The Citizens United Playbook

How a Top GOP Lawyer Guided a Chinese-Owned Company Into U.S. Presidential Politics

Illustration: Arthur Mount for The Intercept
Illustration: Arthur Mount for The Intercept

Six days after the Supreme Court lifted restrictions on corporate money in U.S. elections with its January 21, 2010, ruling in Citizens United, President Obama warned in his State of the Union address that it would “open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.”

But as unlimited contributions have coursed through the election system, no one has been able to point to a specific example of foreign money flowing into U.S. presidential politics as a result of the Supreme Court’s decision.

Until now.

The Intercept has determined that a corporation owned by a Chinese couple made a major donation to Jeb Bush’s Super PAC Right to Rise USA — and it did so after receiving detailed advice from Charlie Spies, arguably the most important Republican campaign finance lawyer in American politics.

As Robert Weissman, president of the nonprofit advocacy organization Public Citizen, said, “We know that Citizens United opened the door for foreign money to influence U.S. elections. This case appears to be the first instance in federal elections where the money trail is clear and documentable from publicly available records.”

Spies presented his advice in a memo, obtained by The Intercept, which he prepared for Right to Rise USA, where he served as treasurer and general counsel. “We conclude,” he wrote, “that a domestic subsidiary corporation may now directly contribute to a Super PAC in connection with a federal election.”

The Spies memo was dated February 19, 2015. One month later, American Pacific International Capital Inc., a California corporation owned by Gordon Tang and Huaidan Chen, a married couple who are citizens of China and permanent residents of Singapore, made a $1 million donation to Right to Rise USA. APIC subsequently gave the group an additional $300,000, its total donation of $1.3 million making APIC one of the Bush Super PAC’s largest contributors.

APIC had, quite literally, gotten the memo.

gary-locke-apic

Wilson Chen, Gary Locke, and Gordon Tang.

Photo: Apicincus.com

The company, which invests in real estate and industries in Asia and the U.S., is well-connected across the American political scene. Neil Bush, the brother of both Jeb and George W. Bush, is a member of APIC’s board. Gary Locke, U.S. ambassador to China from 2011 to 2014 and previously secretary of commerce, serves as senior adviser to APIC. In October 2013, while Locke was still ambassador, APIC co-owner Huaidan Chen purchased Locke’s Washington, D.C.-area home from him for $1.68 million.

In an interview, Wilson Chen, Huaidan Chen’s brother and president of APIC in 2015, compared APIC’s political donations to the Chinese tradition of gong cha, or paying tribute to the emperor. Chen repeatedly emphasized that APIC “did not want to do anything illegal” and made the donations with the guidance of the Spies memo and the company’s own in-house lawyer.

It’s not clear, incidentally, that APIC followed Spies’s memo to the letter. Spies warned that foreign owners could not be involved in the decision-making process for political contributions by their U.S.-based companies. But based on statements Gordon Tang and Wilson Chen both made to The Intercept, Tang may have crossed this line by authorizing the Right to Rise USA donation from APIC.

In any case, for campaign finance experts, Spies’s roadmap provides compelling evidence of a phenomenon many already suspected was well-entrenched. “Spies’s memo is an explicit how-to guide for foreign nationals to get money into U.S. elections through U.S.-based corporations that they own,” said Paul S. Ryan, deputy director of the campaign finance watchdog organization Campaign Legal Center. “It shows that although Obama was attacked in public for misleading Americans about Citizens United, in private people like Spies and others like him seemingly realized that Obama was right and set to work making his prediction a reality.”

Reached for comment by phone, Spies stated that the memo had been prepared “to ensure compliance with the law,” but he declined to say anything further about the circumstances leading to its writing or about APIC itself.

When asked whether Obama’s remarks in 2010 were vindicated by his memo, Spies grew agitated. After a short discussion, he said, “I don’t think there’s any point in our continuing this conversation,” and then abruptly hung up the phone.

The story of APIC captures the bizarre reality of the U.S. political system: George H.W. Bush and George W. Bush between them appointed three of the five members of the Supreme Court’s Citizens United majority; this majority opened up a loophole allowing foreign money to flow into U.S. elections; and this loophole was used to grab foreign money in an attempt to make a third Bush president.

Whether this loophole will continue to exist may largely depend on the outcome of the 2016 presidential race. The Democratic Party has lambasted the Supreme Court’s decision in its campaign rhetoric, and Hillary Clinton has promised to call for a constitutional amendment to overturn Citizens United in her first 30 days as president.

Graphic: The Intercept; Tang: Apicincus.com; Chen: Singhaiyi; Bush: Getty Images (2); Spies: Matt Roth

Gordon Tang and Huaidan Chen, now in their late 40s, have over the past several decades built a business empire largely based in Asia but with some branches in the United States.

The couple are the majority shareholders of SingHaiyi, a publicly traded Singapore-based corporation with a market value of about $250 million. SingHaiyi describes itself as “a diversified real estate company” owning condominiums and commercial property in Singapore, Malaysia, and the U.S.

