Mark Kelly Silent on Firm's Windfall From Chinese Tech Giant

Mark Kelly Silent on Firm's Windfall From Chinese Tech Giant
(Mike Christy/Arizona Daily Star via AP, File)
Mark Kelly Silent on Firm's Windfall From Chinese Tech Giant
(Mike Christy/Arizona Daily Star via AP, File)
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Mark Kelly, the former NASA astronaut who commanded the second-to-last space shuttle mission and spent 25 years in the Navy, readily acknowledges the myriad threats China poses to the U.S. Earlier this month, he told an Arizona TV station that U.S. intelligence has repeatedly shown China suppressed information about the Wuhan coronavirus outbreak before COVID-19 spread to become a global pandemic.

The interview was part of Kelly’s new mission: trying to oust GOP Sen. Martha McSally, herself an aerospace pioneer as the first female fighter pilot to fly in combat. The clash of the two American flight titans has become one of the most closely watched campaigns in the country.

McSally narrowly lost her 2018 Senate campaign to Democrat Kyrsten Sinema. Arizona’s Republican governor, Doug Ducey, appointed her to fill the seat of the late Sen. John McCain, another legendary fighter pilot who spent five years as a POW in North Vietnam, then went on to win two terms in the House, six in the Senate and his party’s nomination for president in 2008.

McSally in recent weeks has blamed China’s coronavirus cover-up for the death of thousands of Americans as both Republicans and Democrats have tried to distance themselves from the Xi government for its failure to contain the virus.

Last August, in another press interview, Kelly mentioned his national security experience with some of “the space stuff, and satellites” as making him particularly sensitive to the threats from China, along with Iran, North Korea and Russia, with the biggest danger coming from “stuff you can’t see,” an apparent reference to cyberwarfare and less obvious malign activities.

Kelly, however, has been far more reticent about the investment by a Chinese company in a commercial space exploration venture he co-founded.  The company, tech giant Tencent, is one of the world’s largest internet enterprises and owns the Chinese social media platform WeChat. The text platform has more than a billion users and is suspected of monitoring the activity of many of them inside and outside of China.

In the fall of 2014, the CEO of World View Enterprises, the company Kelly co-founded, announced during a visit to Beijing that Tencent had invested an undisclosed sum of money in the Tucson-based space travel venture. In April 2016, as part of a subsequent, $15 million investment round, World View announced that it had received more funds from Tencent, along with three other venture capital firms.

Tencent was already under intense U.S. scrutiny before the COVID-19 world crisis. In addition to the surveillance suspicions, Tencent also sparked a U.S. backlash for suspending its streaming of National Basketball Association games after the Houston Rockets’ general manager praised Hong Kong democracy protests last fall.

Now it’s radioactive. A recent University of Toronto study found that WeChat has been censoring keywords relating to the COVID-19 outbreak since at least Jan. 1. Several prominent lawmakers in recent weeks have deemed Tencent an arm of the Chinese Communist Party and a threat to U.S. national security. Republican Sens. Ted Cruz and Josh Hawley in late April introduced a bill aimed at preventing Chinese espionage by prohibiting U.S. federal employees from conducting official business over platforms run by Tencent, Huawei, ZTE and other Chinese companies and barring U.S. tax dollars from being used for any international contracts with those firms.

It’s not just a GOP concern. The United Nations in mid-April backed out of a deal with Tencent to provide videoconferencing and text services at the organization’s 75th anniversary after U.S. officials, lawmakers and human rights groups complained. Louis Charbonneau, the U.N. director for Human Rights Watch, called Tencent “an enabler of Chinese government oppression.”

U.S. intelligence agencies are also increasingly wary of foreign technology companies operating domestically. Over the last several years, the Justice Department has tried to crack down on Chinese hacking of technology companies through their U.S. offices, incursions that also hit several government agencies, including NASA.

Kelly served as a strategic adviser to World View until launching his Senate campaign last year. He maintains a personal financial stake in the company of between $100,000 and $250,000 worth of non-public stock and $15,001 and $50,000 worth of stock options, according to the financial disclosure records Kelly was required to file in his Senate bid. His eldest daughter also works there as the company’s business opportunity manager.

Additionally, Kelly’s campaign has accepted at least $5,000 from David Wallerstein, who serves as Tencent’s chief exploration officer, responsible for the company’s operations outside mainland China and overseeing business initiatives with multinational partners.

World View originally began operating in 2013 as a space tourism start-up with plans to charge $75,000 per passenger on flights to near outer-space in a capsule attached to a huge helium balloon. But the company has increasingly shifted to contracting with NASA and the Department of Defense to use the balloon, known as a Stratollite, to carry unmanned payloads for extended periods and provide imagery of the Earth with a resolution sharp to five centimeters, far better than satellites can offer.

That increasing dependence on government contracts doesn’t seem to have given Kelly pause about Tencent’s investment. If it has, he’s not speaking up about it. Despite the heightened scrutiny of Tencent in Washington, the Kelly campaign has sidestepped questions from RealClearPolitics on whether he believes the Chinese company’s investment is appropriate and whether the money should be returned.

“Mark is a U.S. Navy combat veteran who served in the Pacific and has been clear that China is an adversary and threat to American interests,” Kelly campaign spokesman Jacob Peters told RCP. “Mark’s experience as a pilot and astronaut enabled him to help found World View in Tucson, which has worked with the Department of Defense and NASA among others while creating jobs and generating millions in economic impact.”

Peters referred all questions about the amount of Tencent’s investment to World View. A company spokeswoman downplayed Tencent’s level of investment, saying it came from Tencent subsidiary Mount McKinley, “an early investor,” which now maintains “less than 5% in common stock.”

