrived in Beijing in 2011 as the new U.S. ambassador, he was already a star on both sides of the Pacific.
Born to Chinese immigrant parents in Seattle, he had overcome hardship to get an Ivy League education. He won successive elections in Washington state, becoming the first Asian-American governor outside Hawaii, and had recently completed his term as President Barack Obama’s first secretary of commerce. He was the most successful American politician of Chinese descent in history.
In China, he was welcomed as a native son and a symbol of overseas Chinese success. In addition, he quickly gained viral fame and adoration after someone snapped a photo of him carrying his own luggage and buying Starbucks coffee with a coupon — a powerful contrast to the lavish lifestyles of Chinese bureaucrats.
But behind the image of a humble public servant, Locke has long leveraged his political success into a lucrative consulting career. In between stints in government, Locke worked on and off again for a number of corporate firms, including American Pacific International Capital, a Chinese-owned company that, as The Intercept is reporting today, has spent lavishly to win prestige among U.S. politicians.
Real estate records uncovered by The Intercept reveal that Locke, while still serving as U.S. ambassador to China, sold his home in the D.C. area to the Chinese family that controls APIC.
Two years into his ambassadorship, Locke was speaking openly with businesspeople about eventually moving back home, says Wilson Chen, an executive with APIC. Locke was “desperate to sell” and was looking for buyers for the suburban Maryland house he had purchased in 2009, while serving in Obama’s cabinet. Chen added that he and an associate met with Locke in Beijing and heard that Locke’s “broker didn’t do a good job” and the house had languished on the market for several months. So Chen’s family became involved.
In September 2013, five months before completing his stint in Beijing as ambassador, Locke sold his home for $1.68 million to Huaidan Chen, a Chinese citizen and the wife of Gordon Tang, the Singapore-based Chinese businessman in control of APIC. Wilson Chen is Huaidan Chen’s brother.
Three months after Locke’s home sale, Wilson Chen was invited to an exclusive meeting convened by Locke in the ambassador’s Beijing residence to discuss real estate opportunities in the U.S. with other developers.
In addition to Chen, the exclusive, invitation-only event included executives from some of the largest Chinese and U.S. development firms, including Vanke, China’s largest developer; Tishman Speyer, based in New York; and Guangzhou-based R&F Properties. A report on the meeting from the San Francisco Business Times noted that APIC was far smaller than the other participants in Locke’s meeting.
Chen told the Business Times that the participants discussed barriers to investment, including a number of regulations in San Francisco.
The revelation of a substantial financial transaction with prominent foreign citizens of the host country in which he was serving as a diplomat raises ethical concerns at home and may sully the modest image Locke projected abroad.
Former U.S. Ambassador to China Gary Locke took part in a bicycle body-building event during the Hubei Wuhan USA Week at Jiangtan Park on Sept. 23, 2011, in China’s Hubei province.
Photo: VCG/Getty Images
Locke did not respond to a request for comment. Roger Nyhus, Locke’s spokesperson, did not respond to questions about the sale of the house.
Wilson Chen downplayed the purchase, telling The Intercept that his family bought Locke’s house “because it was cheap.” He said that the home purchase was an investment like any other for them — indeed, he added, he wishes they would make this type of investment more often — and that the property is currently being rented.
But in other contexts, Chen spoke openly about the importance of gaining political influence, saying in an interview that his firm provided campaign donations to U.S. politicians as a form of gong-cha, or paying tribute. As The Intercept is also reporting today, APIC provided a donation of $1.3 million to Right to Rise USA, the Super PAC supporting Jeb Bush’s presidential campaign, making it one of the largest corporate contributors to the committee.
And Locke’s house, situated on a leafy green street in Bethesda, Maryland, is an unusual investment for the Chens, whose firm is known primarily for eight-figure commercial real estate deals involving condominium towers and entire shopping malls.
Locke purchased the home, which has six bedrooms and five bathrooms, for $1,525,000 in 2009. The house went on the market June 20, 2013, and was initially listed for $1.75 million. By August, the house was marked down to $1.68 million, the price the Chen family paid in September. Zillow now estimates the home value at about $1.8 million.