Tang began his career in the 1990s, developing a large distribution network for duty-free goods. According to a SingHaiyi corporate disclosure, in the early 2000s, “leading trade importers and their staff” in the southeastern Chinese city of Shantou, including Tang’s trading businesses and Tang himself, were investigated by the Chinese authorities over “custom matters.” While “many in Shantou [were] convicted,” the disclosure states, including individuals “who were staff in Mr. Tang’s import and export business,” in the end Tang himself faced “no penalties or convictions imposed by the Chinese courts.”

When contacted by Elaine Yu, a Hong Kong-based journalist and contributor to this series, Tang offered to give her 200,000 dollars in an unspecified currency (Hong Kong and Singapore both denominate their money in dollars) if The Intercept did not reference unverified claims on Chinese-language websites that he had been accused of criminal activity.

Though Tang was most concerned about the resurfacing of these old rumors, which arose out of the government investigation into his trading businesses in China, they are actually far less pertinent to this story than his ownership of the U.S.-based APIC. According to a 2016 corporate filing by APIC, it is wholly owned by another corporation, “Jag Pacific Ltd.,” which appears to be incorporated in the Bahamas. But whatever Jag Pacific’s provenance, a 2012 SingHaiyi corporate circular states that APIC was ultimately “100 percent owned” by Tang and Chen. SingHaiyi’s 2014 annual report also says that APIC was owned by the couple, and its 2016 report states APIC is “controlled” by them. (APIC’s general counsel declined to discuss the company’s ownership structure on the record.)

Now headquartered in San Francisco, APIC calls itself a “diversified international investment holding company.” It currently owns, among other properties, five hotels and several residential developments in San Francisco, and three luxury hotels in China.

SingHaiyi has described APIC as its “sister firm” in news releases, a term that means they have the same ultimate owners.

Neil Bush as shown in a screen grab from SingHaiyi’s 2015 annual report.

Neil Bush is a member of the board of APIC and in 2013 joined SingHaiyi’s board as a nonexecutive chairman. Bush owns a small percentage of the Singapore company.

(Bush, like his business partner Tang, has been the subject of government investigations. Bush was famously sued by the federal government for his role on the board of Silverado Savings & Loan in Colorado from 1985 until 1988, when it collapsed with over $1 billion in debts. Silverado made $141 million in never-repaid loans to two investors in Bush’s oil exploration business; one of them used his free Silverado money to buy the entire company from Bush. Bush never faced criminal charges but did have to pay $50,000 to help settle the federal lawsuit and was reprimanded by government regulators.)

“We are very lucky to know them,” Wilson Chen said of the Bush family. “We talk to them as friends.” He noted that the Bushes have always been kind to China and said that “because of our generosity,” he was invited to attend a Right to Rise USA fundraising event hosted by Jeb Bush in April 2015 at the Mandarin Oriental, a luxury hotel in San Francisco.

APIC, which was initially incorporated in Oregon, made contributions between 2010 and 2014 to state and local Oregon politicians, mostly Democrats, totaling about $25,000. The earlier donations include $9,500 given to John Kitzhaber, a Democrat who was elected governor of Oregon in 2010 and 2014 and resigned last year in an unrelated ethics scandal.

“You know the politicians,” said Wilson Chen about the company’s history of donations. “They always ask for help.”

Wilson Chen, who unlike his sister and brother-in-law is a U.S. citizen, stated that APIC has never asked for anything specific in return for its money. However, he said, the connections between the company and prominent U.S. politicians gave those involved with APIC stature in Asia.

When asked whether Gordon Tang was unhappy with the donation to Rise to Rise USA given Jeb Bush’s quick defeat, Chen said no: It was simply about helping a friend. (Right to Rise USA did not spend all of the money it received, and when Bush withdrew from the race, it sent refunds to contributors on a pro rata basis; APIC got back $152,230.)

SWEETWATER, FL - MAY 18: Former Florida Governor and potential Republican presidential candidate Jeb Bush greets people as he attends a fundraising event at the Jorge Mas Canosa Youth Center on March 18, 2015 in Sweetwater, Florida. Mr. Bush is thought to be seeking to run for the Republican nomination but he has yet to formally announce his intentions. (Photo by Johnny Louis/FilmMagic)

Former Florida governor and Republican presidential candidate Jeb Bush attends a fundraising event at the Jorge Mas Canosa Youth Center on March 18, 2015, in Sweetwater, Fla.

Photo: Johnny Louis/FilmMagic

In Politico’s 2015 list of the 50 most influential people in U.S. politics, Charlie Spies is tied for second place with David Bossie, president of the organization Citizens United, and behind only Supreme Court Justice Anthony Kennedy, author of the Citizens United majority opinion.

Before Spies was general counsel for Right to Rise USA, he co-founded Restore Our Future, the main Super PAC supporting Mitt Romney’s 2012 presidential campaign. Spies was also chief financial officer and counsel for Romney’s first presidential run in 2008.

