Husband invested in China as Feinstein pushed trade


An investment fund backed by the husband of U.S. Sen. Dianne Feinstein pumped millions of dollars into firms doing business in China while Feinstein was boosting expanded trade between China and the United States, The Examiner has learned.

Feinstein has denied that her husband, San Francisco financier Richard C. Blum, has investments in China.

In May, before she voted for a measure that normalized trade with China, she said through a spokesman that Blum had divested of his last holdings in mainland China in 1999.

In response to queries for this story, Blum said he had earmarked some China assets for charity and sold others, one as recently as August.

Public records show a venture capital firm backed by Blum's investment bank owns millions of dollars worth of stock in corporations doing business in China.

The firm is Newbridge Capital, a joint venture between Richard C. Blum & Associates and another firm called Texas Pacific Group. It maintains an office in Shanghai for an affiliate called Newbridge Asia, public records show.

And in the past two years, the firm has pumped more than $400.million in U.S. venture capital into East Asian businesses in hopes of profiting from the region's rebounding economy.

At least $90 million of that -- perhaps more -- was invested in companies whose profits are pegged to the burgeoning mainland China market, according to the companies themselves.

Two are companies headquartered in Hong Kong: Kerry Properties, a realty firm that is building highrise hotels and apartment complexes in China; and, which is establishing U.S.-style Web sites for Internet users in China. Another is IAsiaworks of San Mateo, which hopes to wire China for the Internet.

Three others are partly owned or founded by the government of China: Zhongxing Suntek Data Communications Corp., a joint venture involving one of China's leading telecom manufacturers; China Civilink Ltd., China's biggest dot-com; and North Dragon Iron & Steel Works, a Manchurian mining operation.

Venture capital experts said Blum's joint venture, Newbridge Capital, could expect hefty fees for managing the investment fund -- as much as $17 million per year.

subhead Feinstein's "firewall'

Feinstein has advocated closer relations and expanded trade with China. But her career has been dogged by allegations that her husband has sought to trade on his wife's official position to enhance his prospects as an international investment banker.

Feinstein has adamantly denied a conflict of interest, saying she had erected a "firewall" between her office and her husband's career. In 1997, Blum said he was donating profits from his China investments to charity to further defuse conflict concerns.

In May, when Rep. Tom Campbell, Feinstein's Republican opponent in the November election, sought to make Blum's China investments an issue, Feinstein responded through a spokesman by saying that Blum no longer had investments in China.

Although Feinstein's disclosure report shows that Blum himself owns a stake worth more than $1.million in Newbridge Capital's Asia II fund, it doesn't mention any of the companies the fund is invested in. The Senate doesn't require it, experts said.

The Examiner learned of some of Newbridge Asia's China investments from annual reports, postings on corporate Web sites and press releases. Blum disclosed others in response to questions.

The information undercuts Feinstein's election-year claims about Blum selling off his China holdings.

"He's a businessman'

Spokesman Kam Kuwata said Feinstein has an unsullied reputation for integrity and that both Blum and Feinstein have gone to great lengths to avoid conflicts of interest.

"He's a businessman and he has a right to do business and he's never done anything wrong," the spokesman said. "And in her career in public life, no one has ever accused her of that, perhaps other than (Rep. Michael) Huffington (her opponent in 1994) and maybe Tom Campbell now."

Gary Ruskin of the nonpartisan Congressional Accountability Project of Washington, D.C., said officials owe it to voters to be forthcoming about their financial affairs -- and those of their spouses.

"People ought to be sympathetic with the desires of elected officials to keep some of their lives private," he said. "But ..... given that (Blum) is such a major money manager, it's important for Sen. Feinstein to go the whole mile to make sure she discloses to the public, (and) gives enough information to find out if they are benefiting financially from her actions in the Senate."

Blum declined to be interviewed. Via a spokesman, the financier said he has no financial interest in mainland China.

He said Newbridge sold its stock in Kerry Properties back to the firm's owners this summer. Newbridge still has an investment in the Manchurian steel mill, but Blum said he sold his share at a loss last year to investors he wouldn't name.

