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Bush's SEC Choice Hyped 'Chinagate'

By Robert Parry
June 9, 2005

George W. Bush’s nominee to oversee Wall Street produced a congressional report in 1999 that laid the principal blame for China’s alleged theft of nuclear secrets on the Clinton administration when the primary rupture of secrets actually could be traced to the Reagan-Bush administration of the 1980s.

Last week, Bush picked the report’s author, Rep. Christopher Cox, R-Calif., to become chairman of the Securities and Exchange Commission, which regulates stock trading in the United States. Bush’s choice of Cox, a self-described “free market” advocate, is seen as a possible retreat from a period of aggressive SEC enforcement that followed scandals at Enron Corp., WorldCom Inc. and other major companies.

During his 16 years in Congress, Cox’s best-known investigation examined the politically sensitive issue of Chinese nuclear spying. In May 1999, Cox released an 872-page report in three glossy volumes accusing the Clinton administration of failing to protect the nation against China’s theft of top-secret nuclear designs and other sensitive data.

The Cox report dovetailed with allegations that a Chinese government front had funneled $30,000 in illegal “soft money” donations to the Democrats in 1996. Some conservative operatives even accused President Bill Clinton and Vice President Al Gore of treason for supposedly trading nuclear secrets for campaign cash.

In 2000, George W. Bush’s campaign exploited these suspicions by running ads showing Gore meeting with saffron-robed monks at a Buddhist temple in California. Millions of Americans surely went to the polls thinking that Gore’s temple appearance and the Chinese nuclear spying were somehow linked.

Clinton Focus

But the Cox report’s emphasis on the Clinton years – and protection of the Reagan-Bush administration – looks, in retrospect, more like a partisan cheap shot than a fair and balanced investigation.

One sleight of hand used in Cox’s report was to leave out dates of alleged Chinese spying in the 1980s to obscure the fact that the floodgates of U.S. nuclear secrets to China – including how to build a miniaturized W-88 nuclear warhead – appeared to have been open during the Reagan-Bush years.

While leaving out time elements for the Reagan-Bush era, Cox listed the years for alleged lapses during the Carter and Clinton administrations.

For instance, the Cox report’s “Overview” states that “the PRC (People’s Republic of China) thefts from our National Laboratories began at least as early as the late 1970s, and significant secrets are known to have been stolen as recently as the mid-1990s.” In other words, Cox started with the Democratic presidency of Jimmy Carter and then jumped over the 12 years of Ronald Reagan and George H.W. Bush to Bill Clinton’s administration.

In the report’s “Overview” alone, there are three dozen references to dates from the Clinton years and only five mentions of dates from the Reagan-Bush years, with none of those citations related to alleged wrongdoing.

In a two-page chronology of the scandal – pages 74-75 – the Cox report puts all the boxes about Chinese espionage suspicions into the Carter and Clinton years. Nothing sinister is attributed specifically to the Reagan-Bush era, other than a 1988 test of a neutron bomb built from secrets that the report says were believed stolen in the “late 1970s,” the Carter years.

Only a careful reading of the text inside the chronology’s boxes makes clear that many of the worst national security breaches apparently occurred on the Reagan-Bush watch.

For instance, a box for 1995 states that a purported Chinese defector walked into a U.S. government office in Taiwan that year and handed over incriminating Chinese documents. While that would seem to apply to a Clinton year, the documents actually showed that Chinese intelligence may have stolen the W-88 secrets “sometime between 1984 and 1992,” Reagan-Bush years.

The Chinese tested their miniaturized warhead in 1992 while George H.W. Bush was president.

Spy Suspect

Left out of the chronology also was the fact that suspicious meetings with Chinese scientists – that made Los Alamos scientist Wen Ho Lee an espionage suspect – took place from 1985 to 1988, while Ronald Reagan was president.

When released on May 25, 1999, the Cox report was greeted by conservative groups and the national news media as an indictment of the Clinton administration. By then, of course, the Washington press corps was obsessed with “Clinton scandals” and viewed almost any allegation through that prism.

Yet, despite the intensity of the media spotlight, little attention was paid to the shallowness of the Cox report. Though filling three volumes and toting up 872 pages, the report had the look of a term paper written by a student trying to stretch the length by expanding the margins and triple-spacing.

The Cox report certainly didn’t resemble the typical green- or beige-bound congressional report. In a shiny black-red-white-and-gold cover, the Cox report used 14-point type, more fitting for a first-grade reading primer than a government document. [By comparison, most congressional reports use 10-point type or smaller.]

Space also was taken up by large graphics, including one page devoted to a photo of a mushroom cloud. Other pages were given over to colorful graphs and shaded boxes defining simple intelligence terms, such as a “walk-in.” Some pages at the start of chapters were entirely black for dramatic effect.