As Politico put it, Spies “has mastered the art of helping candidates benefit from Super PACs. … His work created a playbook that allows candidates to maximize the new flood of money into politics.”

For instance, Spies advised Jeb Bush to launch Right to Rise USA months before the official start of his presidential campaign in June 2015. This allowed Bush to spend that time directly raising unlimited contributions for his Super PAC, something that would become illegal once Bush was a declared candidate. APIC’s initial donation to Right to Rise USA was made during this period.

Spies’s stature in Republican circles is further enhanced by his wife, Lisa, a prominent GOP fundraiser in her own right. Lisa Spies is known to use a famous quote from Gilded Age powerbroker Mark Hanna as her email signature: “There are two important things in politics. The first is money, and I can’t remember what the second one is.”

Memo by Charles Spies.

Charlie Spies’s Super PAC memo is in some ways a peculiar legal document. It is from Spies, to his client Right to Rise USA, with the subject “Contributions by Domestic Subsidiaries of Foreign Corporations to Federal Super PACs.” But it is not marked as being a confidential communication covered by attorney-client privilege. Moreover, says Ryan at the Campaign Legal Center, the legal questions it addresses generally do not arise “in the abstract. … Instead, such memos are typically sought when a client has a particular course of action in mind.” Taken together, this suggests the memo was created to be given to potential donors, like APIC.

The memo begins by noting that U.S. law strictly forbids any “foreign national” from “contributing, donating, or spending funds in connection with any elections in the United States.” The term “foreign national” includes foreign individuals, corporations, and governments.

However, as Spies helpfully explains in the memo, a company incorporated in the U.S. is not considered foreign. The law prohibiting donations by “foreign nationals” defines the term as equivalent to that of “foreign principals” found in 22 U.S.C. § 611(b). That, in turn, clearly states that a corporation is not a foreign principal if it is “organized under or created by the laws of the United States or of any State.”

By that standard, it doesn’t matter that APIC is owned by Chinese citizens. It’s incorporated in California and therefore counts as an American company that can spend money in U.S. elections just like any other.

And that means it can spend a lot. By striking down prohibitions on corporations and unions engaging in “independent expenditures” on elections, the Supreme Court declared in Citizens United that they can spend as much of their money on engaging in political speech as they want — as long as it is not explicitly coordinated with federal candidates. But as it has turned out, despite the court’s stated intentions, Super PACs like Right to Rise USA are, in all but name, arms of presidential or congressional campaigns.

Supreme Court Justice John Paul Stevens warned about the potential dangers of this in his dissent in Citizens United. “Unlike voters in U.S. elections, corporations may be foreign controlled,” he wrote, and the decision “would appear to afford the same protection to multinational corporations controlled by foreigners as to individual Americans.”

There are, however, a few hoops foreign-owned corporations in particular need to jump through. Spies’s memo explains how to do the jumping.

For example, Federal Election Commission advisory opinions have held that any donation from a company must be, as Spies put it in the memo, “wholly derived from the net earnings generated within the United States [and] spent from segregated accounts not subsidized by the foreign parent corporation.”

In theory, this guarantees the corporation must be a functioning, profitable U.S. business and not simply a shell corporation passing money through into the American political process.

APIC was presumably able to pass that test — its U.S. holdings are large enough that they likely generate considerably more in U.S. profits than the $1.3 million it gave the Super PAC.

But as the enormous amount of corporate tax avoidance demonstrates, multinational corporations can transfer money to subsidiaries in ways that appear legitimate but are not. “It’s often hard to prove those type of things,” said Larry Noble, general counsel of the Campaign Legal Center and previously longtime general counsel of the FEC.

Moreover, money is fungible. The donations to Right to Rise USA made Tang and Chen $1.3 million poorer, whether the money officially came out of their APIC pocket in the U.S. or their pockets in Singapore.

Another hoop: FEC regulations state that foreign nationals may not “directly or indirectly participate in the decision-making process” on political donations. As Spies writes, FEC advisory opinions have held that foreign nationals may decide to create a special segregated account for contributions and set a maximum budget, but that’s it. After that point, all decisions must be “made by a Special Committee comprised solely of U.S. citizens” — including the composition of the committee itself.

But that’s hardly enforceable. As Noble points out, it’s “a fiction” that U.S. citizens in that position could ever make truly independent decisions. “Of course the person is going to be aware of what the board wants, what the company wants, and its interests,” he said.

In any case, in interviews with The Intercept, both Wilson Chen and Gordon Tang made statements that suggest Tang may have violated the relevant FEC regulations.

According to Chen, “I proposed to make a donation to the Republican Party and then let the board of directors approve it before sending the donation.” APIC’s board includes Chen himself and Neil Bush, both U.S. citizens, but also Chinese citizens Tang and Huaidan Chen.

For Tang’s part, when asked why APIC made the donation to Right to Rise USA, he responded: “Wilson said to donate, so I did, I don’t really mind.”

