Josh Rogin - Chaos Under Heaven

AVIC is also a shareholder in another Chinese state-owned aviation conglomerate called Commercial Aircraft Corporation of China. The company’s new C919 passenger jet is based on various technologies stolen from foreign companies, according to a report by the cybersecurity firm Crowdstrike. The technology was stolen by the same Chinese government hackers who stole the personal security information of twenty-two million Americans (including me) by hacking the Office of Personnel Management in 2015. What the Chinese government can’t get us to give over, it takes.

“The Wheel Had Turned”

FIRRMA wasn’t signed into law until August 2018, but the professionals at CFIUS didn’t wait for it to be official before they started cracking down. Almost immediately after Trump got into office, the entire mood toward consideration of Chinese investment had changed. In January, CFIUS had blocked Jack Ma’s Ant Financial from acquiring MoneyGram, the second-largest money transfer company in the country. In March, CFIUS had blocked the acquisition of US tech giant Qualcomm by Singapore-based Broadcom, a company with deep links to China.

In this, the actions of CFIUS are reflective of so much of the story about US-China relations in the Trump era—a story that involves different sectors of American society waking up to the reality of the competition at different speeds and on different calendars. When two of those sectors collided, the result was a struggle between them, often with Americans caught in the middle.

The rapid change in the way the US government treated Chinese investment caught a lot of Wall Street types, especially, by surprise—but none more than Trump’s shortest-tenured senior White House official, Anthony Scaramucci. “The Mooch,” as he is known, never set out to be a test case for the clash between the national security world and Wall Street over China. But by the time he realized what he had gotten himself into, it was too late.

I was sitting in the CNN green room on the afternoon of April 28, 2018, waiting for my hit time, when Scaramucci walked in, talking very loudly on his cell phone. He was talking with a representative of HNA, the Chinese company that had agreed to buy his own “fund of funds” SkyBridge way back in January 2017 when the Mooch thought he was about to join the White House staff right off the bat.

There were a half dozen other people in the room, all chatting and waiting for their segments, but none of them were paying attention as Scaramucci told the person on the other end of the line that he knew HNA wanted out of the deal, which had been caught up in a seemingly endless national security review by the Committee on Foreign Investment in the United States. At first, Scaramucci suggested they try to work it out. But if HNA didn’t meet his price for getting out of the deal, he said he would get President Trump to intervene.

“You have to pay a breakup fee if you want to end the transaction without mitigation,” he said. If they didn’t like that idea, he said, he would call “my friend the president,” who has ultimate power over the CFIUS decisions. “Let the president decide,” he said. “We’ll contact the president and we’ll ask him why they are abrogating his right to make a decision on the deal.”

As I typed notes into my phone, I looked around and wondered whether anyone else in the room realized what Scaramucci was talking about. He was invoking Trump’s name to pressure a Chinese company to pay him to get out of their deal to buy his company. Nobody seemed to notice.

There were several issues with the call. First of all, did Scaramucci still have a relationship with Trump sufficient to make that threat credible? Second, was this an indication Scaramucci was lobbying Trump on the deal? Lastly, why did HNA want out so badly that Mooch thought he had so much leverage to make them pay?

Two days later, HNA and SkyBridge announced they had agreed to scuttle the acquisition. The day after that, Scaramucci told CNBC the two companies would forge a joint venture in China.

When I interviewed Mooch two years later, he admitted to making the comments—but he assured me that it was just part of his impassioned negotiating style. He insists that he never spoke to Trump about the deal, and never intended to. He also said he never got a breakup fee. “I was emotionally charged about it, I had no problem letting them out, but we had money in the deal,” he told me. “We were going to do a joint venture with them, so we never asked for damages. Then the joint venture never materialized.”

He also told me the story of how his wild, albeit brief, political career got tangled up with the rising tensions between Washington and Beijing. “By accident, I ensnared myself in the drama of the United States versus China,” he said. Scaramucci learned the hard way that Wall Street’s open door to selling US companies to China—especially when they dealt with technology—was closing fast.

After Trump was elected, Scaramucci was all set to join the administration as the director of the White House Office of Public Liaison, a job that meant managing the White House’s relationships with any number of outside civil society organizations. Trump was the third presidential candidate Scaramucci had supported in 2016, but after his first two picks, Scott Walker and Jeb Bush, were eliminated, “the Mooch” became a reliable TV surrogate for the Trump campaign and his earlier comments calling Trump a “hack politician” were forgotten.

In order to serve in the Trump administration, Scaramucci needed to divest his personal assets and decided to sell his investment firm SkyBridge Capital, which was basically a hedge fund that invested in other hedge funds and allowed individuals to buy in, for a fee. He hired Gregory Fleming, a former head of Morgan Stanley’s retail brokerage business, to organize the SkyBridge sale. They reached out to about fifty potential investors, of which about fifteen were foreign, but none of them Chinese.

It was another firm, RON Transatlantic, which already owned 10 percent of SkyBridge, that introduced the massive Chinese conglomerate HNA to SkyBridge. RON Transatlantic was best known for having President Obama’s former body man Reggie Love as part of its management team. RON Transatlantic introduced Scaramucci to HNA executive Guang Yang, a Chinese-born American citizen who had raised money for Jeb Bush’s 2016 presidential campaign. HNA came in with what Scaramucci says was the second-highest bid. Scaramucci took it because HNA promised to keep SkyBridge’s people employed.

The exact amount of the transaction was not made public, but Scaramucci said it was around a couple hundred million dollars. For HNA, which had scooped up some $50 billion of US assets the year prior, this was not a big money deal. Scaramucci thought the deal would get signed off by the CFIUS board because CFIUS hadn’t stood in the way of HNA acquiring US financial technology firm Ingram Micro for $6 billion in 2016.

Until then, financial technology wasn’t something the CFIUS investigators were focused on and HNA was not in their sights. “Remember at that time, they were very well regarded,” Scaramucci said. “So this is pre-Trump administration, when CFIUS was being more fair to Chinese companies. We thought that because HNA was buying other asset managers, that was an okay thing to do.”

Scaramucci broke the news of the deal himself—before it was actually completed—during his trip to Davos for the World Economic Forum, where he gave a speech about tree trade and warning against protectionism. “The United States and the new administration does not want to have a trade war,” he told the Davos crowd. The Wall Street Journal declared that Scaramucci, in Trump’s absence, was “the new administration’s ambassador to the global elite.” He spoke after Xi Jinping, who defended the concept of globalization that Trump had campaigned against.