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Special Update #18

IN THIS ISSUE: CHINA

1. How the U.S.-built Panama Canal is now controlled by China - a travesty in U.S. political history with ominous implications.

2. Even if you do know the Chinese control the Panama Canal, I'll bet you don't know how they pulled off this stunning grab with the blessing of the U.S. government (can you say, Clinton?).

3. Now the Chinese want to buy bankrupt Global Crossing and its worldwide, high-tech communications network systems.

4. Question: Will the Bush administration allow this to happen? For now, it appears so.

INTRODUCTION

Do you know that a Hong Kong company with close ties to Beijing and the People's Liberation Army controls the US-built Panama Canal, through which passes apprx. 15% of all US exports and imports? Well, it does and has since the end of 1997. The company is Hutchison-Whampoa, Ltd. - more on it later. Do you know how and why the US agreed to give up its permanent lease on the Canal? We have to go back to Jimmy Carter and follow the money through to, you guessed it, the Clinton administration.

Since Hutchison-Whampoa ("H-W") took over the two ocean ports at each end of the Canal in 1997, America has been under the constant risk that the Chinese could try to prohibit the passage of US ships, including warships, or even unilaterally shut down the Canal. The process of giving away the Panama Canal, complete with control of the ports by the Chinese, spans over 20 years and FOUR presidential administrations. Yet most Americans have no clue that the Chinese control the Canal.

It gets even worse. Now, H-W wants to buy the assets of bankrupt Global Crossing. Global Crossing was one of the leading high tech companies which specialized in transoceanic fiber optic communications cable. As a huge contributor to the Clinton administration, Global Crossing won a dubious $400 million government contract to build a state-of-the-art secure communications systems for the US military.

Not long after George Bush took office, his administration cancelled the order. Global Crossing went belly-up shortly thereafter. Now H-W is the high bidder to take over Global Crossing's assets. This is both preposterous and dangerous! The question is, will the Bush administration allow this sale? In this Special Update, I'll tell why the answer may be YES.

But first a little history on how China got control of the Panama Canal. This is very interesting.

HISTORY SNAPSHOT OF THE PANAMA CANAL

The idea to build the Panama Canal came from Ferdinand de Lesseps, a Frenchman who was very involved with Egypt's Suez Canal. Lesseps' company began work in the Isthmus of Panama in 1882. Lesseps insisted that the canal be entirely at sea level, as was the Suez Canal, instead of a series of locks and dams at different elevations. In 1889, after years of problems and failures, Lesseps's company was liquidated and work halted on the canal.

Also in 1889, the US Congress chartered the Maritime Canal Co, headed by the millionaire J.P. Morgan, to build a canal in either Nicaragua or Panama. After discussions, the Nicaragua route was chosen, and construction began. However, a stock panic in the US in 1893 caused Maritime to lose all funding, and excavation stopped in Nicaragua. While the Nicaragua project failed, the idea of a canal in the region never died, especially after Teddy Roosevelt became president.

In 1902, the US Congress appropriated $40 million to purchase the assets of the successor company to Lesseps' failed concern and the power to negotiate a treaty with Colombia. Panama was a part of Colombia at the time. No satisfactory treaty could be reached with Colombia. Subsequently, Panama declared independence from Colombia; the US supported its liberation militarily; and the US recognized Panama's sovereignty. A new Panama Canal treaty was signed in 1903. Panama was to receive $10 million initially, plus an annual annuity thereafter. US work on the canal began in 1904. The canal was completed in August of 1914, under budget by twenty-three million dollars. The first ship to cross the isthmus was the concrete ship Cristobal, but the first official and publicized ship to make the voyage was the Ancon.

The Panama Canal is still one of the engineering marvels of the world, often called the "Eighth World Wonder." I won't go into the construction details and monumental obstacles faced due to space limitations, but you can easily find one of many histories on the Internet. It is a fascinating story! Just search for "Panama Canal history." Also, there is a link below.