Blum said three other investments -- the Chinese telecom, and the Chinese and Hong Kong Internet concerns -- will go to charity, via a trust he set up in May. The San Mateo dot-com does little business in China, he said.

In May, Feinstein's office "said Mr. Blum had divested all investments in mainland China, and that is correct," Blum's spokesman Owen Blicksilver wrote in an e-mail from New York.

Nevertheless, details of the transactions as described by Blum seem at odds with Feinstein's assertions.

The sale of the Hong Kong realty didn't occur until August, three months after Feinstein said her husband had gotten out of China. And in her statement, Feinstein said Blum had gotten rid of his investments -- never mentioning that he had put them in trust.

In addition, Newbridge still is earning fees for managing the fund's investments.

Both interested in China

Feinstein and Blum both have long-standing interests in China.

As she once recounted in a speech to the Senate, Feinstein's official contacts with China date back to 1979, the year before her marriage to Blum, when she established a sister-city relationship between San Francisco and Shanghai. Over the years, she has made a series of visits to China, becoming close to then-Shanghai Mayor Jiang Zemin, now China's president.

After she was elected to the Senate in 1992, Feinstein began boosting trade as the key to improved U.S.-China relations.

In 1994, when the Senate was considering withdrawing most favored nation trade status from China because of human-rights abuses, Feinstein called the move "counterproductive."

Tough measures would only "inflame Beijing's insecurities" and turn it away from Western- style reform, she told the Senate. And, she argued, trade with China boosts the American economy.

This year, as the Senate considered normalizing trade with China -- paving the way for China's entry into the World Trade Organization -- Feinstein joined the Clinton administration in lobbying for the measure. "No matter how you look at it, this benefits the United States," she said. It passed by a wide margin.

Blum has been traveling to China for 20 years. He has accompanied Feinstein on several of her official trips there.

He befriended the Dalai Lama, exiled religious leader of Tibet, and once said he had served as a "liaison" between the holy man seeking Tibetan independence and the Chinese government, which rules there. Blum founded the American Himalayan Foundation, aimed at helping the people and the environment of Tibet and Nepal.

And, for at least 15 years, he has been involved in business investments in China. In the 1980s, he served as vice chairman and director of a firm called Shanghai Pacific Partners that built a $30 million highrise complex in Shanghai in joint venture with the Shanghai Investment and Trust Co., the third-largest bank in China.

In a 1989 interview, Blum told The Examiner that he had suspended further joint-venture deals with the bank in protest of the Tiananmen Square massacre in which the Chinese army killed hundreds of pro-democracy dissidents. But he still serves as the Shanghai bank's foreign advisor, according to this year's annual report of Northwest Airlines, where Blum is on the board of directors.

And, as the memory of Tiananmen faded, Blum contemplated new ventures in China, setting up a tangle of holding companies, limited partnerships and other investment vehicles ultimately linked to his investment bank.

Among them was the Newbridge Capital investment firm, described in a press release as an "emerging markets private equity fund" jointly founded by Blum's bank and Texas Pacific Group, a firm chaired by David Bonderman, a Fort Worth investment banker and Feinstein political donor.

Starting in 1994, Newbridge raised about $160 million from pension funds, insurance companies and wealthy individuals for its first Newbridge Asia fund.

According to a 1999 news release, Newbridge invested in three firms in China: a company that manufactured candy, another that processed soy milk, and the North Dragon Iron & Steel Works, which produced pig iron for China's auto industry. Newbridge put about $23.million into that enterprise, obtaining a 24 percent stake, the Los Angeles Times reported.

Blum said his China investments comprised only a small percentage of his bank's business. Nevertheless, the issue has proved politically awkward for Feinstein, and she has repeatedly sought to distance herself from her husband's financial affairs and rebut allegations that she has a conflict of interest when it comes to Senate matters involving China.

Recurring questions

The issue flared in 1994, when Feinstein faced a bruising re-election campaign against Rep. Huffington. She had been boosting expanded trade with China at a time when Blum's bank was soliciting investors for the first Newbridge Asia fund.

Feinstein said she had gone to great lengths to prevent conflicts.

"We have a firewall between us," she told the San Francisco Chronicle.

