WASHINGTON - The White House and the Justice Department have put off a high-stakes confrontation over the FBI's use of a confidential source to aid an investigation into the Trump campaign, after top law enforcement and intelligence officials met with President DonaldTrump on Monday to discuss the brewing controversy.
A White House spokeswoman said Chief of Staff John Kelly plans to convene another gathering between the officials and congressional leaders to "review highly classified and other information" about the source and intelligence he provided.
That could be viewed as something of a concession from the Justice Department, which had been reluctant to turn over materials on the source to GOP lawmakers demanding them. But it also could be a bureaucratic maneuver to buy time and shield actual documents.
Earlier this month, the department temporarily defused a similar standoff with House Intelligence Committee Chairman Devin Nunes, R-Calif., who is seeking internal records and FBI reports on the source and threatened to hold Attorney General Jeff Sessions in contempt. The department had Nunes over for a classified briefing but provided no documents, and Nunes decided not to attend a later briefing the department offered.
The Monday meeting, which included Trump, Deputy Attorney General Rod Rosenstein, FBI Director Christopher Wray and Director of National Intelligence Daniel Coats, lasted about an hour. Trump personally called to confer with the officials, two people familiar with the request said, though White House press secretary Sarah Huckabee Sanders said the meeting was put on the books last week.
The gathering came a day after the Justice Department asked its inspector general to investigate Trump's claim that his campaign may have been infiltrated by the FBI source for political purposes. The officials planned to discuss that, as well as the Justice Department's response to congressional requests for documents on the origin of what is now special counsel Robert Mueller's probe into whether the Trump campaign coordinated with Russia to influence the 2016 election.
The source at issue is Stefan Halper, a veteran of the Nixon, Ford and Reagan administrations and an emeritus professor at Cambridge University in England, according to multiple people familiar with his role.
The Washington Post had previously confirmed Halper's identity but did not report the information after warnings from U.S. intelligence officials that exposing him could endanger him or his contacts. Now that his name has been revealed by multiple news organizations, including the Wall Street Journal, New York magazine and Axios, The Post has decided to publish his name. The Daily Caller first reported on some of his contacts with members of the Trump campaign.
Sanders said in a statement after the Monday meeting: "Based on the meeting with the President, the Department of Justice has asked the Inspector General to expand its current investigation to include any irregularities with the Federal Bureau of Investigation's or the Department of Justice's tactics concerning the Trump Campaign."
She added, "It was also agreed that White House Chief of Staff Kelly will immediately set up a meeting with the FBI, DOJ, and DNI together with Congressional Leaders to review highly classified and other information they have requested."
The latter statement could be particularly significant. Justice Department leaders have fought vigorously against turning over to Congress materials on the FBI's source. It was not clear whether they had backed down from their position and would now allow GOP leaders to look at or keep the documents, or whether there would simply be a follow-up meeting for more discussion.
It was also not clear which lawmakers would be invited to review the information. A Justice Department spokeswoman declined to comment.
Rep. Mark Meadows, R-N.C., a close Trump ally who has been critical of the Justice Department for not turning over documents to Congress, said he was glad to hear that Justice officials seemed willing to share more material about how they opened the investigation into contacts between some in the Trump campaign and Russians.
"It's a good day for transparency, and I appreciate the president's leadership," Meadows said. "Obviously, the details of the cooperation that is a result of this meeting today will be a defining moment for the Department of Justice. We can certainly applaud the progress and efforts that were made today."
Meadows said he was interested to see which lawmakers would be invited to attend.
"If it includes critical members of the House Intelligence Committee, it will go a long way to answering these unanswered questions," he said.
The stakes of the meeting were high, and Trump raised them significantly Sunday when he said on Twitter that he would order the Justice Department to "look into whether or not the FBI/DOJ infiltrated or surveilled the Trump Campaign for Political Purposes - and if any such demands or requests were made by people within the Obama Administration!"
That Justice Department officials acquiesced to the demand is significant in its own right. The president effectively requested, and apparently received, a review of the investigation into his campaign.
"In my opinion, it is a terrible outcome for the department," said former Justice Department spokesman Matt Miller, who served in the Obama administration. "The president has basically requested an investigation of the investigators with no evidence of wrongdoing, and they've agreed to do it."
Still, it was unclear how much further officials would be willing to go if the president remained unhappy.
Meadows said Monday before the meeting: "Rod Rosenstein knows exactly what happened and what is in the documents requested by Congress. Either the matter warranted investigation long ago and he did nothing, or he's seen the facts and believes nothing is wrong. His belated referral to the IG is not news . . . it is a ruse."
Justice Department officials cited the safety of the source and others, as well as damage to relations with partner intelligence services, as reasons not to reveal the materials to Congress. Trump has the power to order the department to comply with congressional demands, but it is possible that department officials might resign in protest or refuse the order and force Trump to fire them.
Rudy Giuliani, the president's lawyer, said in an interview Sunday that Trump wanted the materials handed over to Congress, though he conceded that the Justice Department "may want to put some strictures on it, like it has to be confidential or they don't give the name but they give the information."
