[Congressional Record Volume 143, Number 53 (Tuesday, April 29, 1997)]
[Extensions of Remarks]
[Pages E772-E773]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    U.S. SECURITY WAS SOLD TO SUPPORT PRESIDENT CLINTON'S REELECTION

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                        HON. GERALD B.H. SOLOMON

                              of new york

                    in the house of representatives

                        Tuesday, April 29, 1997

  Mr. SOLOMON. Mr. Speaker, the American people are becoming 
increasingly concerned about certain aspects of the scandals 
surrounding the White House.
  In a recent letter to me, an attorney from our 22d District, Mr. 
Robert W. Linville of Old Chatham, put it in words which, if 
universally shared, suggested the concerns of many Americans. He 
suggested that U.S. security was sold to support President Clinton's 
reelection. He based his concerns on a recent article in the New York 
Times, which I place in today's Record.

  Officials Say China Illegally Sent U.S. Equipment to Military Plant

                            (By Jeff Gerth)

       Washington, April 22.--A Federal criminal inquiry has 
     uncovered new evidence, including American satellite photos, 
     suggesting that a state-owned Chinese company had all along 
     intended to divert American machine equipment to a military 
     plant that builds missiles and fighter aircraft, intelligence 
     officials say.
       The equipment, bought in 1994 by one of China's most 
     powerful state-owned corporations, Catic, was supposed to be 
     used solely for civilian purposes.
       Now, as a year-old inquiry accumulates more evidence of a 
     diversion, the Clinton Administration is faced with the 
     question of how to proceed if it is proved that Catic 
     knowingly misled American officials. Administration officials 
     say the next step could be filing charges against the 
     company.
       The new evidence also raises questions about the 
     Administration's approval of the sale in the first place, 
     officials said.
       The Administration preliminarily approved Catic's purchase 
     of machine equipment from the McDonnell Douglas Corporation 
     in late August 1994; the equipment was supposed to be used in 
     Beijing to make civilian jetliners. The approval came about 
     the time Commerce Secretary Ronald H. Brown left for China, 
     where he helped persuade Chinese officials to keep their 
     commitment to spend $1 billion on jetliners from McDonnell 
     Douglas.

[[Page E773]]

       But Pentagon critics of the sale had earlier said they 
     believed that the Chinese wanted the sensitive equipment, 
     which included giant machine tools to shape and bend large 
     aircraft parts, to improve their military capability, 
     Administration officials said. At the time, the Chinese press 
     had reported a Chinese Government plan to cut jetliner 
     production in half, which would have reduced the civilian 
     need for the American equipment.
       In the end, some equipment sent from the United States 
     wound up 800 miles from Beijing, at a military complex of the 
     Nanchang Aircraft Company. The satellite photos recently 
     uncovered show that a plant was being built in Nanchang to 
     house a giant stretch press, a major piece of American 
     equipment, even as Catic was telling American officials that 
     the equipment would go to a civilian machining center in 
     Beijing, intelligence officials said.
       American officials said other documents in the case 
     suggested that Nanchang had been the intended destination 
     from the start. Nanchang officials, for instance, inspected 
     some of the equipment at a McDonnell Douglas plant in Ohio 
     1993, before the deal was signed, and then packed up the 
     equipment in late 1994 as it was being shipped to China, the 
     officials said. The plan to build the Beijing machining 
     center, the supposed destination for the equipment, was 
     abandoned before the license was issued.
       All that raises some diplomatically sensitive questions.
       ``We ought to send the Chinese the message that they can't 
     divert our technology with impunity, and an indictment of 
     Catic might even get the Chinese to talk to us seriously 
     about proliferation,'' said Gary Milhollin, the director of 
     the Wisconsin Project on Nuclear Arms Control, which has 
     tracked the procurement activities of Catic in the United 
     States.
       Catic and its lawyers declined to answer any questions 
     about the grand jury investigation, which, one witness said, 
     is still in the early stages of taking testimony. Catic is 
     based in Beijing, outside the reach of the grand jury, but 
     records from its subsidiary in Southern California have been 
     subpoenaed, Administration officials said.
       A spokesman for McDonnell Douglas, Larry McCracken, said, 
     ``At this point, since these matters are being looked at by 
     the United States Attorney's Office, we have no comment other 
     than to say that McDonnell Douglas has not done anything 
     illegal.''
       McDonnell Douglas, an aerospace company based in St. Louis 
     that has agreed to merge with its longtime competitor, the 
     Boeing Company, discovered the diversion in Nanchang in early 
     1995 and reported it promptly to Commerce Department 
     officials. Commerce Department officials say the unusual 
     conditions they attached at the last minute to the approval 
     for the license enabled them to have the diverted equipment 
     placed under tighter supervision at a civilian location in 
     China.
       But that took almost a year. By then, the criminal inquiry 
     by the United States Attorney's Office in Washington and the 
     United States Customs Service had begun. In late spring of 
     1996, several weeks after the grand jury had subpoenaed 
     records from McDonnell Douglas, a company official tried 
     to obtain the sensitive satellite photos of the Nanchang 
     military site, intelligence officials said.
       The request was eventually denied, but the question of why 
     the company official sought the photos has become part of the 
     investigation, intelligence officials said.
       The decision to approve the export of the machine equipment 
     pitted national security concerns against economic interests 
     and, in the end, the latter prevailed.
       ``For the Administration, this has been a difficult 
     decision, weighting jobs against counterproliferation,'' said 
     Adm. Bill Center, who represented the Joint Chiefs of Staff 
     in 1994 in deliberations within the Government about the 
     proposed sale.
       Admiral Center said, ``The Joint Chiefs of Staff initially 
     opposed the sale on national security grounds.'' But after 
     considerable discussion, led by White House officials, ``all 
     of us concluded that if McDonnell Douglas didn't sell it, 
     others would, and we wouldn't accomplish anything by saying 
     no.''
       Secretary Brown, who died in a plane crash in Croatia last 
     year, intended to raise the issue of economic and security 
     trade-offs when he visited China in 1994. A draft of one of 
     his speeches said, ``Sales of sensitive technologies have 
     been made despite public and political opposition.''
       Some sales to China may wind up being examined as part of 
     the various inquiries into possible ties between the Chinese 
     and the Clinton Administration.
       The House Government Reform and Oversight Committee, the 
     principal panel looking at campaign finances, has requested 
     the use of Customs investigators who have specialized in 
     export diversion cases, Congressional and Administration 
     officials said.

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