Jennifer Rubin is a conservative blogger who used to be a corporate lawyer. You would therefore expect that she would understand a little bit about how cross-border deals work and how governments, including the U.S., support domestic firms in those deals.
In her latest column, which is an attempt to smear the Obama administration by associating Vice President Joe Biden with DreamWorks, a U.S. film studio that recently made a China investment deal (I wrote about it in February) and is being investigated for bribery under the Foreign Corrupt Practices Act (I wrote about that a little over a month ago).
The SEC investigation comes just weeks after Katzenberg announced this February that DreamWorks had struck a $2 billion deal to open a studio in Shanghai under the Oriental DreamWorks brand. The China deal was inked in a ceremony that featured Katzenberg alongside Chinese Vice President Xi Jinping, who stopped off in Los Angeles in February on his way back to China after a series of high-level meetings at the White House, including meetings with Obama. Katzenberg joined Vice President Joe Biden, Secretary of State Hillary Clinton and the Chinese vice president for a meeting that led to the DreamWorks deal.
Rubin uses much of her column to detail the high-level involvement of the U.S. government. The Obama folks have done themselves a disservice by distancing themselves from the whole thing. Both Rubin and the government come off looking foolish.
What’s her allegation here? Actually she never makes one. I guess it’s enough to say that here is an investment deal that is under scrutiny, the government played some sort of role as facilitator, and therefore . . . I don’t know. The government was involved in bribery or something?
The reason I find this suggestion odious is that it takes the very normal process of trade and investment facilitation, which the U.S. government, including the State and Commerce Departments, has been doing probably since those agencies were created. It’s very hard to believe that Rubin doesn’t understand that high-level meetings between government officials, which occurred recently when VP Xi traveled to the U.S., always involve splashy business deals, complete with formal signing ceremonies.
This is how it usually works. President X of the U.S. travels to China for a formal series of meetings with Premier Y or President Z. During this stay, the U.S. government and the Chinese government put their heads together and come up with several “deliverables” that include business deals and/or new policies that benefit both sides. This is a political win-win: each side will spin the visit as a “victory” for his country within the context of bilateral negotiations. You see this all the time. It usually involves the purchase of a number of Boeing airplanes.
During Xi’s U.S. visit, there was a series of big deals in the entertainment industry, with several of the U.S. film studios announcing investment deals with Chinese counterparts. At the same time, the two countries cut a deal, finally, on the WTO dispute over film import and distribution, which the U.S. won. The deal included a modified expansion of the film import quota and a reworking of revenue sharing for domestic screenings of U.S. films. And there was much rejoicing.
Now, everyone knows all this stuff is choreographed. Obviously the policy reforms were handled carefully by the governments themselves, but the related “private” deals (State-owned Enterprises for the most part on the PRC side) pretty much always have support/coordination help from the folks here at State and Commerce, and a few back in D.C. as well. After the groundwork has been taken care of, the big boys step up and sign off (e.g., Xi, Biden, the higher-ups at the film studios) either literally or behind the scenes.
For each investment deal, the involvement of the U.S. government varies. The same could be said for any big China investment deal from the U.S. The majority of my clients, for example, never touch base with the commercial section of the U.S. Embassy here at all. For other companies, the U.S. government is their first point of contact and a valuable source of information as the company performs market research, looks for a local partner, and moves toward sealing a deal.
So I don’t know whether Joe Biden was holding Katzenberg’s hand as the DreamWorks deal was being hammered out. I doubt it. On the other hand, I bet there were several guys at the Embassy here (or in D.C., including Biden staffers) who were involved from the beginning and kept tabs on progress as Xi’s visit itinerary was being finalized. That’s just standard operating procedure.
Is it therefore fair for Rubin to use this involvement to smear Biden (and Obama)? Of course not. First, a number of entertainment companies are being investigated. We still don’t know why or have specific knowledge of what, if anything, went down in terms of payoffs.
Second, does Rubin really want to suggest that since the government helped to facilitate a cross-border deal where bribery is alleged, the government may actually have been involved in the payoff itself? I know she doesn’t say this outright, but that’s the subtext here. A very serious charge, and we still don’t even know that DreamWorks did anything wrong.
Third, should we examine all FCPA investigations where the underlying deal, or company operations, have been facilitated by commercial officers at a U.S. Embassy or Consulate? Even if Biden had lunch with Xi and Katzenberg (ooh, suspicious), the actual commercial support for the deal came from other U.S. government offices. Is that work now suspect?
Rubin has absolutely no evidence of any illegal activity here by the U.S. government, and even DreamWorks is innocent until proven guilty. If I was a nice guy, I’d say that her slimy insinuations, which distort how the U.S. government helps companies that invest abroad, are based on ignorance. But given her background and obvious intelligence, I can’t call her ignorant. The whole thing is deliberate and ideological, and I feel sorry for all those good foreign service staffers who provide valuable support for U.S. companies. I’m surprised that a conservative Republican like Rubin would even go there.