Hoosier Responsible?

Experts say Bill Clinton could have stopped it as well.

Clinton Administration 'Approved the Sale'

In 1995, China National Non-Ferrous Metals, headquartered in Beijing, and San Huan New Material High-Tech Inc, funded by the Chinese government, joined with other interests to purchase the Anderson, Ind.-based Magnequench, which made Neo powder for use in magnets.

The two Chinese companies were headed by the husbands of the first and second daughters of then-Chinese leader Deng Xiaoping. One of those daughters was at that time "vice minister of China's State Science and Technology Commission, whose responsibilities included acquiring military technologies by whatever means necessary," according to David Cay Johnston in "Free Lunch: How the Wealthiest Corporations Enrich Themselves at Government Expense (And Stick You With the Bill)."

"Complaints about the sale of Magnequench were made to the U.S. government because of the military applications for the magnets," Johnston reports. "Still, the Clinton administration, an ardent proponent of globalization, approved the sale."

The Clinton administration requested that the technology and production remain in the U.S.

"If we believe this was truly a national defense issue, the company should not have been allowed to be sold in 1995, to the group it was sold to, which was backed by the Chinese government and Chinese entrepreneurs," says Virginia Shingleton, head of the economics department at Valparaiso University for the past 12 years.

A memo prepared for Bayh by the non-partisan Congressional Research Service earlier this year stated that the Clinton administration could have objected to the sale under CFIUS, but it did not, and that the consortium promised to keep those Anderson, Ind., jobs in the U.S. only until 2005.

An Oct. 6, 2005, press release from Bayh noted that he asked for the Government Accountability Office to study "concerns over foreign takeovers of American companies with national security implications … after an Indiana company called Magnequench closed thanks to a 1995 decision by CFIUS to approve a Chinese consortium's takeover. At the time, Magnequench made 85 percent of the magnets used to guide U.S. smart bombs."

Said Bayh, in the release: "The committee responsible for providing this protection does not have a good track record, as I saw myself when it allowed an Indiana company that made smart bomb magnets to be purchased by a foreign business. When it comes to protecting our national security interests, we should be doing more, not less."

But Bayh now glosses over the outrage he once expressed at the Clinton administration's approval of that 1995 sale, emphasizing instead the fact that there are currently no companies in the U.S. that manufacture Neo magnets.

Did Chinese Already Have the Know-How?

In 2000, also during Bill Clinton's presidency, Magnequench purchased from UGIMAG the factory in Valparaiso that manufactured the Neo magnets.

President Clinton's administration took no steps to stop the purchases in 2000, either.

Around that time, Shingleton says, "there was talk about the national security issue and the loss of jobs because they were leaving. Some of the higher-wage jobs left immediately [in 2000]. I knew personally some people who were managers and who lost their jobs."

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