Global Crossing, the largest telecom company in U.S. history to seek Chapter 11 bankruptcy protection, has agreed to a buyout by Hong Kong's Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Ltd.
Under terms of the agreement, Hutchison and STT would each invest $375 million in cash in the Bermuda-based company. Creditors would receive the remaining 21 percent equity of the firm, $300 million in cash and $800 million in notes, in exchange for forgiving the company's debt.
According to the agreement, Global's shareholders would receive nothing.
However, the Global Crossing buyout by Hutchison Whampoa is drawing fire from inside Capitol Hill. At issue is the role of billionaire Li Ka-Shing, Hong Kong's most well-known businessman, whose companies make up 15 percent of the market capitalization of the Hong Kong stock market.
Li Ka-Shing's empire includes Hutchison Whampoa, Chinese ports, telecom, energy assets and the Panama Canal.
Rep. Dana Rohrabacher, a California Republican, has sent letters to President Bush, the attorney general, the Department of Defense and the investigative arm of Congress demanding an inquiry into the plan, according to Al Santoli, national security adviser to Rohrabacher.
"The purchase of Global Crossing by Li Ka-Shing is another step as his role of a stalker for the People's Republic of China," stated Santoli.
Rep. Rohrabacher claims Li's close connections to the Chinese government should disqualify him from owning Global Crossing's network. Li Ka-Shing's ownership also raises national security issues. Global is a major bidder for U.S. Defense communications contracts.
Global Crossing recently lost a $400 million U.S. defense contract to provide secure communications for the U.S. military. The contract remains a major part of the controversy surrounding the bankrupt telecommunications giant, which also reportedly controls 20 percent of all the fiber-optic cable leaving the United States.
"China is gaining access to global communications via [Li's] acquisitions in air, land and space. There will be a big price to pay for this if the PRC were to decide to call in its chips in the event of conflict with the West," noted Santoli.
"The Chinese government helps Li Ka-Shing, and his close ties to PLA intelligence are well known," said Santoli.
There is overwhelming evidence to support the assertions that Li Ka-Shing is part of the communist Chinese government. According to documents obtained using the Freedom of Information Act "Li's relationship with senior PRC officials is very strong."
Li is not only in business with PRC President Jiang Zemin's son, jointly developing property inside Tiananmen Square for the communist government, but he also is directly in business with the Chinese military through its vast empire of front companies such as weapons maker Poly Technologies Inc.
Li Ka-Shing's direct business contacts with the Chinese army were documented in a 1997 Rand Corporation report on the Chinese military industry.
According to the 1997 Rand report, "Hutchison Whampoa of Hong Kong, controlled by Hong Kong billionaire Li Ka-Shing, is also negotiating for PLA wireless system contracts, which would build upon his equity interest in Poly-owned Yangpu Land Development Company, which is building infrastructure on China's Hainan Island."
According to a recent biography entitled "Li Ka-Shing," the billionaire formed a partnership with two leading members of the Asian "Triad" organized crime families, Robert Kwok and Henry Fok, to form the China International Trust Investment Company (CITIC).
The Rand Corporation report noted that CITIC had acted as a front for Poly Technologies Inc., the arms manufacturer owned directly by the Chinese army.
"CITIC does enter into business partnerships with and provide logistical assistance to PLA and defense-industrial companies like Poly," noted the 1997 Rand report.
"Poly Technologies, Ltd., was founded in 1984, ostensibly as a subsidiary of CITIC, although it was later exposed to be the primary commercial arm of the PLA General Staff Department's Equipment Sub-Department," states the Rand report.
"Throughout the 1980s, Poly sold hundreds of millions of dollars of largely surplus arms around the world, exporting to customers in Thailand, Burma, Iran, Pakistan, and the United States."
"Poly's U.S. subsidiaries were abruptly closed in August 1996. Allegedly, Poly's representative, Robert Ma, conspired with China North Industries Corporation's (NORINCO) representative, Richard Chen, and a number of businessmen in California to illegally import 2000 AK-47s into the United States," states the Rand report.
Li Ka-Shing is also part owner of a firm involved in the illegal transfer of missile technology to the Chinese army. The Commerce documents show that Li owns one-third of Asia Satellite Telecommunications Holdings, or AsiaSat.
According to Aviation Week and Space Technology, AsiaSat is also partly owned by the Chinese army. AsiaSat satellites regularly carry "military communications" traffic for PLA units and Chinese military-owned companies.
U.S. defense contractor Lockheed Martin pleaded guilty to 30 counts of illegal missile technology exports to AsiaSat. Lockheed Martin agreed to pay the U.S. government $13 million in fines for the illegal transfer of "kick-motor" technology to AsiaSat in order to avoid export restrictions.
The Hong Kong billionaire has even closer ties to the Chinese army. Li Ka-Shing is in business with China Resources, a firm operated directly by the Military Intelligence Department of the PLA headquarters. According to Senate testimony, China Resources is "an agent of espionage – economic, military and political – for China."
China Resources Enterprises has previously been accused of illegal donations to the Clinton-Gore 1996 re-election campaign. According to Senate testimony, China Resources Enterprises was directly linked to Chinese military espionage and Indonesian billionaire Moctar Riady.
