Loral chairman, China full partners
As security scandal unfolds, Schwartz accepts 'investment'

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By Joseph Farah
© 1998 WorldNetDaily.com

Only weeks before a national security scandal over the propriety of a relationship between Loral Space & Communications Corp. Chairman Bernard Schwartz broke, a subsidiary of the U.S. company was accepting full partnerships and a $37.5 million investment by two Chinese government-front companies. On April 21, Loral's Globalstar Limited Partnership division finalized a deal with China Telecom and CHINASAT, both wholly owned by Beijing's new Ministry of Information Industry. "The addition of China Telecom as a full partner solidifies Globalstar's commitment to bringing the promise of mobile satellite communications to China's 1.2 billion people," said Schwartz, chairman and chief executive officer of both Loral and Globalstar, in a public statement issued last month. Loral remains the largest equity holder in Globalstar with 42 percent. Beijing's government companies will manage all Globalstar operations in China, according to Schwartz. With the world's largest population and one of the fastest-growing economies, the deal reportedly will mean additional revenues of about $250 million annually for Loral. The telecommunications deal was the result of a meeting between Schwartz and top Chinese officials made possible by a trade mission coordinated by the late Commerce Secretary Ron Brown. Globalstar bills itself as "a dynamic consortium of international telecommunications companies dedicated to serving the world with low-cost, reliable satellite-based wireless communications -- anywhere, anytime, for everyone." Other strategic partners include AirTouch Communications, DACOM/Hyundai and France Telecom/Alcatel. The Soros Fund has invested venture capital and controls about 4 percent of the stock. Loral Skynet, another division of the parent company, is also developing a digital broadcast service with ABC. Besides construction, operation and maintenance of a Chinese telecommunications infrastructure, China Telecom lists among its specific responsibilities "emergency communication during wartime;" the construction and operation of government communications networks; ensuring security in communication; exercising "centralized control over public satellite communication" and "any duty that may be entrusted by MPT" (Ministry of Posts and Telecommunications) or the new Ministry of Information Industry. The revelations of Loral's closer connections with the Chinese government are certain to interest congressional investigators who are demanding President Clinton answer questions about links between Schwartz, the single largest contributor to his successful 1996 re-election campaign, and White House decisions to share U.S. satellite technology with Beijing. In addition, a close Clinton friend, Johnny Chung, has admitted donating to the Democratic National Committee at least $100,000 of a fund he secured from Chinese military intelligence. The concern is that the satellite technology shared with the Chinese may have allowed them to improve their capability of launching intercontinental ballistic missiles. China currently targets 13 such nuclear-tipped missiles at the United States. House Speaker Newt Gingrich, who recently named Rep. Chris Cox, R-CA, to head a congressional investigation of possible national security violations involved in the deal, has called upon Clinton to cancel a scheduled trip next month to China. More than 150 other House members have called for Clinton to halt plans for the trip. The White House maintains that is not an option. The Clinton Justice Department is also investigating whether political contributions, from either the Chinese government or American business interests, influenced the administration's China policies. After the Chung donations, Clinton approved a waiver that allowed Loral to launch one of its satellites on top of a Chinese rocket. Clinton has defended the waiver, saying it "was in the national interest, and supportive of our national security." Schwartz, too, has denied any wrongdoing and taken exception to accusations that his conduct was "treasonous." "Allegations that Space Systems/Loral provided missile guidance technology to the Chinese are false," he said. "SS/L makes commercial communications satellites, not launch vehicles. The company did not advise the Chinese on how to fix any problems with the Long March rocket. All company employees were specifically instructed not to provide any such assistance, and the company believes that its employees acted in good faith to comply with the strict and complex requirements of the export control laws." Nevertheless, the latest revelations about the relationship between the Chinese government and Loral raise questions about how the U.S.-based company could or would withhold such sensitive information from its own business partners.