As Paul Ryan points out, this indicates that Tang “was the ultimate decision-maker” even if he made his decision at Wilson Chen’s suggestion. Tang’s statement also has significance beyond the narrow legal question, said Ryan, because it “makes clear that the legal fiction that a U.S.-based corporation that is wholly owned by foreign nationals is a U.S. donor, not a foreign national donor, is ridiculous.”

So APIC — to its potential detriment — may not have followed Spies’s playbook in every respect. But there’s no question that Spies’s analysis was correct: The Intercept asked numerous lawyers from both parties who specialize in campaign finance law to examine Spies’s reasoning, and all agreed with it. As long as a foreign-owned U.S. corporation follows the rules, it can legally go ahead and give an unlimited amount of money to a Super PAC.

While this would likely seem like an alarming conclusion to most Americans, it is the law of the land.

 

When Obama predicted during his State of the Union address that Citizens United would open the door to foreign money in elections, the television cameras cut to Justice Samuel Alito, part of the majority in that decision. Sitting in the second row, Alito could clearly be seen shaking his head and mouthing the words “not true.”

Bradley Smith, a former chairman of the FEC and key intellectual architect of the deregulation of campaign finance, wrote that “the president’s statement is false.” PolitiFact found Obama’s claim to be “mostly false.”

As for Spies, he told The Intercept that if any Americans are truly concerned about foreign influence on U.S. politicians, they should look to donations by foreign governments to the Clinton Foundation. “That’s a real problem,” he said, “not the three or five steps removed like you’re trying to pigeonhole the situation into here.”

Of course, however troubling contributions to the Clinton Foundation by foreign governments may be, such donations do not violate any laws. So there, at least, Spies and Obama find common ground on money in politics: Both believe something can be completely legal yet deeply wrong.

In response to detailed questions about APIC’s political activities, a representative for Tang and Huaidan Chen responded, “APIC is a legal American company. Our donations are all legal and approved by lawyers. We won’t break the law for our donations.”

The Campaign Legal Center told us it plans to file a complaint with the FEC asking it to open an inquiry into APIC’s contributions, but the reality is that the FEC has largely stopped enforcing even what few campaign finance limits still exist. The FEC has six commissioners, no more than three of whom may come from any one political party. The three current Republican commissioners philosophically object to most restrictions on political spending, which has led to frequent 3-3 deadlocks on important votes, including ones on whether to investigate possible foreign influence on U.S. elections.

“These days, the FEC doesn’t investigate anything,” said Noble. “The way things stand today, you’d probably have to hand them an email that says, ‘I’m directing you to make this contribution out of our foreign money.’”

There is just one known inquiry in the six years since Citizens United into a situation similar to that of APIC, but it was conducted by the Justice Department, not the FEC: A Mexican businessman was charged in 2014 with funneling $100,000 to a Super PAC he created via a U.S. shell corporation in an attempt to elect Republican Bonnie Dumanis as mayor of San Diego.

If Congress wanted to do something about foreign money in elections, it could have passed the DISCLOSE Act of 2010, which would have prohibited corporations with greater than 20 percent foreign ownership from putting money into the U.S. political process. But the act failed when first introduced, even with Democrats controlling the House and Senate. And this foreign ownership provision was stripped out of the most recent version of the bill.

And passage of such a law might make little difference given the partisan gridlock at the FEC; the law hardly matters if it isn’t enforced. Moreover, foreign ownership of a corporation can easily be disguised. As Donald Tobin, dean of the University of Maryland Law School, noted at a June 23 FEC event on the subject of foreign money in elections, “A foreign individual could create a Wyoming corporation. The Wyoming corporation could be the sole owner of a Delaware corporation that could own a Nevada corporation. The Nevada corporation could then engage in independent expenditures on behalf of a candidate. … It’d be incredibly difficult for any government entity, including the FEC, to have any idea that the funds in question” ultimately came from a foreign national.

So are there many more APICs, quietly putting their thumbs on the scale of elections for president, Congress, and state houses across the country? The reality is that America’s system of big-money politics exists in such darkness that it’s impossible to know for certain. And this door to foreign influence will likely remain open unless Citizens United is overturned by a new Supreme Court or invalidated by a constitutional amendment.

“When the president condemned Citizens United and warned that it would open the floodgates to corporate money, including foreign money, he was contemplating this,” said Norman Eisen, who was special counsel to the president when Obama delivered his 2010 State of the Union address. “I think he was prescient. I’m sure there are many more secret examples out there. It’s a sad state of affairs, but the worst scandal in the United States is what’s legal.”

Part 2

Meet the Chinese Husband-and-Wife Team Whose Company Spent $1.3 Million Trying to Make Jeb Bush President

Contact the author:

Jon Schwarzjon.schwarz@​theintercept.com@tinyrevolution

Lee Fanglee.fang@​theintercept.com@lhfang

Additional Credits:

Additional Reporting: Elaine Yu and Sheelagh McNeill. Research: John Thomason.
˅ 60 Comments (closed)
Read more
˅

Power Couple

Meet the Chinese Husband-and-Wife Team Whose Company Spent $1.3 Million Trying to Make Jeb Bush President

Illustration: Arthur Mount for The Intercept
Illustration: Arthur Mount for The Intercept

The husband-and-wife team of Gordon Tang and Huaidan Chen have used their wealth to forge ties with an array of American politicians — including San Francisco Mayor Ed Lee; former Ambassador to China Gary Locke; and two prominent members of the Bush family clan, Neil and Jeb. Tang and Chen, both in their late 40s, are Chinese citizens living in Singapore, where they have permanent resident status.

