(This is the fourth in a series of articles exploring Hunter Biden and Chris Heinz’s business dealings with Chinese entities. Additional reporting and research have been provided by RedState’s Scott Hounsell.)
For the last 50 years, the United States military has enjoyed air superiority over essentially every other nation on the planet. In addition to good-old American ingenuity and freedom to create, this superiority was created and is maintained by the government’s support of ongoing research and development to maintain that superiority. The research and development process for new fighter jets can take decades, as with the F-22 Raptor and the F-35 Joint Strike Fighter (JSF). China has always lagged significantly behind the United States in this department, but they’ve recently made major strides.
A significant factor in China’s progress comes as a result of the 2015 acquisition of Henniges Automotive, a Michigan company whose anti-vibration technology is used on the F-35 (stealth) fighter, by Aviation Industry Corp of China (AVIC), the state-owned entity that produces fighter jets for the Chinese military.
Guess whose company partnered with AVIC in that acquisition? That’s right – Hunter Biden and Chris Heinz’s BHR.
As a refresher: BHR is a Chinese venture capital firm in which Rosemont Seneca Thornton (the Biden/Heinz/Archer/Bulger partnership) owned a 30 percent stake, and which is majority-owned and controlled by the state-owned Bank of China. (Hunter Biden still owns 10 percent through his Skaneateles, LLC entity.)
For the 2015 transaction a wholly-owned subsidiary of AVIC, AVIC Auto, partnered with BHR to acquire Henniges, with AVIC Auto owning 51 percent and BHR owning 49 percent – meaning that the Chinese government-owned military manufacturer ended up with controlling interest of Henniges.
The Chinese government and military have attempted for decades to catch up to the aforementioned US military superiority, by any means necessary. At the time of the sale, US government officials – and the public, through Edward Snowden – were aware that China had hacked “terabytes” of data, including F-35 technology, and made use of it in their J-20 fighter. By acquiring Henniges and their anti-vibration technology, AVIC could put that technology directly to use in the Chinese military jets.
In a press release announcing the deal Daen Lu, described as chairman of Henniges Automotive, said (emphasis added):
“This acquisition represents a long-term, strategic investment by AVIC Auto to sustain and grow the Henniges business, while keeping the successful leadership, culture, benefits and contracts associated with the company intact. We are excited about this acquisition, and look forward to the addition of their significant expertise and the benefits it will bring to both of our companies.”
Yes, we’re sure AVIC looked forward to the significant expertise Henniger brought to the table. And who is Daen Lu? A Bloomberg profile describes him as both the Chairman of the Board of Henniges Automotive and as Chairman of AVIC Capital Co., LTD. So, was he on the board of Henniges before the acquisition, or was he inserted by AVIC?
BHR’s press release shares similar sentiments. In a March 2016 interview BHR CEO Jonathan Li characterized the Henniges transaction as BHR’s “typical business model”:
Henniges [an automotive equipment manufacturer acquired last year] is our typical business model. We set up a joint venture with AVIC – they own 51% and we own 49% – and did the acquisition together. AVIC has industry experience, operations in China, and it knew Henniges well. As a financial investor, we use our international network and our professionalism. While the AVIC is very experienced in international acquisitions, some Chinese companies don’t have the same cross-border experience and so may appreciate what we can offer in this domain.
Xin Wang, a US-educated Canadian attorney who serves as BHR’s Managing Partner, said that by BHR serving as a conduit for the SOE they “can facilitate the transaction.”
Just by virtue of being an SOE there is the perception – rightly or wrongly – that there will be some cross-cultural issues. Having us and our global resources there as a financial investor, and serving as a conduit, can facilitate the transaction.
A look at the research and development timelines of the F-35 and the J-31 illustrates the advantage that both hacking and the strategic acquisition of Henniges have given the Chinese.
When the Joint Strike Fighter (JSF) was originally contracted in 1996, the United States was looking to develop a next-generation fighter that would allow for the US to phase out aircraft like the F-16 and the F-18, which were already 20 to 25 years old at the time JSF development started. Production on the F-35 began in 2006. It first flew in 2015, and the fighter also entered service in the US military in 2015. So, 19 years from first development to production.
