Federal agents investigating a Chinese government-linked gun-smuggling ring in 1996 conducted months of surveillance on a California mansion where close relatives of China’s paramount leader Deng Xiaoping lived and worked, records and interviews with federal officials show.
From the lavish $2 million Palo Alto home, Deng’s son-in-law and several other Chinese executives helped operate a state-run weapons trading company that was created to generate profits for the Chinese army.
Records gathered in the gun-smuggling investigation have become part of a second federal probe into whether Chinese officials used campaign contributions to the Democratic Party to win access to the Clinton administration and to try to influence U.S. trade and military policy.
The link between the two cases is Chinese arms dealer Wang Jun, who visited the Palo Alto mansion that served as an unofficial U.S. headquarters for his conglomerate soon after he attended a White House coffee last year, according to federal officials.
As part of the campaign finance investigation, federal agents using electronic eavesdropping devices gathered evidence that the Chinese Embassy in Washington was used last year to plan foreign contributions to the Democratic National Committee, The Washington Post reported Thursday.
“It would be a very serious matter for the United States if any country were to attempt to funnel funds to one of our political parties for any reason whatsoever,” Clinton said at a news conference Thursday. “So I think we have to let the investigation proceed.”
U.S. officials are seeking to determine what Chinese policymakers stood to gain from any contacts they may have had with Democratic fundraisers, including what Wang Jun’s visit to the White House on Feb. 6, 1996, may have reaped.
By Clinton’s account, Wang’s presence at that coffee klatch was one of the most embarrassing episodes in the unfolding campaign finance controversy. For several years before Wang’s White House visit, U.S. intelligence officials had suspected Wang’s state-run munitions company of arming rogue states while secretly funneling American military technology back to China.
In May, three months after Wang’s White House visit, federal agents raided the Palo Alto mansion, carting out boxloads of company memos and computer files that detailed the arms-trading activities of Wang’s Poly Group conglomerate.
Authorities charged one of the Palo Alto home’s residents, Wang deputy Robert Ma, president of Poly’s U.S. subsidiary, with helping to smuggle 2,000 AK-47 rifles that were destined for the American street market. It was the largest cache of automatic weapons ever seized by U.S. authorities. Ma fled to China.
Records and interviews show that Wang’s status as head of China’s largest state-owned investment conglomerate gave him a keen interest in a broad array of U.S.-Sino trade issues.
The possibility that Chinese officials used campaign contributions to win access to the Clinton administration surfaced last month in a letter from House Rules Committee Chairman Rep. Gerald Solomon (R-N.Y.) to FBI Director Louis Freeh.
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Solomon asked the FBI to investigate whether Democratic fundraiser John Huang conducted “economic espionage” on behalf of his former employer, the Lippo Group, an Indonesian financial conglomerate.
Freeh responded with a letter indicating that the Justice Department’s 25-agent task force already was looking into that matter as part of its probe of Democratic fundraising. Federal agents have subpoenaed Democratic Party records that may pertain to Wang Jun.
White House and law enforcement officials are trying to determine the extent of Wang’s U.S. government contacts and to find out what role, if any, he played in the alleged gun-smuggling operation.
Similarly, investigators are trying to piece together the activities of Deng Xiaoping’s daughter and son-in-law, though they have not become formal targets of the criminal investigation.
The ailing Deng was quoted as saying last year that his son-in-law played no role in the smuggling operation, which he called “a trap by the United States.”
But last October, Chinese officials pressured the son-in-law, He Ping, to resign as director of the military’s armament department, which supplies equipment to China’s 3.2 million-strong People’s Liberation Army.
By all accounts, Deng’s three daughters and two sons, who grew up in imperial privilege and assumed control of a sprawling web of billion-dollar, government-linked firms, have seen their influence wane with their 92-year-old father’s ability to protect it.
The “princelings,” as they and other privileged children of China’s Communist revolutionary leaders are sometimes called, are a thorny issue in Chinese domestic politics. Controlling China’s financial houses and weapons factories through an elaborate network of family ties, they wield their fortunes by gambling in Macao, trading stocks in Hong Kong and London, and schooling their children in America.
The pink Palo Alto mansion represented one effort by Deng’s children to establish an American beachhead, some federal officials believe. It was purchased by a Hong Kong financier for $2 million cash in October 1995 and is described by one federal agent as “a mini-embassy,”
Staying at times behind the wrought-iron security gate and three-tiered fountain in the Palo Alto home were Deng’s son-in-law, He Ping, who is an army major general and is president of Poly; He Ping’s wife, Deng Rong; and their teenage daughter, according to records and interviews with federal officials.
Deng’s youngest and perhaps most influential daughter, Deng Rong, 47, graduated from John Hopkins University and lived in Washington from 1979 to 1983, when she and He Ping were stationed at the Chinese Embassy.
