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  •   White House Papers Trace Hughes Executive's Pressure for China Deals

    By John Mintz
    Washington Post Staff Writer
    Monday, July 27, 1998; Page A04

    The congressman was under pressure from one of American business's most persistent executives, and he sought then-national security adviser Anthony Lake's help satisfying the businessman. "Can you make Mike Armstrong happy?" then-Rep. Toby Roth (R-Wis.) asked Lake in 1996 as the pair drafted a law affecting satellite exports to China, according to newly released White House papers.

    Lake and others in the Clinton administration did indeed make C. Michael Armstrong happy. The brash chief executive of Hughes Electronics Corp. got almost everything he ever wanted from President Clinton and Congress in the several hundred million dollars' worth of satellite deals he swung with China during the 1990s, through a combination of full-court-press lobbying, chutzpah and well-timed references to his company's large work force in vote-rich California.

    This week a Senate Governmental Affairs subcommittee will hold a hearing on Armstrong's success in alternately charming and muscling the Clinton administration into relaxing export controls on satellites that Hughes and other U.S. companies wanted to launch on Chinese rockets.

    The hearing, to be chaired by Sen. Thad Cochran (R-Miss.), may include some bruising questions for Armstrong, who now is chairman of AT&T Corp. and whose recent agreement to buy cable giant Tele-Communications Inc. for $48 billion has stirred controversy on Wall Street. Hughes vice chairman Steven Dorfman also is scheduled to testify.

    For Armstrong, the hearing is an unwelcome intrusion from a job he left eight months ago. For Hughes, the nation's leading satellite builder, the hearing may help determine whether the company can continue selling its wares in China, which represents a market worth $3 billion to the firm.

    And for the GOP-run Congress, which already has held more than 20 hearings this spring and summer seeking to prove that the Clinton administration has weakened U.S. national security by allowing high-tech sales to China, the session offers a tempting corporate target to attack and a story to tell about a pliant administration.

    The problem is that Congress, too, joined Hughes in pushing some of its policy prescriptions. In addition, Armstrong is a Republican and Hughes is a GOP-leaning firm that has cultivated key lawmakers such as Roth, once the head of an export policy panel, and the California delegation. For those reasons, the Republican leadership has been wary of letting the hearings veer into Hughes-bashing, congressional sources said.

    The senators will explore whether Hughes received export concessions in exchange for supporting Clinton initiatives and whether the firm grew so cozy with Chinese space officials in 1995 that it helped them improve their commercial rockets -- and, conceivably, their ballistic missiles, congressional staff members said.

    "Hughes was effective with this administration using the most abrasive tactics," said one congressional aide. "They were constantly haranguing administration officials, threatening to go public. . . . There was never a pause for Hughes. After each victory, they'd push the envelope in interpreting the new rules, and then were on to their next complaint."

    Hughes strenuously denies improving Chinese missiles or receiving White House quid quo pros. "Far from pushing the envelope, we did things the administration agreed were reasonable in consultation with all the interested agencies and with the Hill," Hughes general counsel Marcy Tiffany said. The company says it is unfair to condemn it for lobbying hard in its own interest -- preventing European competitors from grabbing its work in China. Clinton aides said they allowed Hughes to launch in China as a way to encourage Beijing to rein in its weapons sales to other nations.

    Last week the White House released hundreds of pages of documents on U.S. space deals with China, and many of them focus on Armstrong's lobbying. Typical was a letter from Armstrong to Clinton in September 1993, when Hughes sought exemption from trade sanctions against China for Beijing's sale of missile parts to Pakistan. Armstrong listed all the issues on which he had supported Clinton and then added, "I have a problem at Hughes and would appreciate your help." The sanctions meant Hughes would lay off workers in California, he said.

    "Armstrong was a supporter of the president's economic package and will be supporting health care reform," then-White House official Alexis M. Herman told Lake in a memo. "I hope you will meet with him. It appears that [Armstrong has] legitimate concerns."

    Armstrong and other Hughes officials peppered top administration officials, including Vice President Gore, with letters, position papers and requests for meetings. The Commerce Department strongly supported its idea that export rules should be relaxed after the Cold War ended, while the State Department opposed it.

    Armstrong was so enmeshed in the administration's China export policy that he engaged in informal diplomatic talks with top Chinese officials, the documents show. While the trade sanctions were still in place in 1993 and 1994, for example, he promoted a deal to leaders in Washington and Beijing: If China would stop selling missiles overseas, Clinton would allow export of U.S. satellites to China.

    "The problem is who/when takes the first step," Armstrong said in a letter to top Clinton and Gore aides in November 1993, recounting a meeting with Chinese Vice Premier Qian Qichen. Armstrong said that after assuring Qian that U.S. officials were interested in such a deal, Qian replied that "it would be very helpful" if Armstrong acted as an intermediary.

    "Hughes has very good contacts with high-level Chinese officials," a White House aide told Robert E. Rubin, then head of the National Economic Council. "I hope you will use them to press China to make serious nonproliferation commitments."

    Numerous other documents highlight Hughes's attempts to broker talks and officials' enthusiastic replies. All along, Armstrong expressed a rosy vision of Chinese intentions; it was "obvious," he wrote top Clinton aides in 1993, that "the Chinese are committed not to proliferate missile technology." But since then Beijing has sold C-802 anti-ship missiles to Iran, alarming U.S. officials.

    In any case, in early 1994 Clinton gave Armstrong most of what he sought -- approval for some satellite launches in China despite the trade sanctions. Even so, Armstrong was furious he had been whipsawed between the feuding Commerce and State departments.

    "Armstrong felt angry and confused," Commerce official William Clements wrote to a White House aide in 1995.

    That's when Armstrong set out to get licensing authority for U.S.-China satellite deals shifted from State to the more pro-business Commerce. Armstrong complained frequently that then-Secretary of State Warren Christopher was anti-business. In September 1995, Armstrong said at a meeting with Clinton national security aide Samuel R. "Sandy" Berger that Hughes lost $400 million in Chinese space deals to a German firm in part because of Christopher's intransigence.

    "U.S. businesses view Warren Christopher as the best friend to foreign competitors of [the] U.S.," Armstrong said, according to meeting notes. Six months later, after Christopher withdrew his opposition, Clinton ordered the transfer of authority to Commerce.

    "While it has been a difficult journey," Armstrong wrote to Clinton, "from the more than 60,000 employees of Hughes Electronics in California and around the country, I want to thank you."

    © Copyright 1998 The Washington Post Company

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