One of the couple’s companies, a California corporation called American Pacific International Capital, cultivated close ties to U.S. politicians as the firm amassed a growing real estate portfolio over the last seven years, snapping up commercial property from Oregon to Ohio to seize upon opportunities following the 2008 financial crisis.

As The Intercept is reporting today, APIC last year made a $1.3 million donation to Right to Rise USA, a Super PAC supporting Jeb Bush — brother of APIC board member Neil Bush. And just two years prior to the Bush contribution, Chen purchased Locke’s Bethesda, Maryland, home while Locke was still in office as ambassador to China.

These financial transactions are part of a strategy for maintaining “our friends,” said Wilson Chen, Huaidan’s brother, a naturalized U.S. citizen who also serves on APIC’s board.

“The politicians, they always want to ask for help, that’s the natural politician,” Chen explained over dinner in a new restaurant he opened in San Francisco’s SoMa district serving food from his native Chaozhou, a city in southeastern China. He emphasized that the campaign donations were legal and reviewed by attorneys.

Chen said his company has contributed to politicians from both parties and has long admired the Bush family, especially for its history with China — going back to George H.W. Bush’s service as the chief U.S. diplomat in Beijing in the 1970s.

Asked if his brother-in-law Gordon Tang viewed the seven-figure donation to Right to Rise as a waste, given Jeb Bush’s failed bid for the Republican nomination, Chen shook his head and said Tang did not because it involved “helping a friend.”

Tang himself expressed similar views on money and friendship during a remarkable telephone interview with The Intercept’s Elaine Yu — a Hong Kong-based freelancer and co-author of this article — in which he offered her cash not to report on online rumors about his past.

The rumors are related to smuggling investigations in the early 2000s in the southeastern Chinese city of Shantou. The fact that Tang was entangled in the Shantou probe is disclosed in corporate filings by SingHaiyi, a Singapore corporation of which Tang and his wife are majority shareholders. The Singapore stock exchange requires listed companies to report if an executive or board member has managed “any corporation which has been investigated for a breach of any law” in any country.

2013 SingHaiyi announcement says that in 2001 and 2002, a “sector wide” investigation of “custom duties matters” was conducted into all leading importers in Shantou, including Tang and a previous company he owned. According to the SingHaiyi statement, “many in Shantou” were convicted, including individuals who “were staff in Mr. Tang’s import and export business,” and assets of Tang’s business were seized, but in the end, Chinese courts imposed “no penalties or convictions” on Tang personally.

(Since Neil Bush serves on SingHaiyi’s board as well as APIC’s, the same disclosure notes the ugly fallout from Bush’s 1980s stint on the board of Silverado Savings & Loan in Colorado.)

Tang strongly averred his innocence during a multiparty conference call with The Intercept and provided an official 2014 Shantou government document stating that he has no criminal record. The Singapore Stock Exchange is very stringent,” said Tang. “When they saw some nonsense on the internet they asked about it. So I showed them the [Shantou document], and they have verified its authenticity.”

James Mei, Tang’s U.S. lawyer, characterized the rumors as “grossly inaccurate” and said Tang “passed very high-level security background checks by the U.S. including the State Department, the USCIS [U.S. Citizenship and Immigration Services] and the FBI” when Mei represented him for recent visa applications.

Following that call, Tang telephoned Yu directly in Hong Kong. Speaking with her in Cantonese, Tang was alternately threatening and cajoling, asking Yu to prevent The Intercept from referencing unverified claims on Chinese-language websites that he had been accused of smuggling, tax evasion, and bribery in Shantou. If she did, Tang said, when he came to Hong Kong the following week he would give her “a red packet of 200,000 dollars, so we can be friends,” adding, “I don’t even know why you want to be a reporter, reporters make so little money.” 

Gifts of money in red packets are a Chinese tradition on holidays and special occasions. Tang did not specify whether his offer was denominated in Hong Kong, Singapore, or U.S. dollars; at current exchanges rates, HK$200,000 would be worth about US$25,000.

Tang subsequently contacted Yu on his arrival in Hong Kong, saying he had a “little gift” for her, and asked her to meet him at the city’s Four Seasons luxury hotel. She declined.

APIC-graphics-21

Graphic: The Intercept; Tang: Apicincus.com; Chen: SingHaiyi; Locke, Bush, Lee: Getty Images (4); Hales: Linkedin.com; Kitzhaber: AP; House: BTWImages

APIC’s donation to Right to Rise USA is not the only flow of money from Tang and Chen to the Bush family. When SingHaiyi was formed by Tang in 2013, Neil Bush was named nonexecutive chairman and was awarded a small percentage of shares in the company. In addition, SingHaiyi records show that Bush has received at least $717,000 since 2013 for serving on the company board. (Any directors’ fees Bush receives for his place on APIC’s board are not public.)

