Peter Schweizer, president of the Government Accountability Institute, joined SiriusXM’s Breitbart News Tonight co-hosts Rebecca Mansour and Joel Pollak on Monday to explain how politicians corruptly monetize political power as detailed in his latest book, Secret Empires: How the American Political Class Hides Corruption and Enriches Family and Friends.
Mansour asked Schweizer to explain the term “princelings” and its application to the children of high-level politicians. “All of these books basically show that corruption is like a game of Whack-a-Mole. You knock it down in one area, and then these corrupt politicians find another avenue for graft, and I’m looking at Secret Empires, and there’s another avenue for graft. I want you to explain to us this concept of ‘the princelings.’ This is something you describe in this book. Tell us what that is.”
Schweizer shared the origin of the term “princelings,” pointing to Western pursuits of Chinese state favoritism via cultivation of financial relationships with the children of Chinese state officials.
“Well, Rebecca, you’re exactly right about corruption,” replied Schweizer. “When you have the motive of greed and when you don’t worry too much about ethics, it’s very easy to come up with creative ways to enrich yourself, and one of those is what we call ‘American princelings.’ The term ‘princelings’ is really a term that’s been widely used in China and in the West to talk about China, where in communist China, if you want to get deals done, if you want to get favors from the government, you basically do business with their children, and these children of communist party officials are called the princelings. One of the things I argue in the book is that we are, in a sense, importing that model into the United States, and you see that a lot as it relates to the Chinese government.”
Schweizer explained how political favoritism is procured by foreign governments via business dealings with the children of high-level U.S. politicians.
“The Chinese government has figured out that the way to get favorable treatment from policymakers in Washington, DC, is by, basically, signing sweetheart deals with the children of politicians because they think by doing so, they’ll get better policy positions from our government, and the history indicates in the Obama administration that that’s exactly what happens,” Schweizer said.
Schweizer pointed to Hunter Biden, the second son of Joe Biden, as illustrative of an American princeling. Hunter Biden sits on the board of Bohai Harvest RST (BHR), a private equity firm funded by the Chinese government to the tune of $1.5 billion.
“In December of 2013, Vice President Joe Biden flies to Asia for a trip, and the centerpiece for that trip is a visit to Beijing, China,” said Schweizer. “To put this into context, in 2013, the Chinese have just exerted air rights over the South Pacific, the South China Sea. They basically have said, ‘If you want to fly in this area, you have to get Chinese approval. We are claiming sovereignty over this territory.’ Highly controversial in Japan, in the Philippines, and in other countries. Joe Biden is supposed to be going there to confront the Chinese. Well, he gets widely criticized on that trip for going soft on China. So basically, no challenging them, and Japan and other countries are quite upset about this.”
Schweizer added, “Well, I think the reason he goes soft on China is because with him on that trip, flying on Air Force Two, is his son Hunter Biden, and ten days after they return from China, Hunter Biden — who has this small firm, he has no background in private equity, he has no background in Chinese finance — gets a whopping $1.5 billion deal from the Chinese government. This is the Chinese government giving Joe Biden and a [John] Kerry confidante the management over this money, and they made huge fees off of this money, and it’s an example of this kind of corruption. That’s the first of three major deals that the Chinese government does with people who are either the children — that is the sons — or close aides to Vice President Biden or Secretary of State John Kerry.”
Schweizer discussed national security implications related to modern corruption, highlighting the acquisition of Henniges Automotive — a formerly America-based company developing “dual-use” technologies with military applications — by Aviation Industry Corporation of China (AVIC), a Chinese state-run military contractor. AVIC acquired Henniges in 2017 with a 51 percent stake purchase. The remaining 49 percent was purchased by the Biden- and-Kerry-linked BHR.
“So [Hunter Biden and Devon Archer] get this $1.5 billion to invest, and what they are supposed to do is basically invest in companies that benefit the Chinese government,” stated Schweizer. “So just think about this for a second. This is the vice president of the United States whose father is supposed to be commanding American presence and power in the Pacific to deal with the rising challenge from China, and his son is investing $1.5 billion of Chinese government money. So what do they do? They invest in an American high-precision tools company called Henniges, which used to be owned by Rocket Company, but they produce anti-vibration technologies which have a dual-use application, so this transaction actually requires the approval of the federal government, as it has national security implications. So again, the vice president’s son is helping the Chinese government take over a dual-use military technology-related company called Henniges.”
BHR also invested in a Chinese state-run atomic energy company indicted by the Department of Justice in crimes related to stealing nuclear secrets, Schweizer said.
“But it gets even worse because another investment that they make is in something called CGN — China General Nuclear — which is an atomic power company,” recalled Schweizer. “They invest in this company in 2014. A year later, what happens? The FBI arrests and charges senior officials in this company with stealing nuclear secrets in the United States. Specifically, they’re trying to get access to something called the AP-1000 nuclear reactor that is very similar to the ones that we put on U.S. submarines. So again, you have the son of the vice president, a close aide to the secretary of state who are investing in a company that is trying to steal nuclear secrets in the United States. It’s a stunning story, and here’s the thing: none of this is required to be disclosed because they’ve figured out a way to get around these disclosure laws.”