HOW WE GAVE THE CANAL AWAY

The 1903 canal treaty gave the US exclusive rights to operate and control the Panama Canal and surrounding areas in PERPETUITY. The US spent around $400 MILLION to build it, making it the largest US construction project in history at that time. Since the Canal's completion, the US has spent another apprx. $32 billion in the Canal Zone, with some of that going toward the Canal itself, and some for military bases and installations.

However, in the mid-1970's Jimmy Carter and his liberal cronies decided the US should GIVE the Canal and its operations to Panama. The Panama Canal Treaty (Torrijos-Carter Treaty) was signed on September 7, 1977. The treaty required a 2/3 vote of the US Senate to be approved. After an intense misinformation mission by the Carter administration, the treaty was approved by the Senate on March 16, 1978 in a 68-32 vote.

The Panama Canal Treaty provided that the Canal would be operated jointly by the US and Panama during a transition period that would end on December 31, 1999. Most conservatives (including yours truly) were outraged by the Treaty. Unfortunately, many figured that with 20+ years in the transition period, something would be done to reverse the giveaway. It wasn't!

On September 23, 1996 Bill Clinton signed Public Law 104-211, the National Defense Authorization Act for Fiscal Year 1997. That law contained measures requested by the Panama Canal Commission to prepare the agency for the full transfer of the Panama Canal to the Republic of Panama in 1999. Bill Clinton, by the way, was ALL FOR giving the Canal to Panama. It was officially handed over at noon on December 31, 1999. We also handed over land, military bases and installations valued at over $10 BILLION.

PANAMA THROWS A CURVE

By the mid 1990s, Panamanians were operating the Canal almost exclusively. The Americans were mainly observers. The US just assumed the Panamanians would continue to operate the Canal once it was officially turned over in 1999. In 1996, however, the government of Panama announced that it would turn over operation of the oceanic port facilities at Balboa (Pacific) and Cristobal (Atlantic) to the highest bidder.

This move may have surprised the Clinton administration, but then again, maybe it didn't. We'll get more into that question later. In any event, Panama had a long, long history of corruption in its government, so this move to hand over the ports to the highest bidder should NOT have come as a surprise.

Several US companies, including Bechtel Corporation, bid on the port operations contract; some Japanese firms submitted bids; and Hutchison Port Holdings, a subsidiary of Hutchison-Whampoa of Hong Kong submitted a bid. It was reported that Hutchison-Whampoa ("H-W") was FOURTH in the initial bidding. Two American companies were reportedly the highest bidders. It was further reported that Panama manipulated the process by requiring the bidders to resubmit their offers. This time around, H-W was the high bidder at $22.5 million a year, plus what one Panamanian official called "bucket loads of money under the table."

By the way, the contract is for 25 YEARS, with an option for 25 MORE years after that, and many more goodies as you will read below.

I have searched and searched for the details on how the port operations contract was awarded to H-W. I have found nothing more than the skimpy details above. This was a mighty big deal for there to be so little information available. I'll come back to this later.

Shortly after the port operations contract was awarded to Hutchison-Whampoa, the government of Panama passed a new "Law No. 5" which granted H-W broad powers and rights in the Canal Zone. Law No. 5, Art. 2.1 also grants "first option" to H-W to take over the US Rodman Naval Station, the Pacific deep-draft port facility capable of handling any warship. This option violates the Panama Canal Neutrality Treaty, Article V, which stipulated that only Panama is allowed in defense sites left behind by the US.

Law No. 5, Art. 2.11 gave H-W "priority" for its own business operations, meaning it can move its own ships to the front of the line. That violates the Neutrality Treaty's Article VI, which guaranteed "expedited" and "head of line" passage for U.S. warships.

Art. 2.10 of Law No. 5 gave H-W the "right" to operate piloting services, tugs and work boats, which translates into control of all the Canal's pilots. This means that H-W's pilots are at the helm of all ships passing through the Canal. Art. 2.10 also grants the "right" to control the roads to strategic areas of the Canal, and Art. 2.12 grants priority to all piers, including private piers.

