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Chinese Rocket
The Justice Department investigated whether two U.S. firms violated laws by sharing information with the Chinese after a failed satellite launch in February 1996. (Reuters)

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U.S. Firms Fight China Bans (Washington Post, May 23)

Chinese Company: No Sensitive Technology (Washington Post, May 23)

Key Stories About Missile Allegations

Loral Company Statement

On the Web
Center for Responsive Politics report on Loral political contributions.


President Overrode
China Launch Concerns

By Roberto Suro and John F. Harris
Washington Post Staff Writers
Saturday, May 23, 1998; Page A01

President Clinton gave the go-ahead in February to a U.S. company's satellite launch in China despite staff concerns that granting such approval might be seen as letting the company "off the hook" in a Justice Department investigation of whether it previously provided unauthorized assistance to China's ballistic missile program.

Documents released by the White House yesterday also show, however, that the State Department and other agencies had determined that the launch by Loral Space and Communications Ltd. was in "the national interest" and recommended approval.

This week, in an indication that the initial White House fears of criticism were well-founded, congressional Republicans cited the Justice Department warning in alleging Clinton jeopardized the nation's security in granting a waiver. They suggested that the decision to do so was influenced by campaign contributions from Loral Chairman Bernard L. Schwartz.

The documents made available to reporters yesterday were handed over to Congress as the administration sought to buttress its contention that while Justice reservations were given due consideration, the decision to grant the waiver was made on its merits.

"These documents reflect the serious policymaking on national-interests grounds that goes into satellite waivers," said White House spokesman Michael McCurry. "They also make clear that those who are taking taking political cheap shots should butt out."

But the documents also demonstrated how Loral sought to use its connections to pressure the White House for a decision. Obtaining the required presidential approval was critical for Loral, which faced the loss of a hugely lucrative satellite sale and tens of millions of dollars in penalties if Clinton did not act before a contractual deadline with the Chinese. The company found significant support for its plight within the White House. Numerous officials there noted Loral's financial interest in a speedy approval of the waiver.

The documents indicate that Schwartz, who has given more than $1 million to the Democratic Party since 1995, planned to raise the issue directly with National Security Adviser Samuel R. "Sandy" Berger at a state dinner for British Prime Minister Tony Blair on Feb. 5.

However, Loral Vice President Thomas Ross wrote to Berger a week later that Schwartz "missed you in the crowd" and was not able to make his case. Instead, Ross, who served as a senior National Security Council official earlier in the Clinton administration, pleaded in his Feb. 13 letter for speedy action by the president.

"If a decision is not forthcoming in the next day or so we stand to lose the contract," Ross wrote. "In fact, even if the decision is favorable, we will lose substantial amounts of money with each passing day."

Five days later, Clinton granted his approval, despite what Berger advised him were Justice concerns that the move "could have a significant adverse impact" on its ongoing criminal investigation. The Justice Department was looking into whether Loral illegally provided sensitive missile technology information to the Chinese following the 1996 crash of a Chinese rocket carrying a Loral satellite.

In making the documents available for reading at the White House late yesterday afternoon, the administration limited the number of reporters who could examine them and declined to make copies, citing concerns by White House counsel Charles F.C. Ruff that they were sensitive.

Special presidential waivers for satellite launches in China are required as part of the sanctions imposed on Beijing following the 1989 Tiananmen Square uprising. A total of 11 such waivers, covering 21 launches of U.S.-made satellites, have been granted -- two by President Bush and nine by Clinton.

The House and Senate this week announced investigations into the the Loral waiver, as well as into the broader question of whether national security has been violated in sending U.S. high technology to China.

In brief remarks to reporters at an unrelated event yesterday, Clinton said that the February waiver followed precedents set by the Reagan and Bush administrations. "About 10 years ago, it became obvious that our country had an interest in developing a globally competitive commercial satellite system," he said.

The documents released by the White House make no mention of Schwartz's campaign contributions, but show how the company sought to use its connections to the administration to urge a favorable decision.

A statement released by Loral earlier this week stated that Schwartz "was not personally involved in any aspect of this matter." It added, "No political favors or benefits or any kind were requested or extended, directly or indirectly, by any means whatever."

But a Loral official said the company enlisted Ross's help out of frustration in early February. Having shepherded the project through the bureaucratic shoals at the State, Commerce and Defense departments, Loral saw it languishing at the White House while the contract was on the verge of expiring.

