Menendez Urges Secretary Ross to Enforce ZTE Sanctions Independent of Political Pressure; Demands Answers from Trump Org on Chinese Government Financing

Menendez Urges Secretary Ross to Enforce ZTE Sanctions Independent of Political Pressure; Demands Answers from Trump Org on Chinese Government Financing

   

WASHINGTON – U.S. Senator Bob Menendez (D-N.J.), Ranking Member of the Senate Foreign Relations Committee, today sent a letter to Secretary of Commerce Wilbur Ross, warning him of the danger of bargaining away law enforcement matters for short-term trade gains, and urging that any enforcement decision be made independent of political pressure from the White House. Ranking Member Menendez also sent a separate letter to the Trump Organization requesting information regarding the recent announcement that the Chinese government will guarantee up to $500 million in financing for a project in Indonesia, called MNC Lido City, that includes Trump-branded buildings and a golf course.

In his letter to Secretary Ross, Menendez cautioned that President Trump’s recent statements on ZTE indicate that he is “willing to bargain away enforcement matters for short-term trade gains, which sets a dangerous precedent that potentially undermines U.S. national security interests and the rule of law.”

Menendez also raised concerns regarding the timing of Trump’s statements on ZTE with the announcement that the Chinese government will guarantee up to $500 million in financing for MNC Lido City, a project from which President Trump continues to drive income:  “ZTE’s declaration that it would cease business operations came just two days before the Chinese government announced its financial support for the Lido project. And just two days after that announcement of financial support, President Trump ordered your Department to help ZTE, which has close ties to the Chinese government. The chronological proximity of the announcements by ZTE, MCC, and President Trump raise the worrying possibility that he may be putting his own financial interests above the security and economic interests of the American people.”

In his letter to the Trump Organization, Menendez noted that President Trump still has at least six LLCs and companies linked to the project which the Chinese government guaranteed $500 million in loans to, and Trump has reportedly already earned between $2 million and $10 million from the development. “Given President Trump’s ongoing financial interest in the project, from which he continues to derive income, this development has raised concerns that U.S. foreign policy may be affected,” wrote the Senator in requesting any information the Trump Organization has on discussions, agreements, or negotiations around the Chinese government financing arrangement, including with officials of the Chinese government or Chinese state-owned enterprises.

 

A copy of both letters can be found below.

 

May 25, 2018

The Honorable Wilbur Ross

Secretary of Commerce

Department of Commerce

1401 Constitution Avenue, NW

Washington, DC

Dear Secretary Ross:

As you know, last year the United States fined Chinese telecommunications firm ZTE nearly $1.2 billion for violating U.S. law by selling products with U.S. components in North Korea and Iran – and for deliberately trying to deceive U.S. government officials in the process. On April 15 of this year the Department of Commerce took further enforcement action against ZTE after it found that the company had not honored its commitments as part of that settlement and had again deceived the U.S. government. Last week, ZTE announced that it would have to cease business operations as a result of the April 15 enforcement action, which barred U.S. companies from exporting to ZTE.

Shortly thereafter, President Trump declared that he had instructed the Department of Commerce to find “a way to get [ZTE] back into business, fast” and that “nothing has happened with ZTE except as it pertains to the larger trade deal [with China].” By ignoring ZTE’s violation of American law, these statements indicate that President Trump is willing to bargain away enforcement matters for short-term trade gains, which sets a dangerous precedent that potentially undermines U.S. national security interests and the rule of law. 

Furthermore, AFP recently reported that the Chinese government has guaranteed up to $500 million in loans for the subsidiary of a Chinese state-owned conglomerate, the Metallurgical Corporation of China (MCC), to build a theme park as part of MNC Lido City in Bogor, Indonesia. Because he never divested from his businesses, President Trump still holds a financial interest in at least six LLCs and companies linked to MNC Lido City, and has reportedly already earned between $2 million and $10 million from the project. The AFP reports that the recently announced loan guarantees put the project’s “success or failure in the hands of decision-makers in Beijing.”

ZTE’s declaration that it would cease business operations came just two days before the Chinese government announced its financial support for the Lido project. And just two days after that announcement of financial support, President Trump ordered your Department to help ZTE, which has close ties to the Chinese government. The chronological proximity of the announcements by ZTE, MCC, and President Trump raise the worrying possibility that he may be putting his own financial interests above the security and economic interests of the American people.

I am also greatly concerned by the prospect that easing the enforcement action on ZTE would allow it to avoid paying a large portion of last year’s settlement – $300 million – which was suspended pending a review of ZTE’s compliance, and, now that ZTE has been found in violation, should be paid. Of that unpaid portion, $150 million is due to go into a fund that Congress created to compensate the families of victims of state-sponsored terrorism, including persons taken hostage at the U.S. Embassy in Tehran in 1979, as well as victims of the 1983 Beirut barracks bombings and 1996 Khobar Tower bombings, both of which Iran was found responsible for. If your administration chooses to let ZTE off the hook for this payment, it would not only flout the intent of Congress, it would insult the families of Americans – including New Jerseyans – who have died at the hands of terrorists.

I encourage you to take all of these circumstances into account when reviewing the Department of Commerce’s enforcement measures against ZTE, and to commit to making any further enforcement decisions independent of political pressure from the White House over unrelated trade or business matters, which threatens to undermine our national security and commitment to the rule of law.

 

May 25, 2018

George A. Sorial

Executive Vice President and Chief Compliance Counsel

The Trump Organization

725 Fifth Ave

New York, NY 10022

Dear Mr. Sorial:

AFP recently reported that “in response to” China’s Belt and Road Initiative, the Chinese government has guaranteed up to $500 million in loans for the subsidiary of a Chinese state-owned conglomerate, the Metallurgical Corporation of China (MCC), to build a theme park as part of MNC Lido City in Bogor, Indonesia. As you know, the Trump Organization is a partner in the MNC Lido City development, with licensing and management agreements for Trump-branded hotels and a golf course. Because he failed to divest from his businesses, President Trump still holds a financial interest in at least six LLCs and companies linked to the project, and has reportedly already earned between $2 million and $10 million from it. The AFP report also cites corporate filings and internal documents which show that the Trump Organization, including Executive Vice Presidents Donald Trump Jr. and Eric Trump, have been “directly involved in various stages of [the project’s] planning.”

While recognizing that none of the financing guaranteed by the Chinese government will go directly toward the Trump Organization elements of the Lido project, the report makes clear that the overall project is nonetheless now dependent on officials in Beijing. Given President Trump’s ongoing financial interest in the project, from which he continues to derive income, this development has raised concerns that U.S. foreign policy may be affected.

I therefore write today to request that you provide information on any discussions, negotiations, agreements, or other communications between any employees of the Trump Organization (including officers, representatives, or agents of the six Lido Golf Manager, Lido Hotel Manager, and Lido Technical Services Manager companies that President Trump retains an interest in) and any employees of MCC or officials of the Chinese government about MNC Lido City.

In addition, please provide any information the Trump Organization has been given by MNC, MCC, or others regarding the recently announced loan guarantees for MNC Lido City, including whether or not any Chinese state-owned banks – especially the Industrial and Commercial Bank of China (ICBC), which rents commercial space in Trump Tower – will be involved in the financing.

Thank you for your attention to this request and I would appreciate a response from the Trump Organization by June 08, 2018. Please do not hesitate to contact my office if you have any questions.

  

Sincerely,

Press Contact

Juan Pachon 202-224-4651