Schweizer noted the lack of public disclosure regulations regarding the financial relationships of politicians’ family members with foreign governments.
“It’s remarkable,” exclaimed Schweizer. “Think about this. Think about it in Joe Biden’s case. If Joe Biden gets a $1,500 gift or he gets a $1,500 donation for his campaign, he has to disclose it. If his wife gets a $1,500 gift, she has to disclose it. But if his son gets a $1.5 billion private equity deal from the Chinese government, there’s no requirement to disclose it. It’s outrageous, and it’s an example of how they try to work around these disclosure rules.”
Schweizer emphasized Hunter Biden’s lack of a background in the private equity business, casting his status as the son of a vice president as a golden ticket for Chinese state funds.
“Here’s the thing people have to keep in mind: Hunter Biden got $1.5 billion from the Chinese government,” Schweizer said. “He has no background in private equity. He was a lobbyist before his father became vice president for the casino industry. He has no background. He has no business getting a deal like this. He got this deal, pure and simple, because he is the son of a vice president, and the Chinese said, ‘We give him this deal, and his pal, who’s a former aide to John Kerry, they’re going to run it, and by doing so, we are going to curry favor with these guys,’ and you know what? Based on the track record, based on the response of the Obama administration of Secretary of State John Kerry and of Vice President Biden, that’s exactly what they got. They got good action for their money.”
Senate Majority Leader Mitch McConnell’s (R-KY) familial ties to the Chinese state via his father- and sister-in-law are also causes for concern, Schweizer speculated. James Chao, McConnell’s father-in-law, founded Foremost Group, a shipping company that has done “large volumes of business” with Chinese state-owned companies.
“So Mitch McConnell, the Senate majority leader, his wife Elaine Chao, who’s the transportation secretary in the Trump administration, her family has deep economic and financial ties to the Chinese government itself,” said Schweizer. “They are in the shipping business, and they own something called the Foremost Group, and really, in 1993, Mitch McConnell, as a senator, travels to China with his father-in-law, James Chao, as guests of the China State Shipbuilding Corporation.”
Schweizer added, “The China State Shipbuilding Corporation is the largest defense contractor in China, and the projections are that by 2030, if current trends continue, they are going to surpass the U.S. Navy as far as naval capability. Basically, what happens is, the China State Shipbuilding Corporation says to the Chao family, ‘Look, we will build your ships. We will finance the purchase of some of your ships. We will provide crews for your ships. We will provide contracts for you to ship state-owned goods from state-owned companies around the Pacific. In other words, we are going to set you up in the shipping business,’ which is exactly what they do.”
China pursues political leverage over American policy through its business relationship with McConnell’s in-laws, according to Schweizer.
“In fact, James Chao — this would be Elaine Chao’s father, Mitch McConnell’s father-in-law — and Elaine’s sister, Angela Chao, actually joined the board, in 2007 and 2008, of something called China State Shipbuilding Corporation, CSSC Holdings, which is a subsidiary of the largest defense contractor in China,” Schweizer recalled. “So you have this powerful American political family that is making U.S. policy related to China, related to trade, and other critical issues that is highly dependent upon the good graces of the Chinese government.”
Schweizer framed McConnell’s “increasingly soft” political positioning towards China as a function of his familial and financial ties to the Chinese state.
“McConnell himself has benefited because a few years ago, James Chao gave Mitch McConnell a gift between five and twenty-five million dollars that more than quadrupled his net worth overnight,” Schweizer said. “So this is not just about Elaine Chao’s family getting wealthy. That wealth has now trickled into Mitch McConnell’s pocket, as well, and it’s a huge problem because if you chart the positions that Sen. McConnell has taken on China over the last twenty years, guess what? Shock of all shocks, he has become increasingly soft as it relates to China, and I think it is directly related to the fact that he knows his family’s financial future is tied to the good graces and good faith of the Chinese communist government.”
Schweizer described the Chinese government as “freaked out” over the election of Donald Trump to the presidency, owing to the 45th president’s decades-long view of the “rising threat of China.”
“So the election of Donald Trump, there’s no other way to say it, it completely freaked out the Chinese government because Trump has really been focused — whether one agrees with him on trade policy or not — he has focused since the 1980s on what he regards as a rising threat of China; whether it relates to trade, economics, or military power,” surmised Schweizer.
According to Schweizer, China’s decision to appoint McConnell’s sister-in-law, Angela Chao, to the Bank of China’s board of directors — ten days after 2016’s presidential election — was a response to the election of Trump to the White House.
