WASHINGTON, DC – Today, U.S. Senator Rob Portman (R-OH), Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, stressed the need to hold China accountable for its rampant theft of U.S. taxpayer-funded research and intellectual property at a hearing to consider the nominations of William Valdez to be Under Secretary for Management at the U.S. Department of Homeland Security; Dimitri Kusnezov to be Under Secretary for Science & Technology at the U.S. Department of Homeland Security, and Kenneth Wainstein to be Under Secretary for Intelligence & Analysis at the U.S. Department of Homeland Security.
Portman discussed his bipartisan Safeguarding American Innovation Act, which passed the Senate last year on a bipartisan basis as a part of the U.S. Innovation and Competition Act, and the nominees acknowledged the importance of the legislation to hold China accountable. Portman and Senator Tom Carper (D-DE), as Chairman and Ranking Member of the Permanent Subcommittee on Investigations (PSI), led a year-long investigation into this issue culminating in a bipartisan report and hearing that detailed how American taxpayers have been unwittingly funding the rise of China’s military and economy over the last two decades while federal agencies have done little to stop it. Starting in the late 1990s through its “talent recruitment programs,” China began recruiting U.S.-based scientists and researchers to transfer U.S. taxpayer-funded IP for China’s military and economic gain. This legislation will ensure that the federal government is taking decisive action to safeguard American innovation and Portman has called for the legislation to be included in the House Democrat’s version of the legislation, which does not currently include the provision.
In addition, Portman pressed Valdez on how, if confirmed, he would work to address the worst unlawful migrant and narcotic crisis at the southern border in recorded history. Portman highlighted his recent visit to the southern border in Nogales, Arizona where he witnessed firsthand the ongoing crisis and spoke to Border Patrol agents about the need for more and better technology to adequately scan all incoming passenger and commercial vehicles for drugs and other contraband. Portman has visited the southern border twice in the past year, and each time Border Patrol agents have highlighted the challenges they face with increased and more sophisticated efforts to smuggle illegal migrants and deadly drugs into the United States.
A transcript of his questioning can be found below and a video can be found here.
Portman: “Thank you, Mr. Chairman. I appreciate it, and I appreciate the testimony from all three of you. You understand the seriousness of the challenges that you would face should you be confirmed. Mr. Wainstein, we know from a US Trade Representative’s report that a Chinese state-owned company called the China National Offshore Oil Corporation submitted formal request to Chinese intelligence services seeking information on several American oil and gas companies. In your questionnaire, you stated that as a lawyer in private practice, you did work for this company, the Chinese National Offshore Oil Corporation, apparently, in relationship to this issue. Can you tell us what was the nature of your work for this organization?”
The Honorable Kenneth Wainstein, Nominee to be Under Secretary for Intelligence & Analysis at DHS: “Thank you, Ranking Member Portman and I got a number of questions about this in my SSCI hearing as well, and I think it’s a very fair and appropriate area of inquiry. So just in short, early 2018, colleague of mine who does trade work called and asked for an associate in the white collar group – I’m a partner in that group – to write up a memo about whether any criminal laws might have been implicated by the conduct that you just talked about that was in that US Trade Representative report. I asked an associate to do it. He wrote up a memo, I reviewed it, and I sent it on to my colleague, who was doing the trade work and wanted to take the administrative implications and include them with the criminal implications in a memo. It was 2.8 hours of work. I didn’t talk to the client, never advocated on behalf of the client, didn’t make any calls, literally just processed the memo. Nonetheless, I take your point. The concern about the Chinese Communist Party, and sort of its approach to economic competition, economic geopolitical, military competition with the United States. They’re seeking supremacy of the United States in every way, and they’re using whatever means are available, many of those means being completely inappropriate. I understand that state-owned enterprises are often being used as vehicles for those needs and that people like myself need to take a hard look at those entities before doing any work for them. Just as I explained to Senator Rubio about this issue, I actually have long had harbored serious concerns about the Chinese Communist Party. And back when I was Assistant Attorney General of the National Security Division, I started the Export Control Initiative that was focused largely on China and was banging the drum about how China was eating our lunch in terms of stealing our technology. That’s an area that I’ve been quite vocal about, both in government and then outside of government. And I can commit to you that if I go to I&A, I’m going to keep an intense focus on that, because if anything, the approach by the Chinese Communist Party in competition with us has become more sharp edged, not less sharp edged over the years. And the danger is even greater than before. So I understand the concern about that matter that I worked on, and I will keep that concern close in mind as I conduct my duties at I&A.”
Portman: “Well, I appreciate that answer and I would say at the time that you oversaw the work by the associate and billed some time to it yourself, as you indicate, I assume you were aware of the fact that years previous, it sounds like six years previously, based on the USTR report, that this company had used Chinese intelligence services to investigate American companies. Is that correct?”
Mr. Wainstein: “That’s what the allegation in the report was, and I know that then a few years later, the US and Chinese governments reached an agreement saying that they explicitly wouldn’t do that, in 2015. My understanding is that that agreement has now been breached. But back in 2012, according to the report, and have no reason to doubt the allegations, that was, in fact, the case.”
Portman: “During your time at DOJ and the National Security Division, you indicate you did observe an uptick in Chinese nationals trying to steal American technology. Is that true?”