Around that same time, Huaidan Chen and two other executives from APIC donated $1,320 to help defray the costs of San Francisco Mayor Ed Lee’s eight-day visit to China. The mayor used that trip as an opportunity to secure real estate investments for his city.

In November 2013, APIC helped underwrite a second trip for Mayor Lee to China, this time to Chaozhou, where the Chens are from and where Tang’s investment company owns a hotel. Wilson Chen accompanied Mayor Lee and appeared next to him for a sister-city ceremony between Chaozhou and San Francisco.

tang-properties

From top to bottom: KOIN Tower in Portland, Ore., Carriage Inn in San Francisco, Calif., and Vietnam Town in San Jose, Calif.

Photo: Koin: Aaron Hockley; Carriage Inn & Saigon Village: Apicincus.com

Campaign finance records show that APIC gave $2,500 to Portland, Oregon, Mayor Charlie Hales’s 2012 election campaign, $9,500 to former Oregon Gov. John Kitzhaber’s campaign account, as well as corporate donations to local candidates throughout the state.

Executives associated with APIC have also made individual campaign contributions to San Francisco Mayor Lee’s campaign and provided $41,100 in funds to state and federal campaign accounts, including the Republican Party of Kentucky and the Democratic National Committee. In January, Wilson Chen donated $2,700 to the Hillary Clinton campaign.

Tang has also found ways to court high-profile politicians other than money. The 2008 ribbon-cutting ceremony for his soybean processing plant featured an array of local Chinese politicians and Chinese-American dignitaries, including Locke. A similar ribbon cutting the following year, to dedicate the construction of three residential office and condominium towers in Shantou, featured Elaine Chao, former secretary of labor during the George W. Bush administration, who is married to Senate Majority Leader Mitch McConnell.

In an interview, Victoria Yu, APIC’s director of public relations, said that like any other major company, APIC engages in politics to “influence in some way good or bad policies” and to “create a better environment” for doing business.

Tang’s first notable business endeavor began in 1994 when he invested 80 million renminbi — approximately $16.5 million in U.S dollars adjusted for inflation — to form the Shantou Haiyi Group, a holding company that he used to buy stakes in construction materials, real estate, health supplements, and air purifiers, among other interests.

Tang went on to found Tang Dynasty in 1995 and Haiyi Holdings in 2003. Tang used Haiyi Holdings to conduct a 2012 friendly takeover of SingExpress Land, an already-existing Singapore company, and rename it SingHaiyi.

Tang’s initial significant investment in U.S. real estate was APIC’s purchase of the iconic KOIN Tower in downtown Portland, Oregon, in 2009 for reportedly close to $50 million. APIC subsequently sold it in 2015 for $88 million. In 2013, SingHaiyi purchased two American shopping malls. Vietnam Town, a condominium and commercial mall under development near San Jose, California, was bought for $33.1 million. Tri-County Mall, the other investment property, is a major shopping destination serving the Cincinnati region that boasts a Macy’s, PacSun, and Forever 21, among other popular stores. In 2014, APIC moved its offices to San Francisco, where it has steadily acquired real estate, including several hotels and condominium towers.

APIC also has holdings outside the U.S., including two luxury hotels in Shantou as well as “multiple high-rise residential development projects.”

A screen grab from a May 2016 SingHaiyi corporate presentation; Huaidan Chen also goes by the name Serena.

Today, the future of Tang’s businesses looks bright. SingHaiyi raised $226.5 million to develop luxury and public housing in Singapore and began investing in what executives described as “undervalued” real estate opportunities in the U.S., as well as real estate projects in Malaysia.

In a 2013 message to SingHaiyi investors not long after he was named the company’s nonexecutive chairman, Neil Bush said, “The real estate market in the U.S. is underestimated, with the U.S. economy in a recovery phase,” which presented “attractive real estate investment opportunities for both distressed and non-distressed U.S. real estate assets.”

Last year, RHB Bank, one of the largest financial services companies in Malaysia, issued a “buy” rating for SingHayi. SingHaiyi, RHB noted, not only snapped up “savvy investments in undervalued assets in the U.S. at attractive costs,” but maintains “well-affiliated backing,” listing the names of prominent American politicians, such as Neil Bush and Gary Locke, who have signed on to work with the company.

The website for APIC serves as a testament to Tang’s business success, with visitors greeted by a carousel of photos flashing gleaming properties from southern China to San Francisco. Below the building pictures are two other trophy images: Tang posing with his American friends Bush and Locke.