White House officials echoed Loral's sense of urgency in memos that repeatedly referred to the "severe contractual penalties" Loral faced from the Chinese for further delays. And they showed the administration's inclination to take a benign view of the company. Berger, in a hand-written note to Gary Samore, a NSC official in charge of proliferation issues, asked if there was "anything we can hang our hat on to characterize Loral's 'offense?' "

One aide attached a handwritten note on a decision memo that was heading to the president: "Make changes ASAP -- needs to go to POTUS [president of the United States] today!!"

But that was on Jan. 20, immediately before the Monica S. Lewinsky controversy erupted, and as aides were pondering a military strike against Iraq. A distracted White House staff did not act until nearly a month later -- despite the importunings of various senior aides.

In mid-February, Samore complained in an e-mail to staff, "By the time we finish tinkering with this, the Chinese will cancel the contract."

At the time, unbeknownst to Loral, the Justice Department had initiated its criminal investigation of the earlier launch. The documents show that development gave pause to White House officials as they considered the waiver.

Although the State Department had recommended approval of the satellite launch, correspondence and notes make clear that officials at Foggy Bottom knew that the satellite deal might hinder Justice's criminal investigation.

Notes taken by NSC lawyer Newell Highsmith quote Will Lowell, head of the State Department agency that reviews technology export decisions, about the quandary. "Lowell thinks it's critical, likely to be indicted," Highsmith wrote, in apparent reference to the growing suspicions about Loral. "Knowing and unlawful."

But White House officials noted yesterday that State Department policy, dating from 1993, is not to withhold export licenses because of an investigation, if there has been no conviction.

An NSC lawyer, in handwritten notes made while preparing for a meeting with White House Counsel Ruff, framed the issue this way. "Issue is not impact on DoJ [Justice] litigation, but whether bilateral U.S.-China concerns and economic factors outweigh risk of political embarrassment."

In his Feb. 12 memo to Clinton, Berger said the Justice Department's concerns were that "a jury would not convict once it learned that the president had found [Loral's satellite project] to be in the national interest. We will take the firm position that this waiver does not exonerate or in any way prejudge Space Systems/Loral with respect to its prior unauthorized transfers to China.

"Nonetheless, if Justice is correct on this matter the proposed waiver might be criticized for letting [Loral] off the hook on criminal charges for its unauthorized assistance to China's ballistic missile program. In any case, we believe that the advantages of this project outweigh this risk, and that we can effectively rebut criticism of the waiver."

In a memo the following day, Ruff supported Berger's view and dismissed Justice's concerns. "The department had every opportunity to weigh in against the waiver at the highest levels and elected not to do so," Ruff wrote.

Ruff's memo reflected a conclusion by the White House and the NSC that the Justice Department had deliberately chosen not to oppose the waiver, and senior administration officials briefing reporters said yesterday that it was on that basis that Clinton approved it.

However, Justice Department officials yesterday disputed both the White House's conclusions and its version of events.

"The White House called the deputy attorney general's office and asked whether issuing this waiver would have an adverse impact on the criminal case against Loral, and to that very specific question, the answer was a clear 'yes,' " said a senior Justice Department official. "The White House never asked us whether we opposed the waiver."

After conducting a brief review of the White House submission yesterday, House Republicans said the nearly 400 pages of internal documents failed to assuage their concerns over how the president treated Loral.

"The president has an absolute obligation to explain to the American people why he would undercut a criminal investigation," House Speaker Newt Gingrich (R-Ga.) told reporters shortly before leaving for Israel.

"This is a very incipient first step," said Rep. Christopher Cox (R-Calif.), tapped by Gingrich to chair a select committee investigation of the waiver and the concerns that Loral turned over sensitive information to the Chinese. He added that the documents "contain red flags about the potential consequences for China's ballistic missiles."

International Relations Committee Chairman Benjamin A. Gilman (R-N.Y.), who initially received the documents but subsequently handed them over to Cox, delivered an even harsher assessment. "It's obvious the president was advised not to proceed with the satellite waiver because it was in violation of national security," Gilman said. "What we're finding is certainly indicative that a more intensive review is required."

Staff writers Ruth Marcus and Juliet Eilperin contributed to this report.

© Copyright 1998 The Washington Post Company

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