She long has been seen as Deng’s helpmate and spokesperson; she informed her invalid father of events in China and abroad, then passed on his responses to outsiders.
In February 1996, the General Office of the Communist Party Central Committee issued a decree forbidding Deng’s children from disseminating their father’s pronouncements.
Western analysts interpret the gag order as an effort by Deng’s successor, Chinese President Jiang Zemin, to shape the ailing but influential leader’s words and legacy.
He Ping, as president of the Poly Group conglomerate, is second in command to Wang, Poly’s chairman.
Founded in June 1984, Poly’s original mission was to sell China’s stockpile of missiles and machine guns to governments and mercenaries around the world, turning the profits back to the army, while acquiring advanced Western technology for duplication in Chinese factories.
The conglomerate, headquartered in Beijing’s glittering glass Poly Plaza tower, spawned subsidiaries that stretch into every corner of China’s domestic economy. The corporation maintains offices in Moscow, Macao, Hong Kong and Los Altos, Calif.
Poly’s Ringo Trading Ltd., for example, holds a majority stake in the Hong Kong-based Continental Mariner shipping firm, whose dozen freighters have a 400,000-ton capacity. Continental Mariner, in turn, expanded into real estate and construction ventures on mainland China.
Today, Poly’s $700 million real estate portfolio includes the $106 million Beijing Garden Villas, a luxurious, European-style subdivision marketed to expatriate executives; the Shanghai Securities Exchange Building; and the Beijing International Shooting Range, company reports show.
While profits from these ventures fund fresh speculative commercial ventures and lavish management perks, they also help to feed, clothe and arm China’s troops, company records and interviews with Western analysts show.
During their time in Palo Alto, He Ping and Deng Rong’s teenage daughter was cared for, in part, by the wife of fugitive smuggling suspect Robert Ma, who also lived at the Palo Alto home with the Mas’ 11-year-old son, according to records and interviews with federal officials.
In May 1995, federal agents obtained court permission to wiretap all phones and faxes associated with Ma, a former Chinese naval intelligence division lieutenant who loved to show off his crisp blue uniform and sparkling white officer’s cap.
Also at times staying at the house, according to records and federal officials, was Xie Da Tong, an army officer and president of a $500 million, import-export subsidiary called Poly Technologies Inc., and Zhou Kejia, a Poly executive. Company memos show Zhou negotiated the purchase of advanced Western technology, as well as computer and radar equipment, for export to China.
Their superior was Wang, 55, a king among China’s “princelings,” and a business manager whose decisions send tremors along the wireless silk road that stretches from the Hong Kong stock exchange to London.
The son of the late Chinese Vice President Wang Zhen, Wang is also chairman of China International Trade & Investment Co., or Citic, the Chinese government’s most powerful and visible capital investment conglomerate.
When China’s State Council created the conglomerate in 1979, Wang was appointed its business manager; he became vice president in 1986, then president in 1993.
By the end of 1994, Citic boasted $16 billion in assets. The conglomerate controlled banks, telecommunications companies, power plants and big-ticket construction firms with projects around the globe, employing more than 50,000 people, according to company reports and independent analysts.
But that year the company was shaken by a series of scandals and imprudent trades, including an embarrassing $40 million loss on the London Metals Exchange that resulted in the arrest in China of the conglomerate’s Shanghai branch director.
China’s powerful State Council sent Wang in to clean up the mess. He was appointed Citic chairman in May 1995 and directed to discipline or divest some of the 30 subsidiaries that were not run efficiently or were not large enough to push China into the global economy’s first ranks.
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At the time of Wang’s White House visit in February 1996, the conglomerate’s Citic Pacific subsidiary was seeking U.S. partners for several multimillion dollar development projects in Hong Kong and China. These included the expansion of the state-owned Jiangyin Steel Mill, in Jiangsu province, and the retooling of a massive coal-fired power plant in nearby Ligang.
On the day of his White House visit, Wang was granted a five-minute meeting with then-Commerce Secretary Ronald Brown. Department officials said they could not determine who arranged the meeting or what was discussed.
Wang was invited to the White House by Little Rock, Ark., dealmaker Yah Lin “Charlie” Trie. He is a Clinton friend and fundraiser who has emerged as a central figure in the campaign finance controversy when it was disclosed that the first family’s legal defense fund returned more than $600,000 in contributions Trie gathered because of questions about the money’s sources.
It is not clear what business and political interests brought Trie and Wang together, and only scattered details have emerged about Trie’s activities after he sold his modest Little Rock Chinese restaurants in 1991 and launched an international trading firm exploring deals in Hong Kong, Beijing and Washington.
The coffee session to which Trie squired Wang was typical of the 103 receptions White House officials held in 1995 and 1996 to reward top Democratic contributors and encourage more donations. The 10 guests, an eclectic group of international and domestic investors, gave a total of $429,890 to the Democratic Party during the last election cycle, campaign records show.