To the Los Angeles Times, Feinstein suggested she had done everything possible to address the issue, saying, "He is in San Francisco running his business, and I am in Washington being a United States senator, and they are two separate things. I don't know what I can do to prove it to people like you. Maybe I get divorced. Maybe that is what you want."

The issue flared again in 1997, when Feinstein was considering a run for governor.

By then, Blum's bank had pumped millions into the iron works and other Chinese ventures.

When queried by Los Angeles Times reporters about his investments in China, Blum announced he would donate his profits from China investments to his Himalayan charity.

"This should remove any perception that I, in any shape or form, benefit from or influence my wife's position on China as a U.S. senator," he said.

An issue in this campaign

Nevertheless, in May, when the permanent trade status measure was headed for a vote, Campbell raised the issue again. He accused Feinstein of failing to make full disclosure of Blum's China investments and implied Blum could benefit financially from the measure, which Campbell supported.

"Do you and your family have any holdings in China?" Campbell asked. "..... Do they stand to benefit from China's entry into the World Trade Organization."

Feinstein responded through her spokesman Kuwata, who gave a series of interviews in which he said Campbell was wrong because Blum had already dumped all China holdings.

"Neither Dianne nor her husband have any holdings in mainland China," he was quoted in the Chronicle on May 19.

Blum and Feinstein "have divested of any holdings in mainland China," Kuwata told the San Jose Mercury News, saying Blum had disposed of his last asset in China, "an iron factory," the year before.

But according to Feinstein's May 2000 disclosure statement, Blum holds a stake of more than $1.million in the Newbridge Asia II limited partnership fund.

And both Newbridge and the firms in which it invested have acknowledged the partnership is investing in China.

In 1999, when Newbridge Capital closed the $400 million Newbridge Asia II fund to new investors, it issued a press release saying it would make "private and public equity investments in Greater China (the PRC, Hong Kong and Taiwan), Japan, Korea and Southeast Asia."

The Newbridge holdings

Newbridge has invested in six firms based in China or doing significant business there., a Hong-Kong based firm, hosts more than 20 entertainment and e-commerce Web sites in eight Asian markets, including China.

In March, a combine of venture capital firms including Newbridge Asia pumped $30 million into Daniel Carroll, a Newbridge managing director, was named to the firm's board.

Blum said that in May he set up a charitable trust to benefit his Himalayan charity. Proceeds from his investment are placed in the trust, he said.

IAsiaworks is a San Mateo company that offers lease-line Internet connections and Web hosting in 11 Asian and Pacific countries, including China. It has established "Internet data centers" in Beijing, Guangzhou and Shanghai to support Internet services in China, the company Web site said.

In December 1999, Newbridge Asia was part of an investment group that pumped $85 million into the company. According to SEC records, the Newbridge Asia II limited partnership owns 15 percent of IAsiaworks' stock, worth about $62 million.

Kerry Properties Ltd. is a Hong Kong-based Bahamian company formed to hold the real estate of tycoon Robert Kuok Hock Nien. According to the firm's Web site, more than 20 percent of its holdings are in real estate and infrastructure projects in China.

In October 1998, Newbridge Asia II and Colony Capital Inc., a Los Angeles realty firm affiliated with the Texas Pacific Group, pumped about $57 million into Kerry Properties. Blum said Newbridge sold some Kerry stock in April, and sold the rest back to the Kuok Group in August.

China Civilink Ltd., is a Web hosting company. Founded in 1996 with money from China's Internal Trade Ministry, it has sought to jump-start Internet use and e-commerce in China. In May, Newbridge Asia invested an unspecified amount in the firm, a company spokesman said. Blum said his share of the investment had been placed in the charitable trust.

Blum also said he had invested an unspecified amount in Zhong xing-Suntek Data Communications, a joint venture involving Zhong xing Telecom (ZTE), the state-owned telecommunications manufacturer. This investment also benefits the charity, Blum said.

"What Mr. Blum is doing here, if and when there is a (Newbridge) investment in China ..... is immediately transferring it to a charitable trust," Blum's spokesman said.