Part 3

Three Paths Citizens United Created for Foreign Money to Pour Into U.S. Elections

Contact the author:

Lee Fanglee.fang@​theintercept.com@lhfang

Jon Schwarzjon.schwarz@​theintercept.com@tinyrevolution

Elaine Yuyuenok@​gmail.com@yuenok

Additional Credits:

˅ 10 Comments (closed)
Read more
˅

Cracks in the Dam

Three Paths Citizens United Created for Foreign Money to Pour Into U.S. Elections

Illustration: Arthur Mount for The Intercept
Illustration: Arthur Mount for The Intercept

Before the 2010 Supreme Court decision known as Citizens United, all money spent in federal elections urging the election or defeat of a candidate had to originate from identifiable human beings.

There were also strict limits on the amount any one human being could contribute to any particular campaign. And there were public disclosure requirements for donations over $200.

Corporations and unions were forbidden from involvement beyond organizing individuals’ contributions, via regular (i.e., non-Super) political action committees.

For example, Microsoft long ago established a PAC. But it could only solicit donations from individuals connected with Microsoft — e.g., executives and stockholders — and these individuals could only contribute to the PAC in amounts limited by law. The PAC doled out the money it collected from these individuals, but it couldn’t use any of the tens of billions of dollars in cash in Microsoft’s corporate treasury to make political contributions or expenditures.

APIC-graphics-3

Graphic: The Intercept

Then Citizens United struck down the prohibition on corporations spending their own money on “independent expenditures.” Corporations had free-speech rights, the court decided, and money was tantamount to speech, so corporations had the right to spend unlimited money espousing their political views. Several months later, a lower court decision clarified that a new kind of political action committee — one that only made “independent expenditures” — could collect and spend unlimited amounts of money to that end.

This was the birth of Super PACs.

The sole, weak legal restrictions that remain revolve around the definition of “independent expenditures.” Technically, they are not to be used for spending that is coordinated directly with campaigns — although that restriction, in 2016, has been blatantly violated.

Karl Sandstrom, a former FEC commissioner, explained the situation this way several years ago: “Prior to Citizens United, all federal election money could be traced back to an individual who expended it or contributed to a political committee. Once you enable artificial entities to contribute, money is no longer traceable back to identifiable individuals.”

One foreseeable effect of this was that the question of whether a campaign contributor was foreign or not went from a yes-or-no question to something altogether hazier, where even experts in campaign finance law can’t say for certain whether the government has grounds to sanction the donor.

This would matter less if the Federal Election Commission, the body charged with overseeing campaign finance law, were a well-resourced, ferocious watchdog, developing rules for such things and enforcing them. But it’s exactly the opposite, with inaction built into its structure by Congress: There are six commissioners, but no more than three can be members of the same party. These days, with the Republican commissioners adamantly opposed to enforcing even existing laws, crucial votes often tie 3-3. The commission has a difficult time just deciding to open inquiries into potential violations; it conducted 36 investigations in 2005, but only four in 2013.

One recent Republican commissioner — Don McGahn, now the chief lawyer for Donald Trump’s presidential campaign — even proposed that the FEC’s investigative staff should be forbidden from using Google without approval from a majority of commissioners. FEC employees have some of the lowest morale in comparable government agencies.

All in all, Citizens United opened three major potential paths for foreign money to flow into the U.S. political process:

The Intercept has discovered that American Pacific International Capital, a company incorporated in California but owned and controlled by Gordon Tang and Huaidan Chen, a married couple who are Chinese nationals, made donations totaling $1.3 million to the Jeb Bush Super PAC Right to Rise USA.

APIC-graphics-4

Graphic: The Intercept; Weintraub: Twitter.com; Walther, Ravel, Peterson, Hunter, Goodman: FEC.gov

APIC is actually an example of a corporation whose ownership was comparatively easy to uncover. It is a real company that does actual business in the U.S., and Tang and Chen also control a publicly traded Singapore corporation whose filings disclose that APIC belongs to them.

By contrast, the 2016 election has seen a surge of contributions to Super PACs by so-called ghost corporations, which appear to exist solely to make those donations and whose ownership is unknown. Whether any of these corporations are ultimately owned by foreign nationals is likewise unknown.

Don’t expect the FEC to find out where the money came from: It recently deadlocked on a vote simply to open an investigation into several million-dollar donations by corporate entities four years ago to Restore Our Future, a Super PAC supporting Mitt Romney. (The treasurer of Restore Our Future was Charlie Spies, a prominent D.C. lawyer who went on to become treasurer of Right to Rise USA — and who, in 2015, authored a memo creating a legal roadmap for foreign nationals wishing to take advantage of Citizens United to invest in U.S. politicians.)

Almost all large publicly traded U.S. companies have some degree of foreign ownership. The most recent Treasury Department survey estimated that about $6 trillion in U.S. stock, or around one-quarter of the total market value of public U.S. corporations, is ultimately owned by foreign nationals.

The money in these corporations’ treasuries therefore belongs in part to foreign nationals. And because their money can’t plausibly be sequestered from U.S. money, any donations by such corporations are technically partially of foreign origin and should theoretically be illegal. To pick one example of many, the publicly traded Florida electricity company NextEra Energy gave $1 million to Right to Rise USA in 2015.

