Sale of Michigan company to China may haunt Clinton





WASHINGTON – National Republican Party officials are questioning why Hillary Rodham Clinton did not intervene in the controversial 2013 sale of high-tech battery plants in Michigan to a Chinese firm when she was secretary of State and could have done so.

At a campaign stop in New Hampshire last month, Clinton, the leading Democratic candidate for president, expressed concerns about the sale of A123 Systems — built with millions in government aid — along with those of other new energy firms, to Chinese investors, calling them "unfortunate" and a "serious" problem for high-tech industries in the U.S.

"That does concern me because a lot of foreign companies, particularly Chinese companies ... are looking to buy American companies," she said in response to an entrepreneur who mentioned A123's sale while commenting that venture capital for new energy technology has largely fled overseas.

Republican National Committee Chairman Reince Priebus, in a statement to the Free Press, called Clinton's remarks "lip service" considering that as the former secretary of state, her department had a "role in signing off on these sales," including A123's to Wanxiang in early 2013.

"She is not being honest with the American people about her record in this critical area of national security and economic policy," Priebus said, suggesting it may not be the last time the bankruptcy sale of A123 and its facilities in Livonia and Romulus come up in the GOP's campaign against her.

Clinton's campaign said she had no role in the review of the sale and referred questions to the State Department, saying only that she "wants us to be the clean energy superpower for the 21st Century, and that means out-competing countries like China so we can keep those jobs and companies here."

Review not taken

It does appear, however, that if Clinton had security concerns about Wanxiang gaining A123's technology, she and the agency she led could have moved to investigate it, which, at least according to congressional researchers, typically leads to about half of all transactions being abandoned.

Several members of Congress, including both of Michigan's U.S. Democratic senators and a bipartisan group of congressmen, urged such a review; as did the Strategic Materials Advisory Council, a group that noted that though Wanxiang had excluded A123's defense contracts from its purchase, it was still obtaining "91 patents for sensitive military and space battery technology."

Only the president can officially block such transactions on national security grounds. But the State Department holds a seat on the nine-member Committee on Foreign Investment in the U.S. — CFIUS — which reviews sales of American assets to foreign investors for any impact on national security.

A State Department spokeswoman confirmed Thursday that the agency is represented on CFIUS by an undersecretary — not the secretary — and its cases seldom if ever reach the secretary's office.

But agency procedures reviewed by the Free Press and published in the Federal Register also indicate that the "Secretary ... may at any time" fill that role, if he or she so chooses.

The campaign did not respond to a question as to why Clinton didn't play a role in the deliberations, despite her noting as a presidential candidate in 2008, CFIUS's role in "ensuring that technologies ... critical to U.S. national security are not sold off and outsourced to foreign governments."

In 2008, Clinton was critical of the Bush administration for not blocking foreign investors from moving jobs from a former General Motors-subsidiary in Indiana, which made magnets for bombs, to China, saying "not only did the jobs go to China but so did ... the technological know-how."

Concerns raised

The back-and-forth is the latest chapter in the continuing political fallout from massive government investments in new energy technologies in Michigan and across the nation beginning around 2009 that promised thousands of jobs but which, in many instances, failed to materialize.

It also continues a line of attack against Clinton by her critics regarding her level of involvement — or lack thereof — in foreign purchases of American assets.

In "Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich," Peter Schweizer wrote she had "veto power" over the sale of uranium assets to Russia, though that claim — that she could have stopped it alone — has been debunked.

In her remarks at a Hampton, N.H., brewery on May 22, Clinton clearly was referring to economic competition, not national security concerns, in discussing the sale of A123 and other American businesses. CFIUS does not get involved in cases only related to economic considerations.

But any of CFIUS's member agencies — Treasury, Defense, Homeland Security and the others — can request a deeper review to determine if there are national security implications. A 2014 report by the Congressional Research Service found nearly half of those investigated "were terminated ... because the firms decided to withdraw from the transactions rather than face a negative determination."

If Clinton, who resigned as secretary in 2013, wanted to raise concerns about the national security implications of the sale, there was plenty of support for her to do so: In their letter to then-Treasury Secretary Tim Geithner, who served as CFIUS's chair, members of Michigan's delegation said the sale "might constitute a potential threat" to security since the company's "core" lithium-ion battery technology was being transferred.

They also suggested the sale might not be appropriate given that A123, which was based in Massachusetts, had received $133 million in stimulus funds and was granted more than $125 million in state tax incentives and credits to build advanced lithium-ion batteries for its clients. Other members of Congress raised concerns with CFIUS as well.

Expansion in Michigan

A123 went bankrupt after its biggest customer, electric car maker Fisker, fell on hard times. After a battle for control between Johnson Controls and Wanxiang, the Chinese company won the bidding, paying $257 million. In January 2013, CFIUS approved A123's sale without comment.

Treasury, CFIUS's lead agency, declined to comment on the case, citing confidentiality requirements.

Despite the confidentiality rule, the Republican National Committee has filed a Freedom of Information Act request with the State Department asking for "any and all records ... that mention, reference or relate to the sale of A123 Systems to Wanxiang Group."

Under CFIUS's regulations, parties to a sale typically file notice with the committee, which then has 30 days to "identify and address" any national security concerns. If it chooses, the committee may initiate a subsequent 45-day investigation or refer the sale to the president's office for a decision.

It is rare for foreign transaction to be blocked, but it does happen: President Barack Obama blocked a sale to Chinese investors in September 2012 of four Oregon wind farm companies located near a site where the military tests aircraft and unmanned drones.

Meanwhile, the Free Press reported earlier this week that Wanxiang and A123 plan to invest more than $200 million to add capacity in Livonia and Romulus, as well as at plants in China, 21/ 2 years after exiting bankruptcy.

The company, having largely switched over to smaller batteries for hybrid vehicle systems, continues to employ several hundred workers in Michigan.

Contact Todd Spangler: 703-854-8947 or at tspangler@freepress.com. Follow him on Twitter at @tsspangler. Free Press staff writer Nathan Bomey contributed to this report.