Peter Schweizer, who delved into the Clinton Foundation’s dealings in 2016’s “Clinton Cash,” has turned his sights to the money-making machinations of DC’s political elite.
[Larry Getlen | March 17, 2018 | Politico]
His new book, “Secret Empires: How the American Political Class Hides Corruption and Enriches Family and Friends,” — due out Tuesday from Harper Collins — exposes how politicians engage in “corruption by proxy” by exploiting family and business ties to enrich themselves and their relatives.
Here, The Post’s Larry Getlen details the book’s revelations on Senate Majority Leader Mitch McConnell and Transportation Secretary Elaine Chao, ex-Commerce Secretary Penny Pritzker and others:
In 2004, current Senate Majority Leader Mitch McConnell and his wife, current US Transportation Secretary Elaine Chao, had an average net worth of $3.1 million. Ten years later, that number had increased to somewhere between $9.2 million and $36.5 million.
One source of the windfall, according to a new book from Peter Schweizer, was a 2008 gift from Chao’s father, James Chao, for somewhere between $5 million and $25 million. But this gift could be seen as more than just a gift. It may have been acquired, according to Schweizer, thanks to the couple’s fealty to China, the source of the Chao family fortune. And that fealty may have occurred at the expense of the nation they had pledged to serve.
“Secret Empires,” the new book from the “Clinton Cash” and “Throw Them All Out” author, details myriad examples of corruption from members of both major political parties. Rather than focusing on direct forms of corruption, such as bribes, Schweizer hones in on the more indirect graft of the modern era.Rather than risk their careers taking bribes for potentially minuscule rewards, Schweizer points out how today’s politicians are savvier, engaging in what he calls “corruption by proxy.”
While politicians and their spouses are often subject to rigid regulations on what gifts they can accept and what sort of business they can conduct, others around them — like their friends or children have no such obstacles. So while a politician could theoretically wind up in prison for accepting $10,000 for doling out favors, establishing overseas connections that could land your children multi-million-dollar deals is harder to detect, and often legal.
“Foreign governments and oligarchs like this form of corruption because it gives them private and unfettered gateways to the corridors of Washington power,” Schweizer writes. “Foreign entities cannot legally make campaign contributions, so using this approach creates an alternative way to curry favor and influence America’s political leaders. Simply camouflaging these transactions as business agreements provides another shield of plausible deniability.”
As Schweizer tells it, the Chao family fortune derives from the Foremost Group, a shipping company that Chinese native James Chao, a classmate of former Chinese president Jiang Zemin at Jiao Tong University, founded in New York in 1964. Chao remains Foremost’s chairman today, and his daughters Angela and Christine are the company’s deputy chairwoman and general counsel, respectively. Elaine Chao worked there in the 1970s, and has been quoted as saying, “Shipping is our family tradition.”
The success of Foremost is largely due to its close ties to the Chinese government, in particular the China State Shipbuilding Corp. (CSSC), a corporation with which Foremost has done “large volumes of business.”
The CSSC, Schweizer writes, is “a state-owned defense conglomerate … at the heart of the Chinese government’s military-industrial complex.” The main goal of the CSSC is to strengthen the Chinese military. James and Angela Chao have both sat on the board of a CSSC offshoot.
While Foremost is an American company, “their ships have been constructed by Chinese government shipyards, and some of their construction financed by the Chinese government.” In addition, writes Schweizer, “their crews are largely Chinese,” despite US Transportation Secretary and company founder’s daughter Elaine Chao having once said that “ships crewed by Americans are ‘a vital part of our national security.’”
Given all this, it’s worth noting how both McConnell and Chao, in their roles as high-ranking US officials, have personally interacted with, and then gone considerably soft on, China since their 1993 wedding.
When Senator McConnell — who took hardline positions against China prior to his marriage — met with high-ranking Chinese officials in 1994, it was not in his capacity as senator, but via a personal invitation from the CSSC arranged by James Chao. McConnell met with Zemin, then the country’s president, and vice-premiere Li Lanqing. After this meeting, McConnell “would increasingly avoid public criticism of China.” More meetings like it would follow in the years to come.
“As the Chaos and the Chinese government went into business together, the Chaos-McConnells tied their economic fate to the good fortunes of Beijing,” Schweizer writes. “Were McConnell to critique Beijing aggressively or support policies damaging to Chinese interests, Beijing could severely damage the family’s economic fortunes.”
In the ensuing years, McConnell has loudly defended China in its actions against Hong Kong and Taiwan, even claiming that “the United States needed to be ‘ambiguous’ as to whether we would come to the defense of Taiwan if attacked by China.” When Sen. Jesse Helms introduced the Taiwan Security Enhancement Act, pledging support for Taiwanese independence, in 1999, it had “twenty-one co-sponsors and heavy Republican support. But McConnell was not on the list.”
When Congress required China to document annual progress on human rights in order to maintain its trade status in the aftermath of the Tiananmen Square massacre, ditching the requirement became a priority for the country. In 2000, “McConnell cosponsored S.2277, which would do just that.”
McConnell also fought attempts to punish China for vigorously undervaluing its currency, a tactic that led Senate Majority Leader Harry Reid to invoke the nuclear option, changing Senate rules on voting. The bill passed, 63-35, with McConnell voting against.
