Jos Horikx on Sun, 26 Aug 2001 12:32:16 +0200 (CEST)

[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]

Re: [Nettime-nl] Fw: [chineseinternetresearch] Ironies of power?

At 10:44 26-8-01 +0200, Lokman Tsui wrote o.a.:

>> WASHINGTON: Soon after becoming US Defence Secretary in   January,
>> Donald Rumsfeld sold a stake in a partnership that helped   finance an
>> operating system designed to protect Chinese computers  from spying and
>> sabotage.

[ stuk geknipt ]

>> It has a 20 per cent stake in Red Flag Software, which President Jiang
>> Zemin's son, Jiang Mianheng, helped set up two years ago.  Chengwei's
>> other founder, Bo Feng, is a son of National People's Congress standing
>> committee member Feng Zhijun.

>> 25 August 2001 / 03:13 AM

Het originele bericht is van 24-8 en staat op (link van een halve meter lang):

Er komt nog een stukje aan het eind bij, voor het gemak citeer ik 
nog eens het hele artikel en geef ik met wat sterretjes aan waar dat
extra stukje begint.

Het zal niet voor iedereen even interessant zijn maar het heeft te maken
met de verwevenheid van bedrijfsbelangen en belangen van staten of
machtsblokken, dus helemaal onbelangrijk is het nou ook weer niet.

--- begin quote ---

08/24 13:07
Rumsfeld Was in Group Financing Chinese Anti-Spying Software
By Judy Mathewson and Eugene Tang

Washington, Aug. 24 (Bloomberg) -- Soon after becoming U.S. 
defense secretary in January, Donald Rumsfeld sold a stake in a
that helped finance an operating system designed to
protect Chinese
computers from spying and sabotage.

Rumsfeld's investment in Chengwei Ventures Fund I, valued 
between $250,000 and $500,000, was one of his 29 non-publicly
holdings earmarked by U.S. ethics officials as requiring
disposal to avoid
conflicts of interest, filings showed.

Unlike other holdings with business ties to the Pentagon, Chengwei 
was an investment partnership with financial connections
to Chinese
leaders, including the son of President Jiang Zemin,
through mutual
investments in Shanghai-based Red Flag Software Co.
That company created
the operating system, Red Flag Linux, in part
to frustrate suspected U.S.
computer spying.

The defense secretary must ``have the appearance of impartiality,'' 
said Martin Nissenbaum, an Ernst & Young financial
consultant who advises
wealthy clients entering public service,
``and try to avoid investments
that would be adverse to the
interests of the Defense Department or the

China's State Council has asked government departments to use 
Chinese-language Red Flag Linux, which is based on the free Linux
system. Microsoft Corp. programs are used in many

`Back Doors'

``Some government organizations that controlled state secrets 
before had no choice but to use foreign software,'' Red Flag 
Chairman Sun Yufang said in an interview. ``We are mainly 
concerned that foreign software, including Microsoft's, has 
back doors'' that allow intruders covertly to enter computers.

Microsoft spokesman Jim Desler dismissed ``myths'' about 
Windows assisting U.S. intelligence agencies. ``Simply put, there
is no
back door, and there has never been any back door in
Microsoft products,''
he said.

China, like the U.S., has devoted increasing resources to so- 
called information warfare, the ability to defend against attacks 
on one's own computers while being able to assault data in the 
computers of adversaries.

In his seven months in office, Rumsfeld has made information 
warfare a Pentagon priority. ``Our dependence on computer-based
networks makes those networks attractive targets for
new forms of
cyber-attack,'' the defense secretary told the Senate
Armed Services
Committee on June 21.

`Great Firewall'

U.S. analysts have cited China's progress in the same field,
with some
Pentagon officials calling Beijing's defenses ``the
Great Firewall of China.''

``China is moving aggressively toward incorporating cyber- 
warfare into its military lexicon, organization, training and 
doctrine,'' the Congressional Research Service, a branch 
of the Library of Congress, said in a June report.

A secure operating system is an important element in an 
information-warfare strategy, said Jonathan Winer, a former 
U.S. deputy assistant secretary of state for international law 
enforcement. Red Flag Linux may give China ``the robust 
ability to protect itself from U.S. information dominance in 
a conflict,'' said Winer, who worked on cyber-warfare issues.