Speaking to reporters on Capitol Hill, Rep. Adam Schiff, Calif., the ranking Democrat on the House Intelligence Committee, said: "Rudy Giuliani made it clear today that he wants these documents for the Trump legal defense team. That is not appropriate, and I have a concern about anyone from the White House being present for review of these sensitive documents, because the White House should have no role in access to these investigative materials."
Schiff also raised concerns that the Justice Department and the FBI were "capitulating" and pointed to past warnings that officials expressed about the safety of the source. "Why have those concerns gone away? Because if they haven't, they shouldn't be providing this information."
In the summer of 2016, Halper met with Trump campaign co-chairman Sam Clovis for coffee in northern Virginia, offering to provide foreign policy expertise to the Trump team. In September of that year, he reached out to George Papadopoulos, an unpaid foreign policy adviser for the campaign, inviting him to London to work on a research paper. He also had multiple contacts with foreign policy adviser Carter Page for talks about foreign policy.
Rosenstein said Sunday that "if anyone did infiltrate or surveil participants in a presidential campaign for inappropriate purposes, we need to know about it and take appropriate action."
The Washington Post's Rosalind S. Helderman and Karoun Demirjian contributed to this report.
Video Embed Code
Video: As the Russia investigation intensifies, President Trump has fluctuated his stance on the FBI's credibility and independence since the start of his presidency. (Joyce Koh/The Washington Post)
Embed: <iframe width='480' height='290' scrolling='no' src='https://www.washingtonpost.com/video/c/embed/ba261754-f0d4-11e7-95e3-eff284e71c8d' frameborder='0' webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe>
Video Embed Code
Video: As the Russia investigation intensifies, President Trump has fluctuated his stance on the FBI's credibility and independence.(Joyce Koh/The Washington Post)
Embed code: <iframe src="https://www.washingtonpost.com/video/c/embed/ba261754-f0d4-11e7-95e3-eff284e71c8d?ptvads=block&playthrough=false" width="480" height="290" frameborder="0" webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe>
SOMERVILLE, Mass. - Housed in a 19th-century meatpacking plant, Formlabs boasts all the accoutrements of American high-tech success: exposed brick walls and ductwork, a morale-boosting pool table, and plenty of young employees hammering away at laptops.
The maker of desktop 3-D printers, which can produce everything from dentures to Tesla car parts, is the kind of company that President Donald Trump once saidmust be protected from Chinese investors seeking American technology secrets.
But Formlabs' eagerness to accept funds from a Chinese investment firm backed by the country's government shows why any attempt to insulate the American technology sector from an economic adversary risks damaging the very industry itseeks to protect.
On Sunday, one day before he was due to recommend to the White House new limits on Chinese investments in high-tech U.S. industries, Treasury Secretary Steven Mnuchin announced instead that the trade war with China was "on hold."
Other administration officials continue to push for constraints on China's ability to buy into U.S. technology companies. "As this process continues, the U.S. may use all of its legal tools to protect our technology through tariffs, investment restrictions and export regulations," U.S. Trade Representative Robert Lighthizer said shortly after Mnuchin's comments. "Real structural change is necessary. Nothing less than the future of tens of millions of American jobs is at stake."
The House and Senate also are moving forward with legislation that would intensify scrutiny of investments from countries such as China.
As administration officials duel, the stakes are huge for American technology companies, which are increasingly reliant on Chinese manufacturers, customers and money to grow. Corporations such as Apple, Cisco and Qualcomm all make key products in China, while Chinese investment in the U.S. technology sector has grown rapidly during the past four years, amounting to nearly $13 billion in almost 100 deals, according to the Rhodium Group, a New York-based consultancy.
But overly broad limits on investment from China, after 40 years of ever tighter integration between the U.S. and Chinese economies, could harm companies such as Formlabs. For them, Chinese investment offers access to valuable networks of suppliers and customers in a fast-growing market - along with ready cash.
"This is really a global industry. Any truly tech industry is global," said Max Lobovsky, Formlabs' chief executive. "I don't think it would be possible if you drew a circle around the U.S. and said 'everything has to come from here.' "
Even as the president in late March was accusing the Chinese government of investing in American start-ups to gather "cutting-edge technologies and intellectual property,"a top Chinese state-backed venture capital firm was taking a multimillion-dollar stake in Lobovsky's company.
Shenzhen Capital Group, which invested in Formlabs' recent $30 million funding round, was one of China's first venture capital firms when it was launched in 1999 by the Shenzhen government. Today, the local government still owns more than 28 percent of the group.
Administration officials worry that suchstate-backed Chinese enterprises could outbid private-sector investors for stakes in U.S. companies, giving China access to advanced technologies it lacks. Lighthizer said earlier this month that it would be "madness to let state capitalism come in here and buy our technology."
Shenzhen Capital insists that it does not take orders from the Chinese government,which wants to develop its own 3-D printing industry, and that it invests solely to make money. "The main goal of our investment in Formlabs is capital appreciation and reasonable return" after the initial public offering, the group told The Washington Post.
For privately held Formlabs, the Chinese money is only part of the story.