Locke’s ethics statement for that year discloses that he sold his home in Bethesda but lists the transaction under “rents and royalties” rather than capital gains. He disclosed earning between $50,000 to $100,000 from the sale, though the Chen family paid $150,000 more than the price Locke paid in 2009.
Asked if the State Department reviewed the transaction, a spokesperson for the agency told us that “there is no requirement for any State Department official to clear the sale of his or her personal residence with ethics officials at the department, regardless of the value of the property. The department does not review or approve the terms of sale for an employee’s private residence.”
The sale nonetheless raised concerns among ethics experts.
“This is not appropriate,” said Richard Painter, a former White House chief ethics counsel from 2005 to 2007. “If I were the State Department’s legal adviser, I would be very unhappy with ambassadors selling their houses to foreign nationals of the country where they’re working without an independent appraisal to prove actual value.”
Craig Holman, the government ethics watchdog with Public Citizen, said the sale raised a number of flags. Locke, Holman said, was in a position to influence American policy decisions and needed to “steer clear of placing himself in a conflict of interest situation in which financial opportunities could be perceived as influencing his judgment.”
Locke’s financial disclosure statement, filed in 2009 for his Senate confirmation hearing to become secretary of commerce, reveals that he provided legal assistance to APIC prior to being nominated. In 2008, he provided legal consulting services to APIC and appeared at a ribbon-cutting ceremony for an APIC-owned biofuels refinery in Shantou, a city in southern China. The facility imports soybeans from the U.S. and Latin America.
Since retiring from public office in 2014, Locke is again serving as an adviser to the firm.
Roger Nyhus, Locke’s spokesperson, said in a statement that Locke’s first encounter with APIC came “in the summer of 2008 when he worked with Seattle law firm Davis Wright Tremaine and attended a ribbon-cutting ceremony of a soybean factory in China with other DWT attorneys at the request of APIC, a client of the firm.” Nyhus added, “It was there in China that he first met Mr. Tang, and Mr. Locke did not meet him again until the fall of 2014.”
Former Washington Gov. Gary Locke, center, cut the ribbon for the grand opening of Huamei Oil and Fat Co. Ltd. in Shantou, China.
Photo: Apicincus.com
Locke was raised in a Seattle housing project, and while campaigning in 1996 to become governor of Washington state, he frequently spoke about his parents’ hardscrabble lives.
But the Associated Press later reported that firms such as Microsoft, Boeing, and others played a vital role in Locke’s political fortunes, providing a significant portion of the money he raised for statewide office in both his 1996 election campaign and his 2000 re-election campaign. Several of Locke’s former aides later took jobs at either Microsoft or Boeing.
Within a month of leaving the governor’s mansion in 2005, Locke joined the law firm Davis Wright Tremaine as a partner to specialize in lobbying and trade with China. The Seattle Times reported that within two years of leaving office, Locke had quickly emerged as “another kind of power broker, opening doors for big-name clients like Microsoft and Starbucks.”
Locke began making frequent trips to China and arranged high-profile meetings in the U.S. between then-Chinese President Hu Jintao and clients such as Microsoft and Boeing. He boasted to the newspaper that he had helped one banking client seek an exception to Chinese banking regulations to open up a subsidiary in the country.
After leaving his post as ambassador in 2014, Locke rejoined the firm to focus on Chinese trade issues. He also launched his own firm, Locke Global Strategies, to advise U.S. and Chinese companies on trade and investment issues.
Neither Locke nor Nyhus responded to our questions about how much APIC has paid Locke either before or after his term as ambassador. Wilson Chen said he could not disclose Locke’s APIC compensation.
APIC, meanwhile, touts several pictures of Locke on its website, including the ribbon cutting he attended in 2008. SingHaiyi, a Singapore-based investment company formed by Gordon Tang, received a “buy” rating for a prominent Malaysian bank last year; the bank argued that SingHaiyi’s ties to prominent politicians, including Locke, buoyed the firm’s reach into the U.S. real estate market.