Mr. Wainstein: “Absolutely. And not only Chinese nationals, it was more just orchestrated activity orchestrated by the Chinese Communist Party, focusing on industry by industry, trying to hoover up as much technology and sensitive data as possible so that they could then sort of accelerate their development of technology over there. And it was quite brash, and that was about the year that it was becoming very evident that we needed to do something.”
Portman: “That’s a good segue to my next question for one of your colleagues on the panel. But let me just ask you quickly for a quick answer to this. What do you think the role of I&A is in all this in addressing this economic threat from China?”
Mr. Wainstein: “I know they’re doing it now. I got briefed on it. They actually have an operation focusing on exactly that. I expect to maintain that, if not accelerate it.”
Portman: “Okay, Dr. Kusnezov, along these same lines, there’s recent data indicating that the Science and Technology Directorate is going to provide around $15 million in grants to colleges and universities each year, should you be confirmed. Bipartisan work that we did here in this Committee, an investigation, a report – I was the Chair, Senator Carper was the Co-Chair – made it very clear that these Chinese talent programs are doing exactly what we just heard with regard to taking US government sponsored research back to China, using it for the rise of their own military and their own economic growth. We’ve proposed a Safeguarding American Innovation Act. It came out of this Committee. It’s an opportunity to get our federal house in order to be able to secure some of this grant funding again, some of which will come from DHS, $150 billion total, by the way. What are your thoughts on this? Do you agree that it’s important to secure DHS science and technology grants against Chinese espionage?”
Mr. Dimitri Kusnezov, Nominee to be Under Secretary for Science & Technology at DHS: “Thank you for that question. That’s an important and pressing question, Senator. The challenges we face in dealing with science is that it thrives by being global, being international, that’s how innovation is done. At the same time, we recognize that there are countries like China that are using some of our facilities, for example, to conduct work that fills knowledge gaps that help advance their goals. There are issues about data, about IP theft, and about the general technology side that we worry about. I have been at the Department of Energy working some of these issues. I have to say, the way we have approached it has been a fusion of activities that started with our intelligence and counterintelligence functions. It is our researchers. It is the fact that we have intelligence elements at our laboratories and we come together and we review the work. The Energy Department has the advantage of having all of this under one roof, and it is also a rich funder of science and technology so we can take a broad view. We have enough data to understand the nature of threats as we see them. I believe at DHS, if confirmed, this would be an important problem as well to look into. I would be very happy to work with my colleagues here, if confirmed as well, with I&A to help understand this. But I believe interagency is also important. There are pieces of research that are being funded by other parts of the government, and you couldn’t do it alone in a single Department without richer conversations across funding agencies of science and technology. So I would take a broader approach to this if confirmed. I do think it’s important, but it’ll take some teamwork.”
Portman: “Have you looked at the Safeguarding American Innovation Act?”
Mr. Kusnezov: “No, sir, I have not yet.”
Portman: “Okay. We’re going to have some follow up questions. I’d love for to you take a look at it and get your view on it. We’re trying to get it passed right now as part of this so called USICA legislation, competitiveness legislation that’s passed the Senate with Safeguarding American Innovation Act in it and trying to ensure it’s in the final product. Let me ask you a question. Have you ever worked directly with Chinese entities yourself? Have you ever had a grant from the Chinese government or any other compensation?”
Mr. Kusnezov: “No.”
Portman: “But you have been exposed to the issue, it sounds like, in your research over the years. So you understand the necessity for us to protect our research?”
Mr. Kusnezov: “Yes, absolutely.”
Portman: “My time is expiring. Just quickly, Mr. Valdez, as you know, the Undersecretary for Management is responsible for all these major acquisitions. We’re behind on a bunch of them. We’re behind schedule on the biometric entry exit program for land travelers. I was just down at the port of entry in Nogales, Arizona, seeing the strong need for that, they want it. The Cross Border Tunnel Threat Surveillance Program and the Integrated Surveillance Towers, the ISTs. And this is all happening in what I believe is the worst border crisis, I think the numbers bear that out, in our nation’s history. When you add the narcotics issues with the illegal migration issues. If you are confirmed what will you do to ensure that these critical acquisition programs are delivered sooner to enable Customs and Border Protection and the Border Patrol to do their work?”
Mr. William Valdez, Nominee to be Under Secretary for Management at DHS: “That’s an excellent question, Senator, and I have experience in this area managing major acquisitions and overseeing that they do not fall out of scope and cost. I think the key is rigorous oversight of these kinds of projects. And my understanding is that when you have projects that fall particularly out of scope, it’s usually caused by three things. Either the technical requirements have changed, there’s mission creep, or conditions in the field have changed. There are ways to manage that. And so if confirmed, I would do a root cause analysis of the existing projects, see what the causes are for them falling behind on scope and then work to remedy that.”
Portman: “Well, I think conditions on the ground have gotten worse, that’s for sure. So to the extent that that’s one of the considerations, I hope you would want to expedite those kinds of projects, should you be confirmed. I’ve got a lot more questions. Thank you, Mr. Chairman, for your indulgence this morning. I’ll submit them as questions for the record. I appreciate your prompt response and full response. And again, thank all three of you for your willingness to step up and serve.”