"Lippo group, run by the Riady family, which employed [John] Huang, had over the past few years become a major business partner with China Resources, a trading company wholly owned by the Government of the peoples republic of China, and which has reportedly served as an intelligence-collection front for China," noted Sen. Thompson during his summary of the China campaign finance scandal.
According to a frantic 1996 cable from the U.S. Embassy in Panama, China Resources put a $400 million investment into Li Ka-Shing's Hutchison Whampoa as part of a "front" company controlled by Beijing.
"Embassy Panama has received information to the effect that HIT (Hutchison International Terminals) is controlled by mainland Chinese perhaps through a Macao front which allegedly recently invested $400 million in HIT," states the cable. "Such control would have security implications and might affect the Panamanian government's views on awarding the port concessions."
In fact, according to an Oct. 1999 "Intelligence Assessment" prepared by the U.S. military Southern Command, the Hong Kong billionaire is a potential threat to America.
"Hutchison's containerized shipping facilities in the Panama Canal, as well as the Bahamas, could provide a conduit for illegal shipments of technology or prohibited items from the West to the PRC, or facilitate the movement of arms and other prohibited items into the Americas," concluded the U.S. military intelligence report.
U.S. Commerce Department documents also show that U.S. law enforcement agencies were very concerned about billionaire Li Ka-Shing and his connections to international smuggling.
A 1995 cable from the American Embassy in Nassau noted that Li Ka-Shing had signed an agreement to build an $88 million container ship terminal in the Grand Bahamas. The U.S. Embassy in Nassau copied the cable to several law enforcement agencies including the U.S. Customs Service and the Drug Enforcement Agency.
"Reftel describes U.S. agencies' security concerns about possible smuggling attempts through the terminal," states the cable from the American Embassy. "Post will request via septel assistance in addressing these concerns while port development plans are still on the drawing board."
According to recently declassified documents from the U.S. Commerce Department, Li Ka-Shing is a very special man in Beijing, Washington and Hong Kong.
"Li is reputed to have a close business relationship with key figures in Beijing," stated an August 1999 cable from the American Embassy in Hong Kong.
"Li is a leading member of Hong Kong's ethnic Chinese business elite, a tycoon who is no democrat. This fact is reflected in his recent claim that he canceled a HK$10 billion (US$1.3 billion) project because of the unfavorable business climate created by Hong Kong's politicized (more democratic) business climate," continued the cable.
Despite his hostile attitude toward democracy, Li Ka-Shing met frequently with the Clinton administration.
Documents from the Commerce Department show that Clinton Commerce Secretary William Daley met with the Beijing tycoon at a 1997 luncheon hosted by the powerful investment firm Goldman Sachs. Daley later went on to lead Vice President Al Gore's failed 2000 presidential bid.
The Commerce documents note that an informal "talk" between Daley, Li and several "influential business people" was held on the Goldman Sachs boat, the "Monkey's Uncle," during a 1997 Hong Kong trade trip.
"Goldman Sachs' boat ('Monkey's Uncle') will depart from the Causeway Bay Typhoon Shelter at 11:30 am. The boat will sail near the new airport site at Chek Lap Kok. Lunch will be served on board."
The Commerce documents also show that Daly and Li met on board the "Monkey's Uncle" with some of the leading Beijing-owned businesses, including some directly associated with the Chinese army – China Resources, CITIC and China Everbright.
The documents note that alleged organized-crime "Triad" gangsters were included on the 1997 voyage of the "Monkey's Uncle." According to official U.S. Commerce materials, Secretary Daley sailed on a paradise cruise from Hong Kong with the "who's who" of Triad mob families.
Some other "influential business people" were also included on the guest list for the lunch cruise. Among the leading figures are Raymond Kwok, Robert Kwok and Canning Fok.
The Fok family leader, Henry Fok, is reported to be a member of the 14K Triad.
According to Ed Timperlake and Bill Triplett, co-authors of "Red Dragon Rising," "Henry Fok first made his name by running United Nations–embargoed goods to China during the Korean War. His son was later convicted for trying to bring Chinese machine guns into the United States."
Robert Kwok reportedly leads the Kwok family businesses and allegedly is involved in the heroin smuggling business inside Burma. In 1997, Commerce Secretary Daley met with Kwok and his son Peter. Peter Kwok is the business partner of Sen. Dianne Feinstein's husband, Robert Blum. Feinstein is a Democrat from California.
Peter has also worked for Li Ka-Shing and the Chinese army. In 1989, he helped CITIC and Li Ka-Shing raise $120 million to buy a Highes-built communications satellite for AsiaSat, a company part-owned by the Chinese army unit COSTIND (the Commission on Science, Technology and Industry for National Defense).
Clearly, Li Ka-Shing is not only a tool of the People's Liberation Army, he also should be a member in standing when one considers the vast amount of technology, money and resources he has brought to the Chinese military.
It is sad testimony that after the disastrous events of Sept. 11 we should so quickly forget the fact that the Chinese army continued to supply al-Qaeda with arms even after the terrorist strikes.
Rep. Dana Rohrabacher's efforts to investigate Beijing's billionaire takeover of Global Crossing deserves the highest priority, because our national security is at stake.
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