Holman, the ethics expert, observed that while it is “unknown whether any strings were attached” to the real estate transaction between the family in charge of APIC and Locke, it would “be very hard for Locke not to feel a sense of indebtedness to someone who just handed him $1.6 million.”
Holman added that Locke’s decision to leave public service and take a position with the very same business interest shows that the “appearance of a somewhat shady relationship has now actually turned into a profitable business relationship for Locke — and, presumably, for the Chinese business interest as well.”
Gary Locke illustration reference: Lintao Zhang/Getty Images
A series exploring how money from abroad has entered the 2016 presidential election thanks to Citizens United.
First these elitist hoes pretend to represent the people on the ground. Then these elitist hoes betray the people they represent. Then they pretend to know the constitution which declares the U.S.A. a soverign country of by and for the people then they get another pimped out hoe to whip out his pocket constitution and claim we dont know what it says. Then the elitist hoes put up a candy date who neither knows nor abides by the constitution but instead lies to the people and then tells her pimps that she will sell America to them – like she ded PEMEX – to her TPP GLOVAL INITIATIVE.
Not only is she a criminal, she should be tried to treason.
I see these stories of corruption that we accept as “normal” way of doing business. How did we Americans reach this level of apathy? It would be considered quaint, if I related the fact, President Eisenhower fired his assistance Bobby Baker because his wife accepted a fur coat from a South American dignitary. Ike said it looked bad. You can’t embarrass this bunch. The courts recently reversed the conviction of a former State of Virginia governor for taking bribes. The court essentially said accepting favors (pay to play) was a “normal” process of governing!
I have not read the other posted comments, but I know the readers of The Intercept…..some will defend this as a “normal” business deal. Ethics apparently died in the 50s.
I’m not surprised.
It’s really odd that the Chinese president can lock down US freeways in Western WA during a visit. Even the US POTUS wouldn’t carry on in such an arrogant way.
It is interesting to me that most of the folks commenting here think this was no big deal and that he sold at “market value”. How is it market value if the house came down from asking price once and had still not found a buyer? And second this is just one clear instance where the evidence was available. The article has a lot of other information on how his career progressed and how ties with MS and Boeing continue to benefit him. And remember coming from a hardscrabble background the guy is now a multi-millionaire at least. If you consider how little politicians and administrative officials get paid at their official jobs, then becoming a multi-millionaire is impossible. ‘APIC was the smallest player in the invitation-only event organized by the Ambassador’. To me that is one explanation for how a “humble” government official becomes a multi-millionaire.
I completely agree with you. The political system here has become so corrupt that quid pro quo for the elites no longer has any meaning unless everything is written down.
Formerly people who worked for the government – even as contractors – were instructed to avoid even the appearance of a conflict of interest. How could Locke have done this? By doing what 99% of us do when we want or need to sell our house: hire a realtor. Buyers then deal with the realtor, who presents the owner with the offers. But Mr. Locke did not take the ethical path, and unfortunately many people have come to accept this particular behavior of the elites as something to be emulated rather than condemned.
Excellent work guys!! Your exceptional focus and journalistic standards give me hope and inspire me to continue to engage and change the system. Locke appears as a folkloric hero based on the few articles I had read about him. This paints a fuller picture of a person with great potential who cannot get over his (Maslow hierarchical) need for financial security and blemishes what could have been a historical trajectory with “business as usual”.
Not sure I understand how this is a conflict of interest. Locke sold his house to a foreign national but it doesn’t seem to be at a significant discount. If the foreign national had BOUGHT a house for Locke or sold him one at a large discount that would be huge. But how is him buying a house from Locke at basically the market price for 2009 a COI issue?
There are 20 or so current and former Obama administration officials more worthy of being “Locked” up. Democrats, I say lock up Hillary, and give us Locke!
Poorly articulated arguments in this article. It was a normal house sale. Fang and Schwarz have gone down in my estimation of what constitutes urgent and sound reporting.
