US: Bush's Brother Has Contract to Help Chinese Chip Maker

by Warren Vieth and Lianne Hart, Los Angeles Times
November 27th, 2003

WASHINGTON - Neil Bush, a younger brother of President Bush, has a $400,000-a-year contract to provide business advice to a Chinese computer chip manufacturer, according to court documents.

At the same time the Bush administration is promising to crack down on alleged trade abuses by the Chinese, Neil Bush has agreed to strategize with China's Grace Semiconductor Manufacturing Corp., the documents show.

While there is no indication he has done anything improper, Bush's arrangement could attract attention during a presidential election cycle in which Chinese business practices have become a hot-button issue.

"There's certainly the appearance of influence being sought," said Charles W. McMillion, a Washington business consultant who advised a congressional commission on U.S.-China policy. "If nothing else, it doesn't look good."

The younger Bush's relationship with Grace Semiconductor, first reported in the Houston Chronicle, is detailed in a two-page contract filed as part of divorce proceedings between Neil and Sharon Bush. The divorce was finalized in April.

The China contract is not Neil Bush's first brush with controversy. In the 1980s, he was a director of Silverado Banking, Savings & Loan, a Colorado thrift whose failure cost U.S. taxpayers $1 billion. He was one of 12 defendants who agreed to pay $49 million to settle a negligence lawsuit brought by the Federal Deposit Insurance Corp.

Neil Bush did not return phone messages seeking comment. Neither did his attorney, Grace Semiconductor or Sharon Bush. An attorney for Sharon Bush declined to comment.

In Crawford, Texas, where the president is spending the holiday, White House spokeswoman Claire Buchan said there would be no comment on the China matter.

According to the consulting contract, Neil Bush was to receive $2 million worth of Grace Semiconductor preferred stock over five years, issued in annual increments of $400,000.

In return, Bush agreed to "provide GSMC from time to time with business strategies and policies; latest information and trends of the related industry, and other expertized advices," the contract states.

In addition, Bush was to attend meetings of Grace Semiconductor's board of directors, and the firm agreed to pay him $10,000 per meeting to cover expenses. Bush signed the contract Aug. 15, 2002.

It was not clear how much compensation Bush has received so far. The contract said he would receive the first $400,000 allotment within one month of the company's 2002 board meeting, "provided you have duly furnished GSMC with the information and details required for the issuance or transfer of the share certificate."

Grace Semiconductor, based in Shanghai, was founded in 2000 by Winston Wong, the son of Taiwanese business magnate Wang Yung-ching, and Jiang Mianheng, the son of former Chinese President Jiang Zemin. Wong co-signed the contract with Bush.

The company has said its goal is to become a leading manufacturer of integrated circuits and other semiconductor products. It has invested $1.6 billion to build two fabrication plants in Shanghai. Production from the first plant began in September.

During a March 2003 deposition taken as part of his divorce proceedings, as reported by the Chronicle and confirmed by an attorney in the case, the president's brother acknowledged that he knew little about the industry he had just joined.

"You have absolutely no educational background in semiconductors, do you?" asked Sharon Bush's attorney, Marshall Davis Brown.

"That's correct," Bush responded.

"But I know a lot about business," he said at another point, "and I've been working in Asia quite a long time."

Disclosure of Neil Bush's consulting contract comes amid an intense debate over America's growing trade deficit with China. U.S. manufacturers have shed 2.8 million jobs since mid-2000, and many firms have blamed unfair trade practices by China.

The American Electronics Assn. released a report this week showing that 49 states lost high-tech workers last year. Total losses were 540,000 in 2002 and 234,000 so far this year, leaving fewer than 6 million people employed in the industry.

The Bush administration has promised to crack down on any abuses its finds. It has pressured China's government to let its currency rise in relation to the dollar, which would make Chinese exports less competitive in this country. It has agreed to impose protective quotas on several categories of Chinese textile products, and to place steep tariffs on Chinese-made televisions.

"I'm sure China will not question our resolve," Commerce Secretary Don Evans recently told a Michigan business group. "We're serious about it, and they'll know we're serious about it."

Semiconductor manufacturing is one of the few industry sectors in which the United States is running a substantial trade surplus with China, consultant McMillion said. But leading chip makers such as Intel and IBM have expressed concern about China's determination to become a major player in the industry.

"China has a huge deficit in semiconductors, so they're putting huge resources into building capacity and acquiring technology from the United States, from Taiwan, from the Japanese and the Europeans," McMillion said. "It's a very big issue right now."

In 1999, Neil Bush founded Ignite, an educational software firm based in Austin, Texas. Among the firm's initial investors were his parents, former President George H.W. and Barbara Bush, and Wong, the Taiwanese entrepreneur who invited him to become a consultant for Grace Semiconductor.

This month, an opposition party leader accused Taiwan President Chen Shui-bian of paying $1 million for a 30-minute meeting with Neil Bush during a recent visit to the United States. The president confirmed he had met with Bush but denied that any payment had been made.

The China contract details were filed in connection with a contentious divorce proceeding between Neil and Sharon Bush, who were married for 23 years.

In the March deposition, Neil Bush admitted to having sex with several women who knocked on the door of his hotel room during a business trip to Hong Kong and Thailand. In response to an attorney's questions, he said he did not know the women, and did not pay them any money.

Last week, according to Houston newspaper reports, Bush voluntarily submitted a tissue sample for genetic testing in an effort to disprove allegations that he fathered a child with his current girlfriend, Maria Andrews, while she was still married to another man.

Neil Bush, the third of George H.W. Bush's four sons (George W., Jeb, Neil and Marvin), is the latest family member to hitch his fortunes to China.

In 1974, President Nixon named George H.W. Bush as his ambassador to China, a position he held for two years. In the 1980s, George H.W. Bush's brother, Prescott Bush Jr., began pursuing business opportunities on the mainland. In 1988, he teamed up with Japanese businessmen to build China's first golf course in Shanghai. He struck up a long friendship with former President Jiang, whose son is now a business partner of Neil Bush.

Prescott Bush Jr.'s Chinese ties generated their own share of controversy. He was criticized for meeting with Chinese business and government leaders just three months after the Tiananmen Square massacre in 1989.

The Shanghai golf venture became an embarrassment when allegations surfaced that his Japanese partners were trying to get business contracts by bribing Panamanian leader Manuel Noriega. Prescott Bush Jr.'s ties to an American firm, Asset Management, were scrutinized in 1989 because it was the only U.S. firm able to skirt sanctions and import communications satellites into China.

When Asset Management later went bankrupt, Prescott Bush Jr. arranged a bailout through a Japanese investment firm later accused of having ties to organized crime. There was no evidence he was aware of the alleged mob connection.