The company, which Lobovsky said is "roughly profitable," is doing well in the United States and Europe but lags behind in Asia. The $30 million raised in April from Shenzhen Capital and four other investors will fund new product development and expansion into China and other Asian markets, the company said.
3-D printing has long been used to produce manufacturing prototypes and parts. In recent years, it has spread to surgical guides, hearing-aid shells and larger items such as bus-stop shelters and simple homes. The technology also has defense applications, including aerospace components such as jet engine nozzles. The U.S. Navy is considering 3-D printers to produce spare parts aboard vessels at sea.
Formlabs' flagship Form 2 model is assembled in Hungary with components from China, Taiwan, Japan and the United Kingdom and uses Ohio resin as the raw material for printed products.
The company buys precision machined parts, such as small motors, from China and produces printer accessories there. Chinese manufacturers are critical to Formlabs' hopes of adapting 3-D printing foruse in mass production, Lobovsky said, and Shenzhen Capital's extensive government and business connections could be critical to reaching those manufacturers.
"It's a networking, relationship-based business culture to a large degree," Lobovsky said. "People in China do care about government connections."
Lobovsky has made several trips to China, where he has seen highly automated factories that excel at handling delicate components and fulfilling custom orders. Chinese suppliers are especially skilled at producing injection-molded plastic parts, such as the tank that holds the printer's resin and resembles fancy Tupperware.
"It's not just that it will cost five times the price in the U.S.," he said. "You can't even get the same parts made."
Lobovsky, 30, the son of two engineers, grew up in New Jersey two miles from the legendary Bell Labs. He started Formlabs nearly six years ago with two graduate school classmates at the MIT Media Lab. They raised $500,000 in preorders in their first 24 hours on the Kickstarter crowdfunding platform.
Since then, they have turned to inexpensive components and powerful software to reduce the cost and size of their units. Where 3-D printers were once hulking $100,000 machines, Formlabs sells $3,350 desktop units.
That price - which Lobovsky says would be far higher without access to Chinese suppliers - has attracted big-name customers such as New Balance and Apple. It has also opened new markets in smaller businesses such as dental offices.
The company has about 400 employees and plans to increase the workforce by 60 percent this year.
For Formlabs, China is a source of potential competitors as well as customers. Lobovsky found a visit last fall to drone producer DJI in Shenzhen "inspiring and a little scary," he said, evidence that China is no longer content to cede the most advanced industries to the United States.
"There's going to be more of them, and they're going to come in industries like that . . . new industries," he said.
Trump has threatened to impose tariffs on $150 billion in Chinese imports to pressure Beijing to abandon its campaign to acquire U.S. technology. The Treasury Department was expected Monday to issue recommendations on restricting future Chinese investment but now may only issue a perfunctory account of its progress doing so. Meanwhile, lawmakers are considering proposals that would enable a Treasury Department-led interagency committee to veto minority investments and other deals involving foreign investors that have escaped review in the past.
The U.S. venture capital industry - which funnels money and expertise into start-ups in hopes of a big payday when they go public - has objected, fearing that the legislation would require even "passive," or purely financial, investors to seek government approval.
"It will hurt start-ups dramatically. It will slow down innovation in companies," said Weijie Yun, founder and managing partner of Tyche Partners, which led Formlabs' recent investment round.
U.S. officials say that the Chinese government is determined to dominate technologies that will be essential to future economic and military prowess, including artificial intelligence, robotics, quantum computing and 3-D printing. Under the Made in China 2025 program, the government is spending $300 billion in subsidies to supplant foreign technology suppliers with homegrown alternatives.
"A core part of the Chinese Made in China 2025 plan is acquiring intellectual property from U.S. technology companies, and increasingly they're trying to do that through venture capital," said Rob Atkinson, president of the Information Technology and Innovation Foundation.
Shenzhen Capital said the government program is "irrelevant" to its investment decisions. "In my discussions, the China 2025 was never mentioned, not even once," said Yun, a Shanghai-born U.S. citizen. ". . . From my engagement with them, they are purely financially driven."
Lobovsky said that concerns that Chinese investors are after technical secrets rather than profits are misplaced. Shenzhen Capital's involvement in Formlabs is "strictly a financial investment" and includes no rights to the company's proprietary secrets, he said.
The National Venture Capital Association says the Pentagon overstates the amount of Chinese investing in U.S. technology industries. Scott Kupor, a venture capitalist and NVCA chairman, estimates that Chinese investors account for less than 5 percent of total venture capital commitments.
"It's definitely different, but that doesn't mean it's necessarily sinister," Lobovsky said of his dealings with Shenzhen Capital. " . . . They don't hide at all that they're investing government money, and they talk about having mandates about how much to invest in the U.S. versus China and in different industries."
But Atkinson said today's passive minority investment could expose companies such as Formlabs to pressures to take a local partner and share technical secrets as they deepen their involvement in China.
Lobovsky said he recognizes the risks. But as the son of emigres from the Soviet Union, he said that he was conscious of the need to balance patriotism and pragmatism.
"They basically had to fight to leave a totalitarian, leftist regime for better opportunities," he said of his parents. "I'm extremely proud that they did that and that I got to grow up here. What we've done is certainly only possible here."