Americans may find this form of foreign influence less alarming than others, since foreign ownership of public U.S. companies is generally (though not always) held by many separate individuals who don’t coordinate with one another and have little influence over the companies’ behavior. But there’s no way to know, given that the FEC has not investigated this subject since the Citizens United decision. One of the Democratic commissioners, Ellen Weintraub, sponsored a recent forum at the FEC about foreign money and has suggested a possible ceiling of 20 percent foreign ownership for any corporation that wants to spend its money on electioneering.

UNITED STATES – JANUARY 20: Move to Amend holds a rally at the Supreme Court to "Occupy the Courts" and mark the second anniversary of the Citizens United v. FEC Supreme Court case on Friday, Jan. 20. 2012. (Photo By Bill Clark/CQ Roll Call) (CQ Roll Call via AP Images)

The Move to Amend coalition held a rally at the Supreme Court to “Occupy the Courts” and mark the second anniversary of the Citizens United decision, Jan. 20. 2012.

Photo: Bill Clark/CQ Rolle Call/AP

Nonprofit corporations are organized under Section 501(c) of the Internal Revenue Code. They have always been able to accept unlimited donations from individuals or corporations, but before Citizens United, could engage in little federal political activity.

Now, thanks to the combination of Citizens United and a 2007 Supreme Court decision, “social welfare” organizations operating under Section 501(c)(4) of the Internal Revenue Code and trade associations operating under Section 501(c)(6) may — within certain lax, seldom-enforced limits — make independent political expenditures just like Super PACs.

The 501(c)(4) and 501(c)(6) organizations are, in fact, much more attractive than Super PACs to anyone hoping to influence elections anonymously, because, unlike Super PACs, they are not required to publicly disclose their donors. This is why contributions to politically active nonprofits are often referred to as “dark money.”

This additional layer of obfuscation makes it even less likely that money originating with foreign nationals would be noticed. For instance, if APIC had donated to Right to Rise Policy Solutions, a 501(c)(4) that was affiliated with the Right to Rise USA Super PAC, it’s unlikely The Intercept would have ever discovered its involvement in the election or ultimate ownership.

A (c)(4) like Right to Rise Policy Solutions does have to privately disclose its donors to the Internal Revenue Service on its tax return, but the IRS is perhaps even more hobbled than the FEC and would be extremely unlikely to notice or investigate possible foreign national involvement.

Want an example? Consider, for instance, that the American Petroleum Institute is partially financed by the U.S. subsidiary of Aramco, the state-owned Saudi oil company. In the 2010 midterm elections, API was one of the funders behind attack ads that helped the Republican Party take back the House of Representatives from the Democrats and stop most of Obama’s plans in their tracks.

Similarly, the American Chemistry Council, partially funded by U.S. subsidiaries of Saudi, Japanese, and Belgian corporations, also spent hundreds of thousands of dollars that year to elect its favored politicians. The U.S. Chamber of Commerce, the largest undisclosed outside spending group in federal elections, which has already spent over $16 million on congressional elections this year, has acknowledged that it receives foreign money. (API and Aramco declined in 2012 to comment on their midterm activities. The Chamber of Commerce issued a statement stating it has an internal system in place to prevent the foreign money it raises from financing political activity.)

In theory, 501(c)(4)s and 501(c)(6)s have to keep any foreign money segregated and only spend funds from American donors on U.S. elections. In reality, the public has no idea whether or how they do this, since they are not required to disclose it. And since money is fungible, any foreign donations they use for operating expenses leave more domestic contributions to spend on attack ads.

Part 4

Gary Locke, While Obama’s Ambassador to China, Got a Chinese Tycoon to Buy His House

Contact the author:

Jon Schwarzjon.schwarz@​theintercept.com@tinyrevolution

Lee Fanglee.fang@​theintercept.com@lhfang

˅ 14 Comments (closed)
Read more
˅

A “Desperate” Seller

Gary Locke, While Obama’s Ambassador to China, Got a Chinese Tycoon to Buy His House

Illustration: Arthur Mount for The Intercept
Illustration: Arthur Mount for The Intercept

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.

WUHAN, CHINA - SEPTEMBER 23:  (CHINA OUT) U.S. Ambassador to China Gary Locke takes part in a bicycle body-building event during the Hubei Wuhan U.S.A. Week at Jiangtan Park on September 23, 2011 in Wuhan, Hubei Province of China. The Hubei Wuhan U.S.A. Week was jointly sponsored by Embassy of The United State to the People's Republic of China, Hubei Province People's Government and Wuhan Municipal People's Government.  (Photo by VCG via Getty Images)

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.”

gary-locke-ribbon-cutting

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

Contact the author:

Lee Fanglee.fang@​theintercept.com@lhfang

Jon Schwarzjon.schwarz@​theintercept.com@tinyrevolution

Additional Credits:

Additional Reporting: Sheelagh McNeill. Research: Elaine Yu and John Thomason.
˅ 17 Comments (closed)
Read more
˅
Filters SVG