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www.bloomberg.com/opinion/articles/2019-05-23/private-equity-hides-foreign-capital-from-u-s-scrutiny
www.bloomberg.com/opinion/articles/2019-05-23/private-equity-hides-foreign-capital-from-u-s-scrutiny
Do You Know Which Nations Own Your Data? The U.S. Government Doesn’t
Through hedge funds, venture capital and private equity, it's way too easy for China, Russia and others to secretly control American companies.
Joshua Kirschenbaum
A Chinese’s firm’s ownership of the gay dating app Grindr was not hidden through private funds – so the U.S. government saw the risk and is forcing the company to sell.
Photographer: Chris Delmas/AFP, via Getty Images
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David Murray is the vice president for product development and services at the Financial Integrity Network. He served in the U.S. Treasury Department from 2008 to 2017.
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The U.S. has always welcomed foreign capital – much to our economic benefit. But there is a hidden danger in the way we do business, and it’s growing.
Washington knows shockingly little about foreign money flowing through the financial system, especially via private fund structures like hedge funds, venture capital and private equity, allowing foreign actors to make opaque investments that pose national security risks. Because the U.S. doesn’t track these flows effectively, we don’t know who owns government-issued debt, let alone who holds the trillions in outstanding corporate stocks and bonds or even which foreign actors invest directly in U.S. businesses.
While public attention has focused on the hacking and disinformation Russia deployed during the 2016 election, financial activity continues to be an integral part of Moscow’s covert influence strategy. But the U.S. can secure its financial perimeter. Protecting national security demands financial transparency and an end to anonymous companies, anonymous investment and unsupervised money flows.
The cases that have come to light show the need for more scrutiny: Last summer, the FBI warned Maryland that the Russian billionaire Vladimir Potanin was an owner of the company that hosted the state’s voter registry. Potanin held his stake through Altpoint Capital, a New York-based private equity firm in which he is the largest investor. Maryland elections were just one risk, though. The same private equity firm owns other companies that won technology contracts with the departments of defense, energy and labor.
The challenge doesn’t come only from Russia. The prominence of Gulf and Chinese money in Silicon Valley, often taking the form of venture capital investment, creates political influence and may provide access to Americans’ personal data. A recent U.S. trade representative report named two venture capital funds, Danhua Capital and Oriza Ventures, as examples of Chinese government efforts to “create a web of entities” to “further the industrial policy of the Chinese government,” noting in particular venture capital firms’ “ability to influence and potentially coerce” startups.
Yet the U.S., unlike Europe, does not require managers of private funds to maintain programs to prevent money laundering. These U.S. private funds hold more than $13 trillion, with no requirement that fund managers check the source of clients’ money, report suspicious activity or determine the true identities of their investors.
Anonymous companies are the most pressing weakness in our financial system. They help foreign investors hide their roles in potentially sensitive acquisitions, and they help foreign adversaries interfere in domestic politics. The U.S. is unique among major economies in allowing individuals, whether or not they are citizens, to form a company anonymously. In many states, it is easier to form an LLC than to obtain a library card. That LLC can be used to channel illegal campaign contributions or as a shell to purchase luxury real estate. Anonymity may prevent some illicit activity from being detected at all. When law enforcement agencies do get involved, they must spend enormous time and energy in figuring out who owns the companies.
Despite ample evidence of risks, the U.S. has failed to ban these anonymous vehicles. Compounding matters, illicit actors have exploited technological advances that facilitate cross-border money transfers and investments. Law enforcement, banks, transparency groups and the Treasury secretary all agree that it is past time for Congress to act.
Ending anonymity and improving transparency would also bolster screening of transactions conducted by the Committee on Foreign Investment in the U.S., which vets foreign acquisitions of American businesses for national security risk. Last week the Chinese owner of the gay dating app Grindr announced that it had reached an agreement with Cfius under which it must sell the app. The Grindr decision, which was grounded in data privacy concerns, follows Cfius’s rejection of the acquisition of MoneyGram by a Chinese company and the committee’s requirement that a private equity firm with Russian investors sell its stake in a cybersecurity company. Burying ownership amid layers of shell companies may make it more difficult to identify transactions in which foreigners have acquired a controlling interest in U.S. firms.
