Sunday, January 20, 2013

Notes from Tapes

Tape One

Starting to work with Poly.

I'd gotten away from the military in **** and went to work for Poly. I'd been in the military since 1978 and I'd spent **** year in a military academy in ******. I left because if I worked for Poly I'd get paid better. It was the place, the company, everyone wanted to get into. Before I quit the military services, I'd worked closely with individuals within Poly, on aircraft parts manufacture and importations. Like the ship-borne helicopter purchases, and the avionics and underwater software. Like sonar and acoustic hydronics.
I was in the technology department of the military, for the army, which controls the equipment of the airforce and the navy also. After I was in Beijing in 1985, and I didn't work for the military, but before that I worked in the military and was sent to Tibet.
The company is Poly Technologies, Inc., which was directly financed and controlled by the Army general staff. The individuals who worked for the company, through working with the company, I got to know them so well and I got to know everything about them. And how they were paid and what sorts of business scope that they were covering, and so of course I was interested. And so later on...their backgrounds, some of them had been transferred from the Army, some of them had been army officers and still were, but they dressed now in civilian clothes, and they worked now for the Company. Poly was such a famous institution, directly involved in the arms trade, both important export, of course, almost everyone involved in the world arms trade knows that company. It is the only company in China, that handles the military forces arms importation and exportation. They have their headquarters in Beijing in the CITIC Building. The tall building near the Jianguo Hotel. It used to be on the sixth floor of the building, but what is interesting is that after what happened in Tiananmen Square, because of the use of helicopters that our company purchased from France, and I don't recall the English name, because it was obviously a French name, the function that this helicopter performed at that time, they hovered over Tiananmen Square, and scattering pamphlets and that sort of thing, and that angered people, especially the students in the square, and it angered also the employees of companies that worked in the CITIC building, and they eventually stormed the building, the office, they questioned us, what kind of stupid company do you run here, who do you work for, you spend that kind of valuable hard currency which our country is short of and you bastards are spending the money on something like this. So later on, after that, to let our company be more secure, we moved to the seventeenth floor. No guards at the company door at that time.
The general manager of the company, use to be Wang Jung, the son of Wang Zhen, a very powerful person in the arms trade. Now the general manager is He Peng, a very powerful person in the arms trade. His wife is no longer involved in the business. He is not a general. And He Peng Fei, he was the director, now is the director of the general staff of armaments equipment department, that is a major general.
For these people, they had special privileges, but you had to be at the very top to have the special privileges. Now I was really small potatoes at the company, and began as a translator for the company, only, but later on I was promoted to a project manager. This special privileges were not granted to everyone, of course. These people that I mention by name, on the surface, of course, they didn't earn much more than we did. But actually, in reality, they had all the privileges and access to almost anything that they wanted to have. Like a car, and a nice apartment. They had several apartments for themselves, they wanted perhaps to sleep with one woman tonight and another woman on another night, dividing up night by night and they had those apartments at their disposal. And they had these apartments then at their disposal. While the other girls friends and the wife would have no idea where they spent the night before, naturally. If you look at...well, they had a lot of apartments. And they owned, virtually owned, one car. That was not a very luxurious car, of course, that people would point out. Not like a Rolls Royce, but it would be down a level to a Mercedes Benz. Now he might own one for himself, but he would have access to several others and they would be owned by the company. Now these were really powerful people. That is why arms trafficking in China is really so hard to control. We had special ;business rooms, negotiations ;rooms and business rooms for associations at the various good hotels in Beijing. And the advance reservations were guaranteed at the Beijing Hotel, the Jianguo, the Great Wall, the Sheraton. Poly used to have a permanent suite in the Beijing Hotel, but then it moved to the CITIC building.
How did you get the job. You didn't have to be a party member, that was absolutely not required. Sometimes we had rooms for business negotiations, and we had the advanced reservations for the big hotels, and so on. All the hotels. Our company has...once we had a permanent office we no longer had permanent suites. Then we moved to the CITIC building.
Getting the job. Once you had the party membership, of course, so much the better. But this, in nature, was a business company. This is a company that never worries about money. That is the significant distinction between our company and all the other business companies in China. Government owned companies. We never worried about making a profit. That was unnecessary. That is one of the reasons why I chose to come to the US to study. I really came to hate the company. This is, for example, they spent money almost randomly, just to spend it. For example, if we wished to purchase a wine glass, our job was never to determine which manufacturer made it cheaper or of top quality, all our concern is that we have to spend this amount of money before the end of the year. And the decision that we made, which company we had to purchase it from, was based purely upon which kind of company is offering us personally more profit, or to put it another way, which company is offering us a personal bribe. Do you see that. So to speak.