Chao has also done her part to support her ancestral home.
When she served as Secretary of Labor under George W. Bush, her department resisted efforts to “call out the Chinese government over its workers rights practices.” When a petition was filed against China on the subject of worker’s rights based on the US Trade Act of 1974, Chao opposed it.
After a bipartisan congressional report citing Chinese espionage against the US circulated in 2000, Chao “was critical of the report,” making clear she “in no way” agreed with its findings, and, Schweizer writes, “dismiss[ing] the idea that China could pose any threat to the United States.”
This dishonest double-dealing works on both sides of the political aisle. Schweizer notes the case of Penny Pritzker, US Commerce Secretary during President Obama’s second term, and heir to the Hyatt Hotel fortune.
Pritzker met Barack and Michelle Obama when Barack was a lecturer at the University of Chicago Law School, and her family and the Obamas became fast friends, vacationing together regularly.
Throughout Barack Obama’s political career, Pritzker has been one of his major donors and bundlers. When Pritzker became Commerce Secretary in 2013, she resigned from Hyatt’s board and other potentially conflicting obligations, but maintained her ownership of $400 million in Hyatt stock — Hyatt was a major government contractor — as well as “the vast bulk of her real estate holdings.”
This included Artemis Real Estate, a “private equity real estate investment manager” that “raised $736 million to be used to purchase office buildings. With her White House connections, the federal government, including the government department Pritzker would later head, became a profitable tenant for Artemis and the Pritzker empire.”
In 2013, Artemis purchased the mixed-use Alexandria, VA, complex known as the Carlyle Center, which housed the offices of the U.S. Patent and Trademark Office, which is part of the Commerce Department.
“That meant that the commerce secretary could be seen as, in effect, the landlord of the Department of Commerce. The annual rent: $1.4 million.”
While Pritzker was Commerce Secretary, Artemis purchased, alone or in joint ventures, buildings that brought in over $1.6 million in annual rent from separate US government tenants.
Even more blatant and convoluted, “some tenants of Pritzker-owned companies also received Department of Commerce contracts and money from Pritzker.”
Pritzker bought a 102,000-square-foot industrial space in Huntington, CA, in 2013, and gave a 10-year lease worth $9.1 million to aircraft company Driessen Aircraft Interior Systems. Driessen’s parent company, Zodiac Aerospace, is regulated by the Department of Commerce. Another of their subsidiaries, Zodiac of North America, received almost $800,000 in contracts from Secretary Pritzker.
Money flowed not just to collaborators and tenants, but to family as well. In 2015, a Chicago-based company called Clean Energy Trust won a $10 million grant from the Commerce Department. It was the only Chicago company so rewarded. The company’s co-chair was Nick Pritzker, Penny Pritzker’s cousin.
This ethical looseness is endemic throughout the federal government. Schweizer documents how it has spread like a virus through Congress, where the lines between members, their families, and lobbying groups have become indistinguishable.
Take Republican Congressman Denny Rehberg, who formed the US- Mongolia Friendship Caucus. Why was Rehberg, a Montana rancher, concerned about US relations with Mongolia? Perhaps because his son, A.J. Rehberg, worked for the Washington lobbying firm Gage, whose clients included the Mongolian government. Gage later cited their accomplishments on that government’s behalf to include “formation of the US Mongolia Congressional Caucus.”
Democrat Loretta Sanchez, who served in Congress from 1997-2017, developed a relationship with her military escort, Jack Einwechter, whom she married in 2011. Along the way, Einwechter left the military for a more lucrative career as a lobbyist.
As Sanchez served on the House Armed Services Committee and the House Committee on Homeland Security, Einwechter lobbied on behalf of clients including arms manufacturer Heckler & Koch, aerospace company Oregon Aero, and other potential military contractors.
The list of congress members who have had lobbyist children over the years is long and disturbing. They include former Senator Trent Lott’s son Chet, who was “managing Domino’s Pizza franchises in Lexington, KY, when he decided to spin policy instead of pizza,” and current Senator Orrin Hatch, who, along with his son Scott — a lobbyist for the likes of Schering-Plough, Bayer, Colgate-Palmolive, GlaxoSmithKline and more — have been the best friends the diet supplement industry ever had, helping them avoid government oversight.
And Hunter Biden and Chris Heinz — son and stepson, respectively, of Joe Biden and John Kerry — created an international private equity firm that formed deals with foreign governments, including an investment fund in a joint venture with the Bank of China, at the same time their fathers were working with those governments on highly sensitive political matters.
If we’re to have a truly representative democracy, Schweizer argues, we need to be able to trust that our elected representatives are serving the people who elected them, not the entities filling their pockets — and the pockets of their families and friends.
“Current ethics laws create a zero accountability zone for the Washington, D.C., political class,” he writes.
“If we are to remain an effective constitutional republic, we must face and win the war on corruption at home. We must not tolerate public service as a front for family enrichment and elite will to power. It is un- American, and has direct and dire effects on policy-making and good governance.”
Editor’s Note: According to Chris Heinz’s publicist, while Biden and Heinz were co-owners of the parent company in question, Heinz had no involvement in the joint venture with the Bank of China, or in the offshoot of their firm that did that deal.