National security officials have warned about authoritarian governments using these unconventional tactics for decades: In 2017, an intelligence assessment described Russian influence campaigns as “multifaceted and designed to be deniable because they use a mix of agents of influence, cutouts, front organizations, and false-flag operations.” More than 30 years ago, the FBI delivered almost the exact same warning about the Soviet Union.
While Congress must pass a law to ban anonymous companies nationwide, one powerful tool already available to combat illicit finance continues to go unused. The Treasury Department for over a decade has had the legal authority to set up a database of international funds transfers conducted through the U.S. banking system but has not done so. This collection would be a true game-changer in combating illicit financial flows, whose largest drivers are China and the former Soviet states. The FBI stated in a report to Congress that such raw transactional data – which it has received from Treasury in limited quantities – enhances the bureau’s ability to combat illicit Russian financial flows and bolsters counter-intelligence and investigations into money laundering and transnational organized crime.
A comprehensive American strategy to combat authoritarian interference must put countering illicit finance and bolstering financial transparency front and center. A modest investment in transparency will pay major security dividends. Russia’s and China’s efforts to project power and gain influence in the U.S. through financial means continue to intensify. Defensive measures are prudent and overdue.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the authors of this story:
Joshua Kirschenbaum at GMFPress@gmfus.org
David Murray at dmurray@finintegrity.com
To contact the editor responsible for this story:
Philip Gray at philipgray@bloomberg.net
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Thread by @justinamash: "Attorney General Barr has deliberately misrepresented key aspects of Mueller’s report and decisions in the investigation, which has helped f […]"
6-8 minutes
Attorney General Barr has deliberately misrepresented key aspects of Mueller’s report and decisions in the investigation, which has helped further the president’s false narrative about the investigation.
After receiving Mueller’s report, Barr wrote and released a letter on March 24 describing Barr’s own decision not to indict the president for obstruction of justice. That letter selectively quotes and summarizes points in Mueller’s report in misleading ways.
Mueller’s report says he chose not to decide whether Trump broke the law because there’s an official DoJ opinion that indicting a sitting president is unconstitutional, and because of concerns about impacting the president’s ability to govern and pre-empting possible impeachment.
Barr’s letter doesn’t mention those issues when explaining why Mueller chose not to make a prosecutorial decision. He instead selectively quotes Mueller in a way that makes it sound—falsely—as if Mueller’s decision stemmed from legal/factual issues specific to Trump’s actions.
But, in fact, Mueller finds considerable evidence that several of Trump’s actions detailed in the report meet the elements of obstruction, and Mueller’s constitutional and prudential issues with indicting a sitting president would preclude indictment regardless of what he found.
In noting why Barr thought the president’s intent in impeding the investigation was insufficient to establish obstruction, Barr selectively quotes Mueller to make it sound as if his analysis was much closer to Barr’s analysis than it actually was:
Barr quotes Mueller saying the evidence didn’t establish that Trump was personally involved in crimes related to Russian election interference, and Barr then claims that Mueller found that fact relevant to whether the president had the intent to obstruct justice.
But Mueller’s quote is taken from a section in which he describes other improper motives Trump could have had and notes: “The injury to the integrity of the justice system is the same regardless of whether a person committed an underlying wrong.” None of that is in Barr’s letter.
As a result of Barr’s March 24 letter, the public and Congress were misled. Mueller himself notes this in a March 27 letter to Barr, saying that Barr’s letter “did not fully capture the context, nature, and substance of this Office’s work and conclusions.”
Mueller: “There is now public confusion about critical aspects of the results of our investigation. This threatens to undermine a central purpose for which the Department appointed the Special Counsel: to assure full public confidence in the outcome of the investigations.”