For example, we are going to purchase a set of glasses and we want to spend $500 but this kind of money must be spent before the end of the year.So we are in a hurry to sign the contract. And on the other hand, we are not looking for quality, really. We are just trying to base our decisions on which company better serves us, personally. If we want to purchase something from west Germany, we send a delegation to that company, and in return this company offers us luxurious hotels, luxurious cars, nice food, women, everything you can imagine. Not drugs, however, Never drugs.
So, you are offered this, and despite the fact that we know that this company is not good at producing quality, but who cares about that, as long as have this glass, it is all right. Nobody is going to question how good it is. If my superior one day comes in and says how good is this glass, I just say, Well, this is good.
What about public officials executed for corruption in China. Why did they do that? Because that individual is a convenient scapegoat. For scapegoat catching you have to look toward one particular type of individual. This individual might just be symbolic. On the surface, he holds a high position, very persuasive to ordinary people. But on the other hand, he holds no real power. Just superficially is he somebody. Once that individual is involved in bribery, this individual is the kind who can very easily be caught and then made a scapegoat, cut his throat, and that will serve to show the public that the government is concerned with bribery. This will show everyone, publicly, that the government is clean and clear, but actually, he is just a scapegoat.
As far as drugs go, there are two lines of business in our company. One is official. That's business. The other is personal. Some of the arms exports, such as the DF5, the missile that we sold to Saudi Arabia, the long range surface to surface missile, we just handled them through underground channels. And underground channel, is this, we received some information from the Saudi Arabian government. They told us that they were shopping for surface to surface missiles at the cheapest price. And the signal was sent, or conveyed to the company through a middle man either in Hong Kong or in Pakistan. Some times from our friends in Iran. We have lots of them. Iranians and sometimes foreign businessmen stationed in Iran in Peshawar or in Rawalpindi in Pakistan. These individuals actually gave us a lot of help. We got this information, through a back channel connection, and through the personal connection that our guys maintained with the CMC top officials, the Central Military Commission, the number one organization in China that controls the military. Like Deng Xiaoping used to be the chairman of the commission. Their sons and grandsons part of them actually work for our company. We don't know what happened. We know only that one day someone comes to us, and the word seemed to come through family connections, they had heard at home, that Saudi Arabia had missiles to sell. Now the money that we could make through something like this would serve China. For full modernization drive. And then the fathers would say, All right, that sounds good. Go ahead. Actually, they didn't have to talk to their fathers directly. All they need to talk is to ask his father's secretary, because the father's secretary could be in a very powerful position. So the son could just pick up the telephone and give the equipment department of the army a call, and tell them, all right, now I need three missiles. And I need them at a certain place. And they say, All right, since you are the son of this or that individual, of course, you have permission. Now this happens without written permission, of course. A lot of fields of the arms trade in China, without written permission, without records. Everything was done on the telephone, and the liens could not be tapped. No they, used, when they talk with each other they use secure lines. Secure machines, a big black machine, and once they become clear, secure, two buzzes, and I used these a lot. But the people you are talking to have to have the same machine, otherwise they cannot hear you. First of all, they send a clear, and you say, first I would like to talk to you, so please press. And so the guys press secure at the same time, and if you do not have a secure machine, then all you can hear is something scrambled. Maybe the CIA could tap these lines, but presumably this was clean.
Security clearance for employees? I came from a good family. And that is what they look for. My father joined the army in 1938, and my mother in 1945. And later on my father was promoted to the major general.
There were so many deals that I was involved in. I worked really hard, at first. At first, I began as a translator, doing simultaneous translation. English is the language that I specialize in. The Iranians of course, didn't speak English. So long as business and technology is involved, then English is the language that is used. Even the individuals who are from Italy and from Germany all of them use English. That is, in fact, that international language of the arms trade.
Obviously, before I worked for the company, I was interviewed. By a section chief. They spoke with me in English at first. I know that my English is not perfect at that time. They thought that it was excellent and so they brought me into the company.