Cooler Heads

Though the Cox report fed the post-impeachment Clinton scandal fever, cooler heads began to prevail in June 1999. A study was issued by the President’s Foreign Intelligence Advisory Board – chaired by former Sen. Warren Rudman, R-N.H. – concluding that Chinese spying was less than had been “widely publicized.”

On Sept. 7, 1999, the New York Times weighed in with an article stating that the evidence of Chinese spying was far more tenuous than the Cox report had represented. “The congressional report went beyond the evidence in asserting that stolen secrets were the main reason for China’s breakthrough,” the article said.

Still, the fallout from the spy hysteria continued. The 60-year-old Wen Ho Lee was imprisoned on a 59-count indictment for mishandling classified material. The Taiwanese-born naturalized U.S. citizen was put in solitary confinement with his cell light on at all times. He was allowed out of his cell only one hour a day, when he shuffled around a prison courtyard in leg shackles.

Nine months later, the case against Wen Ho Lee began to collapse and the government accepted a plea bargain on Sept. 13, 2000. The scientist pled guilty to a single count of mishandling classified material.

A furious U.S. District Judge James A. Parker complained that he had been “led astray” by government prosecutors and apologized to Lee for the “demeaning, unnecessarily punitive conditions” under which Lee had been held. Parker ordered Lee released with no further jail time.

Reagan-Bush Lapses

New evidence also pointed to the fact that the hemorrhage of secrets to China traced back to the Reagan-Bush years. After translating more documents from the Chinese defector who had approached U.S. officials in 1995, federal investigators found that the exposure of nuclear secrets in the 1980s had been worse than previously thought.

“The documents provided by the defector show that during the 1980s, Beijing had gathered a large amount of classified information about U.S. ballistic missiles and reentry vehicles,” according to an article in the Washington Post on Oct. 19, 2000.

Still, the Cox report’s suspicions about Clinton-Gore treachery lingered. During Campaign 2000, a pro-Bush conservative group aired an ad modeled after Lyndon Johnson’s infamous 1964 commercial that showed a girl picking a daisy before the screen dissolved into a nuclear explosion.

The ad remake accused the Clinton-Gore administration of selling vital nuclear secrets to communist China, in exchange for campaign donations in 1996. These nuclear secrets, the ad stated, gave communist China “the ability to threaten our homes with long-range nuclear warheads.”

“Chinagate” helped George W. Bush keep Election 2000 close enough so the intervention by five Republicans on the U.S. Supreme Court, stopping a Florida recount, could give Bush the victory.

Looking Back

On Feb. 4-5, 2001, two weeks after George W. Bush took office, the New York Times published a fuller retrospective on the Wen Ho Lee case. A detailed chronology of events again demonstrated that the suspected loss of nuclear secrets dated back to the Reagan-Bush administration.

The Times reported that limited exchanges between nuclear scientists from the United States and China began after President Carter officially recognized China in 1978, but those meetings grew far more expansive and less controlled during the 1980s.

“With the Reagan administration eager to isolate the Soviet Union, hundreds of scientists traveled between the United States and China, and the cooperation expanded to the development of torpedoes, artillery shells and jet fighters,” the Times wrote. “The exchanges were spying opportunities as well.”

But the full story of the Republican-Chinese collaboration was even darker than the Times described.

By 1984, Ronald Reagan’s White House had decided to share sensitive national security secrets with the Chinese communists as it drew Beijing into the inner circle of illicit arms shipments to the Nicaraguan contra rebels.

Reagan’s White House turned to the Chinese for surface-to-air missiles for the contras because the U.S. Congress had banned military assistance to the rebel force and the contras were suffering heavy losses from attack helicopters deployed by Nicaragua’s leftist Sandinista government.

Ollie's Mission

Some of the private U.S. operatives working with White House aide Oliver North had  settled on China as a source for SA-7 anti-aircraft missiles. In testimony at his 1989 Iran-Contra trial, North called the securing of these weapons a “very sensitive delivery.”

For the Chinese missile deal in 1984, North said he received help from the CIA in arranging false end-user certificates from the right-wing government of Guatemala. North testified that he “had made arrangements with the Guatemalan government, using the people [CIA] Director [William] Casey had given me.”

But China balked at selling missiles to the Guatemalan military, which was then engaged in a scorched-earth war against its own leftist guerrillas. To resolve this problem, North was dispatched to a clandestine meeting with a Chinese military official.

The idea was to bring the Chinese communists in on what was then one of the most sensitive secrets of the U.S. government: the missiles were not going to Guatemala, but rather into a clandestine pipeline arranged by the White House to funnel military supplies to the contras in defiance of U.S. law.

This was a secret so sensitive that not even the U.S. Congress could be informed, but it was to be shared with communist China.

In fall 1984, North enlisted Gaston J. Sigur, the NSC’s expert on East Asia, to make the arrangements for a meeting with a communist Chinese representative, according to Sigur’s testimony at North’s 1989 trial. “I arranged a luncheon and brought together Colonel North and this individual from the Chinese embassy” responsible for military affairs, Sigur testified.