I could go on, but you get the picture. Simply put, H-W got the keys to the kingdom! This includes the option to occupy Rodman Naval Station with the power to exclude US warships while admitting Communist warships.

SO WHO IS HUTCHISON-WHAMPOA?

H-W is a huge conglomerate based in Hong Kong. Among its many activities, H-W operates port facilities around the world. Its chairman is Chinese multi-billionaire LI KA-SHING, reportedly the sixth richest man in the world. Ka-Shing and his cronies were big supporters of Bill Clinton and made large contributions to Clinton's campaigns, his legal defense fund and the DNC. The Clinton administration maintained that Ka-Shing was not affiliated with, or an agent of, the People's Republic of China or the People's Liberation Army. Yeah, right! Read the following from NewsMax.com.

LI KA-SHING: FRONT FOR CHINA MILITARY

"There is overwhelming evidence to support the assertions that Li Ka-Shing is part of the communist Chinese government. According to documents obtained using the Freedom of Information Act [docs that were withheld by the Clinton White House], 'Li's relationship with senior PRC officials is very strong.'
Li is not only in business with PRC President Jiang Zemin's son, jointly developing property inside Tiananmen Square for the communist government, but he also is directly in business with the Chinese military through its vast empire of front companies such as weapons maker Poly Technologies Inc.
Li Ka-Shing's direct business contacts with the Chinese army were documented in a 1997 Rand Corporation report on the Chinese military industry. According to the 1997 Rand report, 'Hutchison-Whampoa of Hong Kong, controlled by Hong Kong billionaire Li Ka-Shing, is also negotiating for PLA wireless system contracts, which would build upon his equity interest in Poly-owned Yangpu Land Development Company, which is building infrastructure on China's Hainan Island."
According to a recent biography entitled "Li Ka-Shing," the billionaire formed a partnership with two leading members of the Asian 'TRIAD' organized crime families, Robert Kwok and Henry Fok, to form the China International Trust Investment Company (CITIC). The Rand Corporation report noted that CITIC had acted as a front for Poly Technologies Inc., the arms manufacturer owned directly by the Chinese army.
'CITIC does enter into business partnerships with and provide logistical assistance to PLA and defense-industrial companies like Poly,' noted the 1997 Rand report. Poly Technologies, Ltd., was founded in 1984, ostensibly as a subsidiary of CITIC, although it was later exposed to be the primary COMMERCIAL ARM of the PLA General Staff Department's Equipment Sub-Department,' states the Rand report.
'Throughout the 1980s, Poly sold hundreds of millions of dollars of largely surplus arms around the world, exporting to customers in Thailand, Burma, Iran, Pakistan, and the United States. Poly's U.S. subsidiaries were abruptly closed in August 1996. Allegedly, Poly's representative, Robert Ma, conspired with China North Industries Corporation's (NORINCO) representative, Richard Chen, and a number of businessmen in California to illegally import 2000 AK-47s into the United States,' states the Rand report.
Li Ka-Shing is also part owner of a firm involved in the illegal transfer of missile technology to the Chinese army. The Commerce documents show that Li owns one-third of Asia Satellite Telecommunications Holdings, or ASIASAT. According to Aviation Week and Space Technology, AsiaSat is also partly owned by the Chinese army. AsiaSat satellites regularly carry 'military communications' traffic for PLA units and Chinese military-owned companies.
U.S. defense contractor Lockheed Martin pleaded guilty to 30 counts of illegal missile technology exports to AsiaSat. Lockheed Martin agreed to pay the U.S. government $13 million in fines for the illegal transfer of "kick-motor" [rocket] technology to AsiaSat in order to avoid export restrictions.
Li Ka-Shing's Links to PRC Intelligence:
The Hong Kong billionaire has even closer ties to the Chinese army. Li Ka-Shing is in business with China Resources, a firm operated directly by the Military Intelligence Department of the PLA headquarters. According to Senate testimony, China Resources is 'an agent of espionage - economic, military and political - for China.'
China Resources Enterprises has previously been accused of illegal donations to the Clinton-Gore 1996 re-election campaign. According to Senate testimony, China Resources Enterprises was directly linked to Chinese military espionage and Indonesian billionaire MOCTAR RIADY.
'Lippo Group, run by the Riady family, which employed [John] Huang, had over the past few years become a major business partner with China Resources, a trading company wholly owned by the Government of the Peoples Republic of China, and which has reportedly served as an intelligence-collection front for China,' noted Sen. Thompson during his summary of the China campaign finance scandal.