What was surprising to you on the inside of the company. When I was trying to get a job with the company, I did know something about it but not in much detail. But during the first couple of days, when I worked for the company, everything seemed to me so normal. It seemed just like other business companies. It was as though we were sometimes signing contacts, making documents, everything was typewriters and papers and computers and contracts. But then day after day as things started to become more familiar to me, I started to discover that it was not like other companies. There was something very unusual in this company. Because all of a sudden some sort of document would show up and it would be signed by the very top individuals in the country. And it was just sitting setting there on the table and would be passed around for everybody to see. These were contracts, in the final stages. But there would be letters of intention, memorandum of understanding. There would be a letter from our own government.
Somehow this would be so stunning. And I went, Oh, gee. And I didn't show my surprise of course. Because if you show your surprise, you would never work for the company. If you get really excited, you shout or you become demonstrative and you stand up, people would say you are stupid. And you would not last long. To stay there, working, you really have to be cynical.
Files. The files were destroyed on a regular basis. They were supposed to be kept for a certain short period of time. But after that, you just threw them away. There was no permanent record of what was going on. The memorandum, the original would be kept. Somewhere in China there is an archive, with these individuals names on things, on documents. With all the deals you've made with foreign firms, there are records of these. A lot of people have had their hands in these things.
The business of the company, very simply, is the import and export of weapons for the army.
The first deal that I was associated with, was the discussion of the Lynx Helicopter, anti-submarine helicopters, ASW, Anti Submarine Warfare. That was the first negotiation I was directly involved in. That was in 1986. This was a legitimate business deal. In the end we didn't purchase the helicopter, although it was a much better system than the one that we were to purchase later on. This was really a stupid deal. Let me describe it to you.
We were shopping around at the time, for this specific sort of ship born ASW helicopter. And at that time, we had no ship born capabilities at all. So we actually, this was at the end of 1985. So the British came to Beijing, two groups, the British came and we arranged for them to stay in a hotel, and then the French approached us and we made arrangements for them to stay in another hotel, but the negotiations were carried on at the same time with the two groups. The French were in the Great Wall Hotel. Normally, they paid for their own accommodations. They were in Beijing to introduce their own items.
They were in Beijing purely for business purposes. I dealt with the French at that time. They were private corporations. The British Naval Attache in Beijing was involved at that time, too. His name was commander Farr. There were about a dozen people in each delegation, and this to us was a big delegation. Anything more than ten to us was a big delegation. The group included one for sonar, one for underwater torpedo and so on, one for avionics for helicopters. They would each then make a presentation, they would run through a technical seminar for about one week. Seven business days was taken up by each group to present what they wanted to sell us. Each morning we traveled to the hotel and stayed usually until the evening, and there were banquets involved also. On our side were individuals from the army, the navy and the air force. These were very official and very technical. These were big occasions. There was a lot of talk about us being old friends, and the friendship between the two countries and so on. Nobody ever mentioned price, of course. That comes only at the end of the seminar. But at first you have to tell the Chinese side how advanced your system is. Now the British at this time knew that the French were conducting the same negotiations with us at the same time. They did not like it, but they knew it. And they confided to us privately that they knew this. Sometimes they would run into each other drinking late at night in one of the hotels.
Personally, that was the first time I was involved in a project. And I was familiar with the technological terminology and I understood the system, too. The British company was for assembly, the Lynx helicopter was built by British Aerospace. But the avionics aspects, which is what we were really looking for, we were not looking for the helicopter frame, but we were looking for an airborne torpedo system, the night imaging system, we were looking for sonar buoys, and for sonar, and this sort of thing, and the MAD system, Magnetic Abnormality Detection. Anything that is not normal. These were not associated with satellites in any way. They were purely ship born ASW helicopters.
This was just business. China is still socialist, you must remember, so officially no women were provided to the individuals as part of the negotiations. If there were women in the hotels, this is not run by the government or the company, of course. Sometimes it is impossible to control.
They gave us a quotation at the end of the seminar. This was a deal worth over more than $100 million for one. That was a non recurring price. But if we purchased two then the price went down. This was a lot of money to us. Actually, all we ever wanted to do was to just buy one and then duplicate it, reverse manufacture. We sometimes try just to import the technology. The foreign businessmen of course are not that stupid. And so the technology always cost more than the hardware. Sometimes, they wanted us to buy more than one and this would be a requirement. I do know that at diplomatic occasions everything would be tape recorded, openly. Then, after the two offers were made. The top experts and technicians from China were utterly convinced that the Lynx system was the best one for us, and it was the one that we were looking for. So we were all mentally prepared, actually, we hinted to the British, all right, this time you guys have a deal. But, it turned out not that way at all. Because of bribery.