“At lunch, they sat and they discussed the situation in Central America,” Sigur said. “Colonel North raised the issue of the need for weaponry by the contras, and the possibility of a Chinese sale of weapons, either to the contras or, as I recall, I think it was more to countries in the region but clear for the use of the contras.”

North described the same meeting in his autobiography, Under Fire. To avoid coming under suspicion of being a Chinese spy, North said he first told the FBI that the meeting had been sanctioned by national security adviser Robert C. McFarlane. Then, North went ahead with the meeting to gain the help of communist China.

“Back in Washington, I met with a Chinese military officer assigned to their embassy to encourage their cooperation,” North wrote. “We enjoyed a fine lunch at the exclusive Cosmos Club in downtown Washington.”

North said, in part, the Chinese communists saw the collaboration as a way to develop “better relations with the United States.” Possession of this knowledge also put Beijing in position to leverage U.S. policy in the future.

It was in this climate of cooperation that other secrets, including how to make miniaturized hydrogen bombs, allegedly reached communist China.

Though the evidence of North’s secret contacts with Chinese intelligence had been public knowledge since the late 1980s, the Cox report in 1999 made no reference to this secret collaboration between Reagan’s White House and China.

Enter Wen Ho Lee

Wen Ho Lee first came to the FBI’s attention in 1982 when he called another scientist who was under investigation for espionage, according to the Times chronology. But Lee’s contacts with China – along with trips there by other U.S. nuclear scientists – increased in the mid-1980s as relations warmed between Washington and Beijing.

In March 1985, Lee was seen talking with Chinese scientists during a scientific conference in Hilton Head, S.C. The next year, with approval of Los Alamos, Lee and another scientist attended a conference in Beijing. In 1988, Wen Ho Lee attended another conference in Beijing.

“On Sept. 25, 1992, a nuclear blast shook China’s western desert,” the Times wrote. “From spies and electronic surveillance, American intelligence officials determined that the test was a breakthrough in China’s long quest to match American technology for smaller, more sophisticated hydrogen bombs.”

In September 1992, George H.W. Bush was still president.

In the early years of the Clinton administration, U.S. intelligence experts began to suspect that the Chinese nuclear breakthrough most likely came from purloined U.S. secrets.

“It’s like they were driving a Model T and went around the corner and suddenly had a Corvette,” said Robert M. Hanson, a Los Alamos intelligence analyst, in early 1995, the Times reported.

Looking for possible espionage, investigators began examining the years of the mid-1980s when the Reagan-Bush administration had authorized U.S. nuclear scientists to hold a number of meeting with their Chinese counterparts.

Though the American scientists were under restrictions about what information could be shared, it was never clear exactly why these meetings were held in the first place – given the risk that a U.S. scientist might willfully or accidentally divulge nuclear secrets.

Impeachment Time

But the Chinese-espionage story didn’t gain national attention until March 1999 when the New York Times published several imprecise front-page stories fingering Lee as an espionage suspect. This “Chinagate” story broke just weeks after Clinton’s impeachment and Senate trial for lying about sex with Monica Lewinsky.

With Clinton acquitted by the Senate, the Republicans and the news media were eager for another “Clinton scandal.” To get this fix, they brushed aside the inconvenient timing of the lost secrets from the 1980s and mixed together the suspicions about Chinese spying and allegations of Chinese campaign donations in 1996.

During those chaotic first weeks of “Chinagate,” pundits virtually never noted the logical impossibility of Democrats selling secrets to China in 1996 when China apparently had obtained those secrets a decade or so earlier during a Republican administration.

Conservative groups also grasped the political and fund-raising potential.

Larry Klayman’s right-wing Judicial Watch sent out a solicitation letter seeking $5.2 million for a special “Chinagate Task Force” that would “hold Bill Clinton, Al Gore and the Democratic Party Leadership fully accountable for election fraud, bribery and possibly treason in connection with the ’Chinagate’ scandal.”

“Chinagate involves actions by President Clinton and Vice President Gore which have put all Americans at risk from China’s nuclear arsenal in exchange for million of dollars in illegal campaign contributions from the Communist Chinese,” Klayman’s letter said.

But the ultimate payoff for this twisting of history may have come in November 2000, when possibly millions of Americans went to the polls determined to throw out the Clinton-Gore crowd for selling nuclear secrets to communist China.

That impression was anchored in the public mind by Cox’s three-volume report, which had selectively presented the case and steered away from evidence that implicated the administrations of Ronald Reagan and George H.W. Bush.

Pending Senate confirmation, Cox now will bring these investigative talents – and George W. Bush’s gratitude – to the chairmanship of the Securities and Exchange Commission.


Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His new book, Secrecy & Privilege: Rise of the Bush Dynasty from Watergate to Iraq, can be ordered at secrecyandprivilege.com. It's also available at Amazon.com, as is his 1999 book, Lost History: Contras, Cocaine, the Press & 'Project Truth.'

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