According to a frantic 1996 cable from the U.S. Embassy in Panama, China Resources put a $400 million investment into Li Ka-Shing's Hutchison-Whampoa as part of a 'front' company controlled by Beijing.
'[U.S.] Embassy Panama has received information to the effect that HIT (Hutchison International Terminals) is controlled by mainland Chinese perhaps through a Macao front which allegedly recently invested $400 million in HIT,' states the cable. 'Such control would have security implications and might affect the Panamanian government's views on awarding the port concessions.'
In fact, according to an Oct. 1999 'Intelligence Assessment' prepared by the U.S. military Southern Command, the Hong Kong billionaire is a potential threat to America.
'Hutchison's containerized shipping facilities in the Panama Canal, as well as the Bahamas, could provide a conduit for illegal shipments of technology or prohibited items from the West to the PRC, or facilitate the movement of arms and other prohibited items into the Americas,' concluded the U.S. military intelligence report.
U.S. Commerce Department documents also show that U.S. law enforcement agencies were very concerned about billionaire Li Ka-Shing and his connections to international smuggling. A 1995 cable from the American Embassy in Nassau noted that Li Ka-Shing had signed an agreement to build an $88 million container ship terminal in the Grand Bahamas. The U.S. Embassy in Nassau copied the cable to several law enforcement agencies including the U.S. Customs Service and the Drug Enforcement Agency.
According to recently declassified documents from the U.S. Commerce Department, Li Ka-Shing is a very special man in Beijing, Washington and Hong Kong. 'Li is reputed to have a close business relationship with key figures in Beijing,' stated an August 1999 cable from the American Embassy in Hong Kong. 'Li is a leading member of Hong Kong's ethnic Chinese business elite, a tycoon who is no democrat.'
The Monkey's Uncle:
Despite his hostile attitude toward democracy, Li Ka-Shing met frequently with the Clinton administration. Documents from the Commerce Department show that Clinton Commerce Secretary William Daley met with the Beijing tycoon at a 1997 luncheon hosted by the powerful investment firm Goldman Sachs. Daley later went on to lead Vice President Al Gore's failed 2000 presidential bid.
The Commerce documents note that an informal 'talk' between Daley, Li and several 'influential business people' was held on the Goldman Sachs boat, the 'Monkey's Uncle,' during a 1997 Hong Kong trade trip. The Commerce documents also show that Daly and Li met on board the Monkey's Uncle with some of the leading Beijing-owned businesses, including some directly associated with the Chinese army - China Resources, CITIC and China Everbright.
The documents note that alleged organized-crime 'TRIAD' gangsters were included on the 1997 voyage of the Monkey's Uncle. According to official U.S. Commerce materials, Secretary Daley sailed on a paradise cruise from Hong Kong with the 'who's who' of Triad mob families. Some other 'influential business people' were also included on the guest list for the lunch cruise. Among the leading figures are Raymond Kwok, Robert Kwok and Canning Fok. The Fok family leader, Henry Fok, is reported to be a member of the 14K TRIAD.
According to Ed Timperlake and Bill Triplett, co-authors of 'Red Dragon Rising,' 'Henry Fok first made his name by running United Nations-embargoed goods to China during the Korean War. His son was later convicted for trying to bring Chinese machine guns into the United States.'
Robert Kwok reportedly leads the Kwok family businesses and allegedly is involved in the heroin smuggling business inside Burma. In 1997, Commerce Secretary Daley met with Kwok and his son Peter. Peter Kwok is the business partner of Sen. Dianne Feinstein's husband, Robert Blum. Feinstein is a Democrat from California.
Peter has also worked for Li Ka-Shing and the Chinese army. In 1989, he helped CITIC and Li Ka-Shing raise $120 million to buy a Hughes-built communications satellite for AsiaSat, a company part-owned by the Chinese army unit COSTIND (the Commission on Science, Technology and Industry for National Defense).
Clearly, Li Ka-Shing is not only a tool of the People's Liberation Army, he also should be a member in standing when one considers the vast amount of technology, money and resources he has brought to the Chinese military. It is sad testimony that after the disastrous events of Sept. 11 we should so quickly forget the fact that the Chinese army continued to supply al-Qaeda with arms even after the terrorist strikes.
Rep. Dana Rohrabacher's efforts to investigate Beijing's billionaire takeover of Global Crossing deserve the highest priority, because our national security is at stake."
If all that weren't enough, we stumbled on another key point about Li Ka-Shing in preparing this report. Li also owns the single largest stake in Canadian oil and gas giant HUSKY ENERGY. According to Canada's National Post/Financial Post, Li Ka-Shing is thought to be seeking the sale of the company to, you guessed it, PETROCHINA!