To “alleviate the misunderstandings that have arisen,” Mueller urged the release of the report’s introductions and executive summaries, which he had told Barr “accurately summarize [Mueller’s] Office’s work and conclusions.”
Barr declined; he allowed the confusion to fester and only released the materials three weeks later with the full redacted report. In the interim, Barr testified before a House committee and was misleading about his knowledge of Mueller’s concerns:
Barr was asked about reports “that members of [Mueller’s] team are frustrated…with the limited information included in your March 24th letter, that it does not adequately or accurately necessarily portray the report’s findings. Do you know what they’re referencing with that?”
Barr absurdly replied: “No, I don’t…I suspect that they probably wanted more put out.” Yet Mueller had directly raised those concerns to Barr, and Barr says he “suspect” they “probably” wanted more materials put out, as if Mueller hadn’t directly told him that.
In subsequent statements and testimony, Barr used further misrepresentations to help build the president’s false narrative that the investigation was unjustified.
Barr notes that Mueller did not “find any conspiracy to violate U.S. law involving Russia-linked persons and any persons associated with the Trump campaign.” He then declares that Mueller found “no collusion” and implies falsely that the investigation was baseless.
But whether there’s enough evidence for a conviction of a specific crime which Mueller thought was appropriate to charge is a different and much higher standard than whether the people whom Mueller investigated had done anything worthy of investigation.
In truth, Mueller’s report describes concerning contacts between members of Trump’s campaign and people in or connected to the Russian government.
For instance, Trump Jr., Paul Manafort, and Jared Kushner took a meeting with a Russian lawyer whom Trump Jr. had been told worked for the Russian government and would provide documents to “incriminate Hillary,” as part of the Russian government’s “support for Mr. Trump.”
It’s wrong to suggest that the fact that Mueller did not choose to indict anyone for this means there wasn’t a basis to investigate whether it amounted to a crime or “collusion,” or whether it was in fact part of Russia’s efforts to help Trump’s candidacy.
Barr says the White House “fully cooperated” with the investigation and that Mueller “never sought” or “pushed” to get more from the president, but the report says Mueller unsuccessfully sought an interview with the president for over a year.
The report says the president’s counsel was told that interviewing him was “vital” to Mueller’s investigation and that it would be in the interest of the public and the presidency. Still Trump refused.
The president instead gave written answers to questions submitted by the special counsel. Those answers are often incomplete or unresponsive. Mueller found them “inadequate” and again sought to interview the president.
Ultimately, the special counsel “recogniz[ed] that the President would not be interviewed voluntarily” and chose not to subpoena him because of concerns that the resulting “potentially lengthy constitutional litigation” would delay completion of the investigation.
Barr has so far successfully used his position to sell the president’s false narrative to the American people. This will continue if those who have read the report do not start pushing back on his misrepresentations and share the truth.
threadreaderapp.com
Thread by @justinamash: "Attorney General Barr has deliberately misrepresented key aspects of Mueller’s report and decisions in the investigation, which has helped f […]"
6-8 minutes
Attorney General Barr has deliberately misrepresented key aspects of Mueller’s report and decisions in the investigation, which has helped further the president’s false narrative about the investigation.
After receiving Mueller’s report, Barr wrote and released a letter on March 24 describing Barr’s own decision not to indict the president for obstruction of justice. That letter selectively quotes and summarizes points in Mueller’s report in misleading ways.
Mueller’s report says he chose not to decide whether Trump broke the law because there’s an official DoJ opinion that indicting a sitting president is unconstitutional, and because of concerns about impacting the president’s ability to govern and pre-empting possible impeachment.
Barr’s letter doesn’t mention those issues when explaining why Mueller chose not to make a prosecutorial decision. He instead selectively quotes Mueller in a way that makes it sound—falsely—as if Mueller’s decision stemmed from legal/factual issues specific to Trump’s actions.
But, in fact, Mueller finds considerable evidence that several of Trump’s actions detailed in the report meet the elements of obstruction, and Mueller’s constitutional and prudential issues with indicting a sitting president would preclude indictment regardless of what he found.