Ag that time, remember the French were attempting to sell us their type of ASW helicopters. But they were, they were called Dolphins, naval version helicopters. These were also called ASW.
The French were more clever than the British in this. The British were businessmen and the French were businessmen in this. But the British were also business gentlemen and the French were not, of course.
The British were just not clever enough. They spoke whatever was appropriate for the occasion. We liked working with them very much, really. But they just didn't know how to make a deal with China. They were, unfortunately, just too honest. Very honest. This is my own personal observation.
The french were more clever. They knew, of course, that their system was not as advanced as the British. But they knew how the Chinese business system works. And they approached our fleet admirals. They approached our three star generals in the army, during the negotiations and after that, they brought from France many very valuable gifts, (I want to be sure that my security is guaranteed when I tell you this story. Don't play this tape for broadcasting or anything.)
At that time the admiral in charge of the Chinese Navy, in charge of this operation, his name was, now he is Lt. Admiral, but before that, he was chief of the Naval Fleet Air Arm, Li Jing. These helicopters, later on, would be used by the Navy, so the Navy had a final say in the negotiations and the purchasing. So they brought precious gifts for us. They would give us a small helicopter, made of copper, but it is not a piece of copper on the table, but the way they made it, it was high tech technology, it was so beautiful. And the other gifts, I don't know, I didn't open them. This was just a model. The admiral himself also received a letter from the French. Only the admiral. All he saw was a letter that said we are looking forward to a successful deal that we have with the Chinese Navy and we hope that this deal will work out between us. Nothing more than that, of course. And attached to that letter, the second page The second page, was a bank draft, a bank certificate. For a lot of money. It was for $300,000 US, but that was not much, really. But that was not the biggest that I'd ever heard of. And the draft was on a bank in Zurich, in a numbered bank account there. This was a certificate stating that the money had been deposited. And it meant that only he could go to the bank and get the money. Only you and nobody else. And nobody is going to question you concerning this. This is safe for a deposit for its security. And the third page If the letter was a letter of admission for his son from a French language school. The letter was a scholarship. The letter said that based on our academic evaluations of your son, we are happy to inform you that our school has admitted your son for the fall semester. And of course, he is an undergraduate(if he was a graduate, nobody would be surprised) and this meant he had a full scholarship for the next for years. Now the interesting thing was that they said that based upon the son's performance in the French language, he had been granted the scholarship. But the interesting thing here is that I knew his son, and his son did not speak a single word of French. He had served in the army at the time, and I knew this guy very well. But they granted this Mr. Li a full scholarship covering all of his living expenses. The British of course offered nothing more than dinner. So the British were stupid. The French knew how the system worked. For the French, Aerospeciale, they had actually hired a couple from China, as middle men for them. This couple was from Beijing, from the general staff's communication corps. They had served previously as colonels in the communication corps and later on they retired. But because of their guanxi, because of their personal connections and their influence, their knowledge of the military vips, they were now hired by the French Aerospeciale, and they of course successfully got their sons and daughter into universities in Paris,m and they had a very nice life in Paris. I knew this couple personally. Their job, they spent most of the year stationed in Beijing. They lived in a big hotel, part of the year. They had a permanent office, in the Beijing hotel. And they stayed there permanently. their job consisted of nothing more than try to bet more personal information about the generals, the admirals and the high ranking officials in the military. These could, in a sense, grease the wheels of the deals. They would then supply to the French, sometimes to Thomson SCN(Special Commercial Organization.)They would just find out about the personal backgrounds of the individuals who were influential, who was promoted, who wanted to be promoted, who was the boss in a particular deal. They maintained a list of the people who were constantly on the top, and they were to know the personal habits of individuals. When we were sent off to France, that is another story. Because of their function the French company knew that the Admiral had a son, and on one occasion, he even went so far as to express interests in getting foreign schooling for his son. And the French were so smart as to record this in their memory and to underline that in their conversations. And so God knows how much money the company was going to spend on this kid, actually, to send this kid to school and how much they paid this school. Actually I could recall the name of the school. Now what is so funny is that this letter was translated. Everything was translated.
The decision was made promptly, one month later. In a country like China, one month is prompt. We were involved in the negotiations, and our advice was completely forgotten and the French got the deal.