HOW COULD THIS HAPPEN?

At this point, you are probably asking yourself, how could the US have let Li Ka-Shing's Hutchison-Whampoa take over the Panama Canal? Li is clearly a REALLY BAD GUY who is in cahoots with the Beijing government and the Chinese military. Yet the US, under the Clinton administration, sat idly by while a rigged bidding process gave H-W control of the vital Panama Canal.

The most likely reason this was allowed to occur was the fact that CLINTON WAS INDEBTED TO THE CHINESE due to huge campaign contributions!

The Clinton administration tried to avoid responding in public to the bogus award of the Panama Canal port contract to H-W. When they did respond publicly, their position was that PANAMA controlled the Canal, and that H-W was simply an outside contractor that would oversee only the two oceanic ports. In other words, no big deal.

However, on November 30, 1999, as the official Canal giveaway was approaching, Bill Clinton made the following statement to a reporter asking about China's involvement:

"I think the Chinese will in fact be bending over backwards to make sure they run it in a competent and fair manner. . . I would be very surprised if any adverse consequences flowed from the Chinese running the canal." (See below.)

There you go! A few days later, Clinton's press secretary told reporters that the President "MIS-SPOKE" about the Chinese controlling the Canal, and assured them that Panama was in control of the Canal. "Mis-spoke?" I don't think so!

As long as we are handing out blame for the loss of the Panama Canal, let me also take a shot at a Republican president who should have done more to prevent the giveaway of this strategic asset. The absolute best time to have cut a new Canal deal with Panama was just after we overthrew Panamanian dictator Manuel Noriega and captured him in early 1990. At that time, US troops were as popular in Panama City as they had been in Paris in 1944. Yet George Bush, Sr. let the moment pass and did nothing. You have to wonder why??

NOW THEY WANT GLOBAL CROSSING

The Global Crossing Bankruptcy:

A National Security Nightmare

You've no doubt heard something about Global Crossing, one of the largest bankruptcies in history. However, because of the Enron debacle, you may have missed the national security nightmare that is brewing with Global Crossing. Global Crossing ("GC") is a large, international fiber optics network operator which filed for bankruptcy on January 28.

GC was a big political contributor to both parties but heavily favored the Democrats. In fact, through big donations to the Dems (not to mention the sweet stock deal for DNC chairman Terri McAuliffe), GC endeared itself to the Clinton administration. That almost certainly led to the awarding of a $400 MILLION defense contract to construct a fiber-optic military/intelligence communications system. This contract was to provide a state-of-the-art "secure communications" system for our military.