“They do not have a seat on the board, means of control, or any access to inside information about the company or its technology,” she said.

Since World View has shifted its focus to the unmanned Stratollite for Earth observation, which has defense applications, “World View has not taken foreign investment and has reported all foreign interest and its entire ownership structure to the Defense Counterintelligence Security Agency (DCSA) to obtain security and facility clearance.”

The DCSA “has concluded that foreign interests do not have any influence, control or authority over World View,” the spokeswoman added, referring all questions about the amount of the Tencent investment to Mount McKinley.

A Chinese address listed for Mount McKinley is the same as Tencent’s. Reached by RCP, a representative for Tencent declined to comment.

Since 2016, World View has managed to win at least $51.8 million in government contracts, including $45 million from NASA for its Flight Opportunities Program, which tests the commercial capabilities of proven flight systems to carry scientific payloads into near space, according to the www.USASpending.gov, a government contract database.

Last year, the company also broke time records by keeping the Stratollite balloon aloft for 32 days, and for 16 days before that. The scientific milestones earned it a small business finalist slot in the Arizona governor’s 2019 innovation awards, Peters points out.

Despite this transition to lucrative government work, the company also has had its share of setbacks. A balloon explosion in late 2017 caused hundreds of thousands of dollars in damages to its 120,000-square-foot launch facility, the construction of which was funded by a $15 million loan from Pima County.

Earlier that year, World View sent a Kentucky Fried Chicken sandwich to the edge of space, but the publicity stunt journey ended early because of a small leak in the balloon.

The company originally had a goal of hiring 400-plus employees by 2020 but last year had less than 100 and laid off 10 in an effort to reorganize.

Just last month it endured another round of layoffs and furloughs because of the coronavirus pandemic, delaying plans to bring a fleet of its stratospheric balloons into service. The county eventually stands to gain $4 million in interest payments from World View’s launch-facility loan but has given the firm forbearance for payments during the COVID19 crisis.

The more stable stream of government contracts also doesn’t provide as much local tax revenues as some might expect. While the company is located in Tucson, it’s headquartered in Delaware, which allows companies to lessen their state corporate income tax burden.

Kelly’s aversion to discussing Tencent’s investment in his company and campaign comes at a time when other lawmakers are making a priority of disclosing financial ties to the Chinese tech behemoth. Last week, Rep. Michael McCaul, the ranking Republican on the House Foreign Affairs Committee, disclosed his wife’s investment in Tencent, acknowledging a purchase of between $50,000 and $100,000 worth of shares in the company.

McCaul, a harsh China critic in Congress, has denounced Tencent as a threat to U.S. national security and part of “a dystopian” plot the Chinese Communist Party uses to monitor and “score its citizens’ behavior.” House GOP leaders tapped McCaul last week to chair the China Task Force, which was created to develop legislative solutions “to address the Chinese Communist Party’s malign global agenda.”

Late Monday, President Trump moved to cut investment ties between federal retirement funds and Chinese equities because of Beijing’s handling of the coronavirus outbreak. National Security Adviser Robert O’Brien wrote a letter to Labor Secretary Eugene Scalia stating that the White House wants the Thrift Savings Plan, a federal employee retirement fund, to divest from around $4.5 billion in Chinese stocks.

Even before the pandemic, foreign policy experts who keep a close eye on Chinese business dealings in the U.S. were chronicling a pattern of increased Chinese investment in the commercial space industry, sounding alarms about the national security issues at stake.

In late 2018, the Hudson Institute, a conservative think tank, warned in an opinion piece that “China is infiltrating the U.S. space industry with investments.” The article highlighted a case in which Boeing abruptly canceled a controversial satellite order with Global IP, a Los Angeles-based start-up, after a Wall Street Journal report exposed a $200 million investment by a Chinese company in the venture. Under U.S. export-control laws, Boeing is barred from selling satellites to China directly.

The op-ed also noted Tencent’s investment in World View, along with Moon Express, a commercial lunar exploration company that has worked closely with NASA on a program that partners with commercial entities on delivering payloads to the moon. Another Tencent investment project is the U.S.-based Planetary Resources, which has a stated goal of expanding “Earth’s natural resource base by developing and deploying the technologies for asteroid mining.”

For big investments, the Committee on Foreign Investment in the U.S., or CFIUS, steps in to decide whether the president should block foreign purchases of U.S. companies on national security grounds. But for smaller investments, like Tencent’s cash infusion into World View, there are fewer controls.

Dean Cheng, a senior research fellow and China expert at the Heritage Foundation, says Chinese venture capitalists operate differently than American investors usually do. Namely, they aren’t necessarily in the game to make money.

“The Chinese have this wonderful luxury: ‘If we think this is a technology that is useful to us, we will fund it, then we will suck it up, and it really doesn’t have to make money,’” he said.

Even though Tencent is not a state-owned enterprise, “Chinese companies do what they’re told -- they have to balance making some return with keeping the government happy,” he said.

Cheng cited a recent Science & Technology Policy Institute report from last fall evaluating China’s commercial space sector that showed Beijing in 2014 -- the same year of the Tencent’s first investment in World View -- began a push to encourage private international investment in commercial space enterprises.

The goal of Chinese venture capitalist investment in the U.S. commercial space sector is undoubtedly to gain exposure to the U.S. method of collecting or processing scientific data, if not to the technology itself, Cheng said. U.S. companies could put up information firewalls to prevent that type of information-sharing, but that’s ultimately at least part of the reason for investing, he said.

In addition to his position at Heritage, Cheng sits on the National Space Council Users Advisory Group, but says his views expressed for this article do not reflect those of the group or any U.S. government official. 

Susan Crabtree is RealClearPolitics' White House/national political correspondent.



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