In noting why Barr thought the president’s intent in impeding the investigation was insufficient to establish obstruction, Barr selectively quotes Mueller to make it sound as if his analysis was much closer to Barr’s analysis than it actually was:
Barr quotes Mueller saying the evidence didn’t establish that Trump was personally involved in crimes related to Russian election interference, and Barr then claims that Mueller found that fact relevant to whether the president had the intent to obstruct justice.
But Mueller’s quote is taken from a section in which he describes other improper motives Trump could have had and notes: “The injury to the integrity of the justice system is the same regardless of whether a person committed an underlying wrong.” None of that is in Barr’s letter.
As a result of Barr’s March 24 letter, the public and Congress were misled. Mueller himself notes this in a March 27 letter to Barr, saying that Barr’s letter “did not fully capture the context, nature, and substance of this Office’s work and conclusions.”
Mueller: “There is now public confusion about critical aspects of the results of our investigation. This threatens to undermine a central purpose for which the Department appointed the Special Counsel: to assure full public confidence in the outcome of the investigations.”
To “alleviate the misunderstandings that have arisen,” Mueller urged the release of the report’s introductions and executive summaries, which he had told Barr “accurately summarize [Mueller’s] Office’s work and conclusions.”
Barr declined; he allowed the confusion to fester and only released the materials three weeks later with the full redacted report. In the interim, Barr testified before a House committee and was misleading about his knowledge of Mueller’s concerns:
Barr was asked about reports “that members of [Mueller’s] team are frustrated…with the limited information included in your March 24th letter, that it does not adequately or accurately necessarily portray the report’s findings. Do you know what they’re referencing with that?”
Barr absurdly replied: “No, I don’t…I suspect that they probably wanted more put out.” Yet Mueller had directly raised those concerns to Barr, and Barr says he “suspect” they “probably” wanted more materials put out, as if Mueller hadn’t directly told him that.
In subsequent statements and testimony, Barr used further misrepresentations to help build the president’s false narrative that the investigation was unjustified.
Barr notes that Mueller did not “find any conspiracy to violate U.S. law involving Russia-linked persons and any persons associated with the Trump campaign.” He then declares that Mueller found “no collusion” and implies falsely that the investigation was baseless.
But whether there’s enough evidence for a conviction of a specific crime which Mueller thought was appropriate to charge is a different and much higher standard than whether the people whom Mueller investigated had done anything worthy of investigation.
In truth, Mueller’s report describes concerning contacts between members of Trump’s campaign and people in or connected to the Russian government.
For instance, Trump Jr., Paul Manafort, and Jared Kushner took a meeting with a Russian lawyer whom Trump Jr. had been told worked for the Russian government and would provide documents to “incriminate Hillary,” as part of the Russian government’s “support for Mr. Trump.”
It’s wrong to suggest that the fact that Mueller did not choose to indict anyone for this means there wasn’t a basis to investigate whether it amounted to a crime or “collusion,” or whether it was in fact part of Russia’s efforts to help Trump’s candidacy.
Barr says the White House “fully cooperated” with the investigation and that Mueller “never sought” or “pushed” to get more from the president, but the report says Mueller unsuccessfully sought an interview with the president for over a year.
The report says the president’s counsel was told that interviewing him was “vital” to Mueller’s investigation and that it would be in the interest of the public and the presidency. Still Trump refused.
The president instead gave written answers to questions submitted by the special counsel. Those answers are often incomplete or unresponsive. Mueller found them “inadequate” and again sought to interview the president.
Ultimately, the special counsel “recogniz[ed] that the President would not be interviewed voluntarily” and chose not to subpoena him because of concerns that the resulting “potentially lengthy constitutional litigation” would delay completion of the investigation.
Barr has so far successfully used his position to sell the president’s false narrative to the American people. This will continue if those who have read the report do not start pushing back on his misrepresentations and share the truth.