As soon as the Defense Department (DoD) awarded the huge contract to GC, there were rumblings that the bidding process had "procedural issues." The other bidders protested that the process was rigged in favor of GC. Imagine that! It was also pointed out that former Secretary of Defense, WILLIAM COHEN (Clinton administration) is on GC's board of directors. Does this sound familiar, in light of the above story on the Panama Canal?

Exit Clinton, Enter Bush

The Bush administration launched an investigation into the awarding of the secure communications contract to GC. On August 16 last year, the DoD announced that the contract was being rescinded and would have to be re-bid. GC's stock immediately began to PLUNGE. It continued to plunge until the bankruptcy filing in late January.

At the same time as the bankruptcy filing, GC also announced a pending BUYOUT by, guess who, HUTCHISON-WHAMPOA (H-W) and SINGAPORE TECHNOLOGIES TELEMEDIA (STT). Each company would contribute $375 million for a majority stake, and creditors would receive the remaining 21% of the equity. The shareholders, of course, receive NOTHING.

This deal, while a national security nightmare, may not be preventable. GC is a Bermuda-based company, and H-W and STT are obviously not based in the US. Nevertheless, the US should do everything in its power to STOP this deal!

For one thing, GC controls 20% of all the fiber-optic cable leaving the United States. This is ultra-high speed, ultra-high capacity cable. Are we going to allow the Chinese to take control of our latest high tech fiber network?

For another and perhaps worse thing, the acquisition of GC by H-W would provide the Chinese military with this secure communication technology, giving them a HUGE BOOST in their command and control capabilities and overall security. This means they would have the ability to direct military operations on a theatre, if not global scale.

And then, what does the US military do for a secure communications system? They were planning to use GC's state-of-the-art system. That plan is DEAD if GC is owned by H-W! If GC's system is the best, as it reportedly is, and it is going to the Chinese, what does the US military get? SECOND BEST??

THIS DEAL SHOULD BE STOPPED

The buyout of GC must be approved by the U.S. Bankruptcy Court for the Southern District of New York and the Supreme Court of Bermuda. For national security reasons, the sale of Global Crossing to Hutchison-Whampoa should be blocked. Yet at least so far, the Bush administration doesn't seem to be concerned about it. It appears that George W is following in his father's footsteps, and the lingering policy of "ENGAGEMENT" with China will continue. As for me, I am sick of embracing a communist, oppressive dictatorship!

Since Ronald Reagan left office, US presidents have felt that the best way to deal with China is to engage and appease Beijing. If we can only "westernize" them enough, their people will rise up and demand an end to the current dictatorship and the oppression. I think this policy is WRONG! China should be considered our ENEMY and dealt with accordingly.

POSTSCRIPT: CLINTON

As most of you know, when you do a lot of Internet searches (such as research for this Update), you invariably pull up a lot of information that you weren't really looking for. But you often stop and read certain articles that pop up, even if they aren't germane to your story or project.

In doing the work for this Update, I was unintentionally reminded of just how much BAD STUFF Bill Clinton did while he was president. And especially when it comes to China! They got our nuclear secrets on Clinton's watch. They got long-range missile technology thanks to Clinton relaxing the export rules. They got the Panama Canal. They got "Most Favored Nation" status thanks to Clinton. And who knows what else?

Bush 41 made some mistakes with China as discussed above, and Bush 43 appears to be making some of his own as well. Yet those pale in comparison to the egregious national security breaches that occurred when Clinton was president! It may be years before we know the full extent of the damage done while Clinton was in office.

Hopefully, the history books will someday reveal the truth about William Jefferson Clinton.

That's all for now. Remember, you are free to forward these SPECIAL UPDATES to others, or they can subscribe on their own and get them automatically.

All the best,

Gary Halbert

SPECIAL ARTICLES

Military warned Clinton White House about H-W.

Republicans raise concerns but ultimately do nothing.

Clinton gaff: China does control the Canal.

Panama: China's gateway to Mexico?

Panama Canal history (one of many).

Global Crossing & Hutchison-Whampoa deal.

Global Crossing - brief look at what went wrong.

Latest development on GC & H-W negotiations.


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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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