Blum said Newbridge still owns a share of North Dragon, the Manchurian steel mill, but that he sold his stake at a loss last year. Newbridge sold its shares of the candy and soy milk factories, he said.

Who's the hunter and who's the hunted?

The best and the brightest teenagers showed up at an exam designed to identify new talent for the IDF's renowned military intelligence unit

By Yuval Dror Ha'aretz October 22, 2000

"Who invented the computer?," "What is a critical section?" and "What is a DLL Surrogate?" - these are some of the questions presented to 175 high school students who came to Herzliya last Thursday to sit special entrance exams for the military intelligence unit 8200. The aim of the exam is to identify suitable candidates to serve in the unit.

The Alladin security company, which sponsored the event, had no objections to our gathering some information about the teens who achieved the highest marks. 8200 stopped being just a number a long time ago. The managers of the venture capital funds are well acquainted with this string of digits and any entrepreneur who states that he is an alumnus of the unit can be sure that they know what he is talking about. It is Unit 8200, and not the IDF's computer unit, that is considered the army's R&D department for the most advanced technologies. It is no wonder then, that most of the students said that they had decided to enter the competition the moment they heard that "the unit" was involved.

The first stage was a visit to the competition's Web site (, where they were asked a few questions. Some 2,000 students aged 15-18 applied, and only 175 passed the first stage. They were the ones who were invited to the computer school at the interdisciplinary center in Herzliya. In three separate shifts, the students sat the 90-minute exam, which consisted of 75 questions on a variety of topics, from operating a Unix system, through Pascal programming, C++, and finally advanced mathematics. Among other things, the students were asked at what companies they had worked, if they had taken any post-secondary education courses, and also to write a short description of three large software programs they had written themselves.

Many of the youths left the examination hall long before the time was up, with a perplexed grin on their faces. "It was a hard exam," they declared. Most of these were boys, mainly because only five girls were among the group. One of them, Liran Weissman, related that her father works in the aircraft industry. "We have always had a computer at home. When I was younger, I created programs in BASIC and HTML," says Weissman, "but now I do hardly any programming." She says that she is planning to do five matriculation credits in computer science and would have no objections to serving in the unit. "The whole intelligence corps interests me, but 8200 is the ultimate."

Alon Diament, 18, came all the way from Eilat to take part in the competition. "My uncle," he says, "read about the competition and teased me, saying, 'That's 8200, that's 8200.' He badgered me, and that's how I got here." Diament was born on the day that Time magazine announced it had chosen the personal computer as man of the year.

Diament, like Weissman, was introduced to computers at a very young age, and wouldn't mind serving in the unit. "I hope I made it," said Diament, "There were some really nice questions about algorithms. A lot of kids say they had it hard, so I hope that I came out with a good mark."

He also said that he had found a mistake in one of the questions. Boys will be boys, and one of their favorite tricks was to try to "trip up" the person who drafted the exam, who was in the room with them and patiently answered all their questions. "It took me weeks to compose that exam," he said, " and most of my time was spent consulting experts to make sure that there were no mistakes."

The youngest teen sitting the exam was Dor Kleiman, of Herzliya, who skipped a grade and is currently in 10th grade. He says that he is used to being around older kids. He admitted that the exam was difficult, even though he knows several programming languages that he learned from books and via the Internet. How? "I've had a computer since I was 5."

Members of Unit 8200, dressed in civilian clothing, mingled with the teenagers and refused to admit that they were, in essence, head hunting. At the entrance to the hall, there was a booth manned by representatives of the intelligence corps. The students were asked to fill out questionnaires in order to determine "whether they were suited to development in the computer field." They were also asked to recommend any of their friends who might be suitable candidates for "an elite unit in the computer field."

One source close to the competition said, "This is head hunting right from high school. This type of competition provides information on candidates even before they get their first conscription notice."

The IDF spokesman refused a request by Ha'aretz to interview the commander of Unit 8200.

The CEO of Alladin, Yanky Margalit, said that he sponsored the event in order to stimulate the youth to want to delve deeper into the computer field. He also did not hide the fact that he would be happy if the event ended up being good for his company.