Gary Locke is a good man and the reporters are trying to insinuate wrongdoing where there is none. Rather than seeing a “desperate” house sale, I’m seeing amazingly desperate reporting. As for Richard Painter’s comments about ethics, they are risible at best.
Signed,
Gary Locke.
Hey, Gary…you’re just like Donald Trump…using a phony name.
I sell my house to fatcat foreign lobbyists at least twice a year, as does everyone I know. You are too right. This story is boring and ridiculous! Yawn!
Gary Locke is a tool of corporate interests, and his diehard support for the TPP should be proof of that:
http://crosscut.com/2015/11/unions-mobilize-to-stop-trans-pacific-trade-deal/
Why does the TPP matter? It allows international corporations to sue governments who hurt their profits by implementing environmental pollution and labor safety without going through the U.S. court system, via some bizarre “arbitration panel” run by corporate lawyers – and it continues the export of jobs offshore to low-wage zones. Locke claims this will “Benefit America” but he knows it will only benefit his wealthy corporate paymasters and benefactors.
This is really just the normal behavior of all U.S. politicians and bureaucrats; the higher they rise in the power structure, the greater their ability to leverage their position into a lucrative payout. Consider the Clintons:
The foreign nationals thus also have an open route to U.S. politicians via their private foundations (aka “charities”); at least two dozen such foundations run by U.S. politicians are in operation today, maybe a good many more.
Bottom line? This system is just as corrupt as anything seen in Brezhnev’s old Soviet Union. The means of population control is more propaganda-based, less state-violence-based, but that’s the only real difference. . . incidentally this means that investigative journalists like Fang & Schwarz are greatly hated and feared by the players in this system, who must really wish they could use the state security forces to target them, as in places like Egypt, Saudi Arabia, and other “close U.S. allies,” as well as in China and other authoritarian states.
Nice work!
In the relative scheme of things, is over paying 50 grand of a house really what we need to focus on here? I’m against corrupt policy making as much as anybody, but contending that a public service is corrupt because he is paid better in the private sector for his expertise is just backwards headed. All that is really saying is that the government is actually underpaying the people that it employs, which actually increases the likelihood of corruption. Having worked on both sides of the field, I would much rather do public sector work, but government employees are paid so poorly that they can’t afford to live in many of the locations they’re expected to work without subsidies. If government servants are being paid substantially more in the private sector for the same skill sets, then you are deliberately setting up the government to become a revolving door between the public and private sectors. I’m not sure this is actually a bad thing, as private sector actors tend to be much more motivated to accomplish things than public sector actors. The larger problem is that when public servants leave their positions, they can directly use their personal contacts to push a corporate agenda, instead of just imparting knowledge about how the system works.
For example: it’s one thing to help a company identify who the key personal are for getting a product approved at the FDA; it’s an incredibly Byzantine and expensive process that has bankrupted many a medical company with potential breakthroughs. It’s another to use your position as former (or current) head of the FDA to talk with people directly to speed up the process. The first is leveraging expertise acquired through hard work, and should be freely available to anyone who doesn’t want to pay the price to figure out the FDA themsleves. The latter is a form of extortion.
The reason for a strong dividing line between the public and private sector is best understood with a simple sports analogy:
Imagine if the umpires at baseball games were ex-players for baseball teams? I don’t think I need to spend paragraphs detailing why this would lead to serious conflicts of interest; but long-winded explanations of how the umpires would benefit from tapping “the player’s expertise” would be needed to justify this, and the general public would never buy it, either.
Sorry, but your comment is merely another circuitous evasive explanation of how gross corruption is just good business practice with lots of benefits to everyone. . .enough bullshit already.
No one was buying his house on the regular market. Like many home sellers, he had a price in his head he wanted for his house, but there was *no* market for that price. He had tried already. Enter the lobbyist white knight — who paid that price and more. As for the rest of your argument: this guy’s “expertise” *is* his public sector connections. They aren’t paying for his special brainpowers. They are paying for his ability to influence government processes. Yes, that is corruption.
Agree 100% Kathleen!