The British of course questioned us later about this, about not getting the deal. Of course they were concerned. And they cautioned us and said that the French. didn't even use their dolphin helicopters on board their own ships. The French Navy never used these. And China ended up as one of the very few countries in the world that actually used Dolphin helicopters for ship born helicopter defenses. It is first of all a pretty big helicopter. And for ship borne purposes,, there are space limitations, and you have got to have a hangar, and you have got to have a landing pad, on the ship, on the aft of the ship. And once the helicopter is big enough you have not much space left for anything else. Because a ship is only a ship, especially when it is a war ship. And limits are very severe. But the French were smart at the time, they made all quotations in Swiss francs, of the price. And of course not in US dollars and the British quote was in pounds sterling. And later on they said, don't worry, these are only Swiss Francs, and it ends up that their quotation is less than the British, because they give a special conversion rate and they give us a good deal.
The vice admiral was concerned after that as to what had happened. He sent a letter to the Admiral and he approached the generals on the general staff, and the training and the arms purchases, and it is under.
Definitely in China there are laws. But laws are made to be broken, especially in China. Not everyone, law is not applicable to everyone in China, of course. Personal will is still the biggest laws, the supreme law. Once you are within a certain circle, then your will is the law. Then people will make law for your will, once you are within a certain circle. Don't forget also that China is controlled by the military. Hu Yaobang and Zhao Ziyang, for example, although they have a title on the surface, and although they are the chairman of the central military commission, and because they have no military background, they were not respected by the military, and that is why Fang Guogang, who actually succeeded Mao, he was supposed to be the chairman of the central military commission and one day he made a visit to the naval in Liushun, closed to the soviet Union, and the Russians had fought with the Japanese over this port in the first world war, and he went there and he said that he wanted the fleet to form a review for him, and the local naval commander questioned him and said, "Do you have a permit from the Central Military Commission, and he said, "MY God, I am chairman of the CMC!" Do I need ot have permission from my own organization, and the commander said, yes you do, and I need that. And so that review never took place.
The admiral would be able to use this, his son and daughter in France can enjoy that. They can go to the Swiss bank and withdraw the cash and the son may buy a home for him there, a resort hideaway for him. The father himself, who is a true revolutionary, he personally really could not care less for that sum of money; Like Deng Xiaoping, of course, he personally did not want money. He cannot be bought. But this is for the children and the relatives. Now this is one of the reasons why the old hared liners are reluctant to get away from power, the China they realize , once the power is gone, your whole life is gone. In your system here in America, the president of the Us retires, and he may serve as the head of a private organization or a research institute. But in China this sort of thing doesn't happen because once you are on top, it is impossible for you to receded from the top and to settle down to as secondary position happily. It is absolutely impossible and psychologically it is impossible for the people to accept that fact. Once you are a military commander and now you are in a position of running a factory, people would consider your credibility. People would ask what happened to this individual. They would say that you could not make it, you could not handle responsibly or power and they would then lose respect for you and you would lose face in the country. As long as I have power, I can have anything. Or rather, if I have power I can have access to everything. And sometimes access to things is much more import ant than actually having things.
There was a big celebration after the signing of the contract. The parties waited around Beijing waiting for a decision to be made. Both parties waited, and immediately after the trip, China made a reciprocal trip, with a lot of dignitaries and military personnel from the general staff, including the equipment department, to Aerospeciale in France. I did not accompany them on that trip.
They were there to make a survey of the manufacturing facilities and firms of the helicopter. And the systems attached. But this was just a symbolic trip, since they knew already that the deal was made. The officers from the department were convinced by individuals from the top, or bribed in one way or another, and once the top was in the bag, so to speak, then everyone went to France to pretend like they were interested in making the deal. They stayed for three days, and then they said as a matter of course that based upon their survey of the manufacturing firms.They were even more convinced than ever that the French had an advanced ASW system and this was exactly the thing that they were looking for. This was only one of the deals that we made with a foreign firm. How was I treated when I went to France, might serve as a good example. We flew to France on Air France, but not first class. The head of the delegation flies first class. These were the section chiefs of the equipment department of the general staff, and they were colonels, only, and they went in plain clothes. Nobody would ever see them in uniforms. No one was to know that they were in the military, but the French knew. Now then they resided in luxurious hotels in Paris, and sometimes they were just shown around the city to the night spots, and they were escorted to the southern cities at that time. They were taken to Toulon to see the French Navy and they stayed there for a time. But they were looking then for small helicopters, these were the helicopters that were actually flown around Tiananmen Square. They had private helicopters fly them around then when they were there.

Tape 22.

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