“So when [Donald Trump] gets elected in 2016, China is in a panic. So one of the things that happens is, they appoint, really, the first American, or only the second foreigner to the Bank of China,” Schweizer said. “Now, the Bank of China is government-run, government-controlled, is sort of the backbone of the Chinese government’s economic diplomacy around the world. Ten days after Donald Trump is elected, they put Elaine Chao’s sister — Mitch McConnell’s sister-in-law — on the board of directors of the fourth largest bank in the world, which is run by the Chinese communist government. It’s a shocking development, and, again, unprecedented in American history that you would have senior political leaders have immediate family members that are sitting on the board of foreign government-owned businesses.”
Schweizer explained what he dubbed Barack Obama’s “smash and grab” approach to enriching his friends and allies. The 44th president, he said, would weaponize regulatory policy to devalue certain companies to make them vulnerable to acquisition.
“This one was really surprising because, I have to say, I did not think of Barack Obama as somebody who was necessarily involved in financial corruption,” reflected Schweizer. “I mean, there are all these controversies or certain issues about his policies, but Barack Obama has this best friend that few people have ever heard of, a guy named Marty Nesbitt. When Barack Obama is reelected in 2012, his best friend in the world, Marty Nesbitt, sets up this private equity fund called Vistria, and Vistria says in its corporate documents, explicitly, that it is designed to invest in highly regulated industries, and when your best friend is the regulator-in-chief, I guess that makes sense, and what happens is, they make a series of investments or deals based on companies or industries that are being smashed by the Obama administration’s regulations.”
As an example of Obama’s “smash and grab” approach, Schweizer used the University of Phoenix’s acquisition by Vistria Group, a company headed by Obama’s “best friend,” Martin Nesbitt.
“So to give you one brief example, [the] University of Phoenix, it’s a for-profit school — a lot of people have heard of it — the Obama administration declares that the company is not serving students well, and they say, ‘We are going to suspend GI dollars from the Pentagon for soldiers to study at the University of Phoenix,’” stated Schweizer.
“Well, you can imagine, this for-profit university, its stock price goes from like a hundred dollars a share down to three dollars a share overnight. So what happens? Marty Nesbitt, Barack Obama’s best friend, says, ‘Hey! We’ll step in and buy it. We’ll step in and buy the company.’ They do. They basically buy it for three cents on the dollar, and then, lo and behold, imagine what happens next. The Obama administration decides that, ‘No, we are going to allow GI dollars flow to the University of Phoenix,’ thereby boosting the valuation of the company again.”
Obama’s “smash and grab” strategy’s beneficiaries include Tom Steyer and George Soros, Schweizer said.
“This pattern is repeated over and over and over again, not just with Marty Nesbitt, but with people like the environmentalist investor Tom Steyer [and] George Soros,” Schweizer said. “Barack Obama smashes coal companies, [and] what do these guys do? They go in, they buy them for pennies on the dollar, and when the regulatory weight is lifted, their valuations increase, and they make a lot of money, and you see that pattern in all of these industries. So what you see is these crusades that Obama is going on related to companies that are supposedly doing all these evil things really has this profit or money-making component to it that I was unaware of, and a lot of other people were unaware of. Now, in a sense, the favor gets returned because Marty Nesbitt is now the chairman of the Obama Foundation and is pouring money into that institution and is responsible for raising it so Barack Obama’s legacy can be applauded in Chicago.”
“What can we do stop this?” asked Mansour. “What is your solution? You always offer solutions in your books.”
Schweizer recommended a domestic version of the Foreign Corrupt Practices Act: criminalize the purchase of political influence via business arrangements between foreign governments and the children of politicians.
“First of all, we have something on the books in the United States called the Foreign Corrupt Practices Act,” indicated Schweizer. “So, for example, J.P. Morgan, the big investment house, was charged and fined for violating the Foreign Corrupt Practices Act. Why? Because they were hiring the children of communist party officials in China in the hopes of getting business favors from the government down the road. My approach is, why don’t we apply the Foreign Corrupt Practices Act and create a Washington Corrupt Practices Act? Think about this for a second. J.P. Morgan — an American company — does something like this, it’s illegal. China does it to our politicians, there’s nothing illegal about it, at all, and that is outrageous, and the rules are written that way because the rule makers want their children to be able to cash in.”
Schweizer also called for the extension of financial disclosure requirements for politicians to include politicians’ immediate family members.
“The second solution is, there needs to be wider disclosure” advised Schweizer. “There needs to be a requirement that if you are an elected official in Congress or in the executive branch, and you have a family member, whether that’s a parent, a sibling, or a child, who has foreign governments with which they are making money and they are doing deals, that needs to be disclosed. Right now, it’s not. Again, I go back to the Biden example: $1,500 campaign contribution has to be disclosed. A $1,500 stock investment in a German company has to be disclosed. A $1.5 billion private equity deal to his kid doesn’t have to be disclosed, and that has got to change.”
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