"In the short term," said Margalit, "I will not achieve anything from today, because these youngsters will soon be drafted into the army, but if one of them approaches me asking for details about Alladin, saying that he is interested in the company, I am happy to speak with him and contact him at a later date."

The one body that apparently did not expect to gain any direct benefit from the event was TIM, a company founded by Jews from Boston who invest in Israel in the fields of management and education toward excellence. Being connected with the competition was natural for them.

The results of the competition were posted on Unit 8200's Web site on Thursday, along with the names of the winners. The first place winner will receive NIS 5,000, while those in second and third place will receive NIS 3,000 and NIS 2,000 respectively

Some Questions Concerning The Conflict In The Middle-East

Ken Garrison ()

Does The Outbreak Of Violence In Israel Indicate An End To The Oslo Peace Accords?
The Oslo Peace Accords were a fantasy from the very beginning. This fantasy was woven by Clinton, Arafat and the apostate leaders of Israel like Rabin, Perez and Barak. These "so-called leaders" wove their fantasy around the intentions of Yassar Arafat and his band of thugs. Mr. Arafat is probably the more honest of the group. At least in Moslem lands, he has always been candid and truthful about his intentions. He has consistently announced his intentions of gaining control of Israel step-by-step in the sequence of (1) the Temple Mount, (2) Jerusalem, (3) Biblically significant areas of Israel and (4) finally, all of Israel. He also announced repeatedly that he would use diplomacy as long as that advanced his aims and then he would turn to war. The present outbreak of violence just indicates that he has made that inevitable turn. His "peace partner" repeatedly chose to ignore his true aspirations.

Anyone who now speaks of the "peace process" has to be a complete fool. All anyone has to witness is the enormous, vile hatred manifested in the aroused crowds of Moslems in Ramallah, Nazareth, Gaza, Shechem or Jerusalem to understand that they will never, of their own volition, embrace peace with Israel. The only thing that have kept them involved thus far has been the continual surrender of real territory by the Israelis. They always knew, of course, that there would be a limit to what Israel was willing to forfeit.

The shameful withdrawal from Lebanon, made earlier this year by Barak, convinced the Palestinians that the Israelis were no longer willing to pay the price of the struggle. The great victory of the Hizb'Allah inspired the Palestinians to make the decision to attempt to achieve ultimate victory by the same means.

Did Ariel Sharon Provoke The Moslem Response By His Visit To The Temple Mount?
Perhaps we should ask just exactly what Ariel Sharon did on the Temple Mount. Did he purposely enter and defile the mosque or shrine? He did not. Did he cause physical harm or did he verbally assault any Moslem there? He did not. What he did was expose the hypocrisy of the position of the Israeli government in their pursuit of the "peace process". The Barak government proclaimed that they maintained sovereignty over the Temple Mount while gradually relinquishing that sovereignty to the Moslem authority, i.e., Yassar Arafat. In fact, the previous government of Netanyahu had done the same thing. By his presence on the Temple Mount, Ariel Sharon demonstrated Israeli sovereignty there. The Moslems who had already concluded that Israel had long since relinquished sovereignty there were infuriated and they unleashed their fury on the Israelis worshiping below.

Statement Regarding Art Bell Lawsuit

October 20th, 2000

On December 9, 1997, Ted Gunderson broadcast a radio show transmitted by WWCR in which a guest by the name of David Hinkson made certain statements that may have left the listening audience with the belief that former late night radio host Art Bell had been charged with child molestation.

On May 15, 1998, Mr. Bell filed a defamation suit in the Circuit Court for Davidson County, TN against Mr. Gunderson, his guest Mr. Hinkson and Radio Stations WWCR and WNQM. Mr. Gunderson and the ownership of WWCR have apologized to Mr. Bell and his family for the statements made by Mr. Hinkson.

Sadly, in point of fact, it was Mr. Bells's son who was victimized by a high school teacher who is now serving a jail sentence for his crimes.

Upon receipt of this apology and previous retraction, Mr. Bell, agreed to a confidential settlement releasing Mr. Gunderson and the radio station, Mr. Bell looks forward to putting this matter behind him and moving on with his life.