Military aviation experts have noted that the latest Chinese fighter, the J-31, is strikingly similar to the F-35 – likely because the Chinese had the benefit of hacked data and their acquisition of Henniges’ anti-vibration technology.
AVIC’s J-31 (or FC-31 for international sales) started development in 2009, two years after China’s hack of Lockheed. Production began in 2015, and the first flight was in 2019. China did in nine years what took the United States 19. China estimates that the J-31 will be combat-ready by 2022.
AVIC President Lin Zuoming says the company is looking to sell the FC-31 to “air forces that are unable to buy the F-35”:
“The next-generation air forces that are unable to buy the F-35 have no way to build themselves up. We don’t believe the situation should be that way. The world should be balanced. Good things shouldn’t all be pushed to one party.”
Who are those next-generation air forces? Iran and Pakistan, for starters.
It gets better. Or worse, to be accurate. As Breitbart reported:
AVIC entities have been sanctioned by the United States on five separate occasions since 1993 and the addition to the watch list–a major red flag—occurred less than a year-and-a-half before they co-purchased Henniges.
There are safeguards in place to prevent US technology with potential military applications from getting into the wrong hands, primarily the Treasury Department-administered Committee on Foreign Investment in the United States (CFIUS):
“CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States and certain real estate transactions by foreign persons, in order to determine the effect of such transactions on the national security of the United States.”
The CFIUS review committee is comprised of multiple Cabinet members, including the Secretary of State, Secretary of Defense, Secretary of Homeland Security, and more. After a 45-day review, there is a potential 45-day investigation period and then a potential 15-day presidential review period.
So, in order for this transaction to be approved, BHR and AVIC (both majority-owned Chinese entities) would have had to send in reams of paperwork and likely would have met with representatives of the Treasury Department, at a minimum. The approval process should have taken into consideration the history of both BHR and AVIC, and could have gone up to President Obama for final approval. There’s no way to know whether it did or not since those records aren’t public. But Sen. Chuck Grassley (R-IA) has questions about it, and wants to see the threat assessment prepared in the case.
The fact that this purchase was allowed to occur is mind-blowing. How did AVIC, an entity on the watch list and known to have stolen tech from the F-35 to put into their J/FC-31, obtain authorization by the US government to buy a company that created tech for the F-35 to make it more invisible to radar?
The names Biden and Kerry figure prominently. From a Breitbart report:
Internal BHR documents show exactly how the Chinese military contractor was able to disguise its ownership via shell corporations and formed a joint-venture with the son of the vice president to facilitate the Chinese takeover of an American dual-use technology supplier.
Additional documents suggest that Hunter Biden’s Chinese-backed venture funneled money to an entity controlled by Vanessa Kerry, the daughter of then-Secretary of State John Kerry, just one month before CFIUS approved the takeover. At the time, Secretary Kerry played a lead role on the Obama-Biden CFIUS committee.
In addition, the Obama administration had systematically weakened the CFIUS review process and ignored Department of Defense objections to technology partnerships with China since 2009; their specific actions will be detailed in a future installment in this series.
This goes beyond influence peddling. This is a selling-out of national interests and security for a buck, and Hunter Biden was not only complicit in the deal but instrumental in it. You also would have to assume that Jack Lew’s Treasury Department approved this purchase of Hunter’s firm’s doing, absent the knowledge of Joe Biden? That’s extremely difficult to believe.
UPDATE, October 26, 2020: A spokesperson for Chris Heinz provided the following statement to RedState:
“The statement that Rosemont Seneca Thornton was an entity set up by Hunter Biden and Chris Heinz is false. Rosemont Seneca Thornton was not an affiliate of Rosemont Seneca and Chris Heinz had no role in Rosemont Seneca Thornton. Our belief is that Devon Archer set it up independently in 2013 when negotiating the BHR deal (which Chris did not participate in/was not involved in).”