Rumsfeld, who declined to be interviewed, was a passive investor 
in San Francisco-based Chengwei, with limited knowledge
about how its money
was used, said Rumsfeld's financial adviser,
whom the Pentagon made
available to answer questions on condition
the adviser wouldn't be named.

Sale to Partner

After Rumsfeld was confirmed as defense secretary in January, 
he moved to sell his Chengwei interest to another partner, the 
adviser said. The adviser declined to give the date of the sale,
identify the buyer or to disclose the price.

The financial adviser said only that the partner who bought
the stock lives
in the U.S. and that the stake was sold before a 
Chinese fighter jet collided with a U.S. spy plane off the 
Chinese coast on April 1, straining relations for three weeks.

Rumsfeld, among the Cabinet's wealthiest officials, reported 
assets worth $50 million to $210 million in the broad value ranges
used by
government disclosure forms. Rumsfeld has encountered
difficulty selling
others of his 29 illiquid holdings, requesting
a second extension last
month to complete the sales.

The names of the 29 holdings presenting potential conflicts
were blacked
out on a divestiture agreement released by the Office
of Government Ethics.
While concealed on that document, the 
holdings, including Chengwei, were disclosed in a letter granting 
Rumsfeld deferment of possible capital gains. Bloomberg News 
obtained that letter through the Freedom of Information Act.

`Not an Enemy'

Rear Admiral Craig Quigley, a Pentagon spokesman, said he had
never heard
Rumsfeld express second thoughts about the Chengwei
investment. ``We do not
see a strategic threat to the United
States from China,'' Quigley said.
``China is not an enemy.''

Two years ago, President Jiang Zemin's son, Jiang Mianheng, 
helped start Red Flag Software. Dubbed China's ``King of 
Information Technology'' by Asiaweek magazine, Jiang Mianheng is
president of the Chinese Academy of Sciences, where a unit
became a partner
with NewMargin Venture Capital in the Red Flag

Chengwei was created last year to invest in Internet- 
and computer-related Chinese companies, said the 
fund's co-founder, Eric Li. Chengwei -- which means 
``to become'' -- bought about 20 percent of Red Flag, Li said.

Chengwei's other founder, Bo Feng, is a son of National 
People's Congress standing committee member Feng Zhijun.
Chengwei Investors

--- *** het extra stukje volgt hier *** ---

In the U.S., Chengwei's investors included Yale University, former 
Robertson Stephens Chairman Sandy Robertson, and former
Perot Systems Corp.
Chairman Morton Meyerson, as well as Rumsfeld,
according to Sutter Hill
Ventures Managing Director G. Leonard
Baker, who said he helped develop
Chengwei's business plan.

Rumsfeld's Chengwei investment shows how people with diverse 
holdings can unwittingly expose themselves to criticism if they go
public office, said financial consultant Nissenbaum.

``Whenever a public servant or someone who's running for office 
has invested in a venture-capital fund or a private-equity fund, they 
run the risk that the fund might invest in something that could be 
embarrassing,'' Nissenbaum said.

Asked about potential conflict issues from the Chengwei
holding, Charles
Lewis, executive director of the Center for
Public Integrity, a nonpartisan
group that monitors government
ethics, said the U.S. public at least has a
right to know what
effect Red Flag's technology has had on U.S.-Chinese

``Rumsfeld's financial involvement in Red Flag Software
frankly should have
raised a red flag with senators and the news
media during his
confirmation,'' Lewis said.

Chengwei has held stakes in other Chinese technology companies, 
such as AsiaInfo Holdings Inc., a network software and
services provider,
and, the first commercial Web company
that the Beijing government
allowed to run a news and information

    *** eind extra stukje **
--- end quote ---

Met vriendelijke groet,


* Verspreid via nettime-nl. Commercieel gebruik niet
* toegestaan zonder toestemming. <nettime-nl> is een
* open en ongemodereerde mailinglist over net-kritiek.
* Meer info, archief & anderstalige edities:
* Contact: Menno Grootveld (