Sen. Thompson Seeks Mandate for Intelligence Community To Scrutinize Foreign Proliferators in U.S. Capital Markets

(Washington, D.C.): In the next few days, the U.S. Senate is expected to approve legislation
requiring the U.S. intelligence community to investigate the presence in the U.S. capital markets
of foreign entities engaged in the proliferation of weapons of mass destruction. This provision
was attached to the FY2003 Intelligence Authorization bill at the initiative of Sen. Fred
Thompson during the Senate Select Committee on Intelligence’s mark-up of that legislation last
month.

Sen. Thompson’s amendment is particularly timely insofar as it comes as the General
Accounting Office (GAO) is completing work on a classified report — also tasked by the senior
Senator from Tennessee — that looks into this issue. While it remains to be seen what
conclusions the GAO arrives at, this latest Thompson initiative suggests that momentum is
building for greater scrutiny with respect to the potential presence of proliferators in our capital
markets. This legislation would, moreover, mark the first time that a U.S. government agency
has been instructed by the Congress to analyze potentially egregious national security-related
abuses committed by foreign registrants in our markets.

In a press release issued by the Senator’s office at the time of the adoption of his amendment,
Mr. Thompson calls attention to four unnamed Chinese firms — out of some 50 listed in our debt
and equity markets — that are described as being “linked to the Chinese military or Chinese
espionage.” As public pension funds and mutual funds across the United States have exposure to
Chinese firms, it is likely that a substantial number of Americans are therefore holding the
securities of these four companies that are reported to have dubious ties
.

This danger — and the apparent absence of any U.S. government mechanism for determining the
potential presence of proliferators in our capital markets — was highlighted in a blue-ribbon
congressional commission chaired by former CIA Director John Deutch in July 1999: “There is
currently no national security review of entities seeking to gain access to our capital markets
[and] investors are unlikely to know that they may be assisting in the proliferation of weapons of
mass destruction by providing funds to known proliferators.”

Senator Thompson and his colleagues on the Senate Select Intelligence Committee are to be
commended for their efforts aimed at remedying this intolerable situation and the full Senate and
Congress should adopt the Thompson amendment forthwith.

Committee Adopts Thompson Measure Requiring
Investigation into Whether Proliferators are Raising Money
from U.S. Investors

10 May 2002



WASHINGTON — The Senate Select Intelligence Committee late Wednesday adopted a
provision by Senator Fred Thompson (R-TN) to the FY 2003 Intelligence Authorization bill
requiring U.S. intelligence agencies to investigate whether foreign entities engaged in the
proliferation of weapons of mass destruction are raising money in U.S. capital markets. Senator
Thompson has long been concerned that U.S. investors might unknowingly and unwillingly be
funding the proliferation activities of foreign entities.

“We need to find out if American investors are paying for the illegal sale of weapons of mass
destruction technology and goods to countries like Iraq and North Korea,” said Thompson. “This
issue hasn’t to date received the serious attention that it deserves from our intelligence agencies.”

Concerns about the activities of foreign companies listed on U.S. capital markets, such as the
New York Stock Exchange, are not new. Nearly 50 Chinese companies are currently listed on
U.S. stock exchanges, including four companies linked to the Chinese military or Chinese
espionage. A number of public pension funds have invested millions of dollars in Chinese
companies.



The Cox Commission on U.S. National Security and Military/Commercial Concerns with the
People’s Republic of China concluded that proliferators may be raising funds in U.S. capital
markets. The Deutch Commission on Combating the Proliferation of Weapons of Mass
Destruction also found a need for enhanced transparency. The Deutch Commission concluded
that, “because there is currently no national security review of entities seeking to gain access to
our capital markets, investors are unlikely to know that they may be assisting in the proliferation
of weapons of mass destruction by providing funds to known proliferators.”

At the request of Thompson, the General Accounting Office (GAO) will soon complete a
classified report on the issue. “We need to have our intelligence agencies take a closer look at
this matter,” said Thompson. “American investors need to know whether or not they are funding
the proliferation activities that pose a huge threat to our country.”

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