The Department of Cronyism or Commerce?

Show Notes

It is called the “red-headed stepchild” of cabinet-level government agencies, but the US Department of Commerce is a vast swamp of opportunities for cronyism and corruption of all sorts. As the Government Accountability Institute (GAI) details in its new report, entitled “Department of Cronyism,” it is yet another example of how the communist regime in Beijing has co-opted American institutions, buying access through lobbying and money.

Drill Down hosts Peter Schweizer and Eric Eggers discuss the new report on this week’s podcast, with examples of how the department fits into this larger story of China’s penetration of American government.

Corruption within the Commerce Department has long existed, but it used to be strictly a homegrown matter – industries lobby the department for breaks from regulation, favorable trade treatment for imported or exported goods, and for its billions of dollars in grant money. Peter shares that Commerce is the most lobbied federal agency, despite having one-eighth the budget of the Health and Human Services department. This is because Commerce has such power to pick winners and losers in trade deals, regulation enforcement, and export permits.

GAI began by looking into the personal financial benefits that accrued to the past several secretaries of Commerce – how they benefited their own interests through department decisions. But GAI found that China has learned how to tap into the department for its own benefit. They have been doing it for years, across several different administrations, among Democrats and Republicans alike.

Let’s start with President Biden’s choice, current incumbent Gina Raimondo. Raimondo, the former governor of Rhode Island, has a background in finance, having founded venture capital firm Point Judith Capital in 2000. She is worth roughly $10 million, based on her financial disclosure and as reported by Forbes. Andrew Moffit, Raimondo’s husband, became “Chief People Officer” for a software company called PathAI that applies artificial intelligence and machine learning to medical diagnostics.

In February of this year, Moffit exercised his PathAI stock options and left his full-time job with the company. Instead, he became its “strategic adviser,” thus deepening his financial ties to the firm while creating the appearance of distance between his role with the company and his wife’s duties as Commerce secretary.

Artificial intelligence is the focus of the Commerce Department’s Bureau of Industry and Security because it often has direct military applications, making it sensitive to US national security. Possible restrictions include the sharing of AI technology with foreign employees, an area in which Moffit could well be responsible as “Chief People Officer.” In 2019, US-based venture capital firm Danhua Capital Management (doing business as DHVC) participated in a $60 million fundraising round for PathAI. DHVC not only has holdings in sensitive technology sectors, but also has ties to a Chinese state-owned entity. Therefore, DHVC’s relationship with PathAI could raise conflict-of-interest and/or national security concerns,” according to GAI’s report.

Raimondo’s department also loosened restrictions on Huawei, the Chinese telecom giant the Trump administration leveled sanctions on because of the company’s ties to the Chinese government and particularly its military. The company’s founder, Ren Zhengfei, is a party loyalist who urged his workers to “surge forward, killing as you go, to blaze us a trail of blood,” in their efforts to sell Huawei products to the West. Huawei, Peter points out, has been identified as a security threat by the governments of Japan, Taiwan, France, Great Britain, the US, Australia, and Germany, among others.

Raimondo’s predecessor during the Trump administration was Wilbur Ross. Ross was a successful businessman with huge commercial ties to China. He had shipping companies that had major Chinese investment. In fact, Trump criticized him for being too soft on China while Ross ran the department.

Donald Trump’s ambassador to China was former Iowa governor Terry Branstad. The connections of Branstad’s sons really show the systemic levels of influence China has built up in Washington. His son, Eric Branstad, worked during the Trump administration at (guess where?) the Commerce Department, as an adviser to then-Secretary Ross. Branstad’s youngest son, Marcus, was a longtime lobbyist for the American Chemistry Council which, despite its name, actually lobbies for Chinese chemical companies, opposing some of Trump’s restrictions and trade agreements.

Peter reports that when Eric Branstad left the Commerce Department, he went to work as a lobbyist for a Chinese telecom firm immediately after restrictions against that firm were lifted by the Commerce Department. “He actually goes over to China after he leaves Commerce and meets with Chinese officials and he brags about his access to the White House, and he makes good money there.”

Before him, President Obama’s Commerce Secretary was Penny Pritzker. She is the heir to the Hyatt Hotel fortune, but also has extensive commercial ties of her own to the Chinese, as the report also details.

The point of all this, as the report makes clear, is the concept of “elite capture.” This is an explicit strategy on the part of the Chinese to forge connections to the levers of power in the US. Whether Hunter Biden is indicted over his own Chinese deals or not, the problem is greater, deeper, and far more lasting.