China’s Texas Hold ’em: Rick Perry and a Chinese plant on the Gulf

This is the first in a three-part investigative series on China’s inroads in Texas’ energy industry. The second part looks at the historically black community near the proposed site, which is already flanked by chemical plants. The third looks at Beijing's recent push to "hunt down" escaped Chinese officials in the United States. The project follows a series on another push by Chinese politician-investors and U.S. officials for a methanol plant in a predominantly black neighborhood of St. James Parish, Louisiana.

TEXAS CITY, Texas — The administration of former Texas Gov. Rick Perry, a likely 2016 GOP presidential contender, appears to have had a hand in helping two Chinese politician-entrepreneurs — who in recent years have come under public scrutiny on allegations of environmental abuses and corruption — park assets in a proposed methanol plant beside an underserved, predominantly black community in southern Texas.

What would be one of the largest methanol plants in the world, valued at $4.5 billion and receiving hefty tax incentives from Texas City and the state, would send its product to China, according to promotional materials. But China has in recent years struggled to find a use for all its methanol, which is used in producing biodiesel and as a solvent.

The market for Texas-made methanol remains unclear. But the Chinese entrepreneurs’ bid to pour funds into an overseas enterprise comes at a time when Beijing’s sweeping anti-corruption campaign has officials and industry magnates scrambling to put their wealth abroad to avoid losing it in probes that have targeted China’s ruling class.

In January an Al Jazeera investigative series revealed that Louisiana Gov. Bobby Jindal, another probable 2016 GOP presidential candidate and a Perry ally, met with China's consul in Houston and Yao Caoliang, the CEO of the U.S. subsidiary of a Chinese energy giant planning to build a $1.85 billion methanol plant in St. James Parish, Louisiana. The investor behind that bid, Wang Jinshu, is a Chinese politician and entrepreneur who is increasingly coming under fire in Chinese state media for allegedly shirking environmental regulations and receiving government credits after misreporting green technology measures. The plant would receive a $9.5 million incentive package from Louisiana. 

Now an Al Jazeera investigation has revealed the Texas methanol plant’s connections to a Republican presidential hopeful, Chinese politicians publicly accused of misdeeds and Chinese-American organizations alleged to secure the flow of information and technology from the United States to China.

In August 2014, Fund Connell USA Energy and Chemical Investment, a company incorporated by the Chinese moguls in Delaware just before the deal was announced, leased Shoal Point, an empty 900-acre parcel of land on Texas City ship channel, for two years for $200,000 in order to conduct due diligence, according to a copy of the land lease obtained by Al Jazeera and Texas City officials.

The attorney listed as the registered agent on Fund Connell’s corporate filings, Fred Raschke, did not respond to a request for an interview with the company’s leadership. 

Perry’s office directed the Chinese bid to Don Gartman, then the president of the Galveston County Economic Alliance. Gartman collaborated with Perry in previous economic development campaigns, according to Web archives of The Galveston County Daily News. It’s unclear why the governor’s office was directly involved with the bid.

Perry’s representatives and Political Action Committee RickPAC did not respond to requests for an interview with Perry. The Texas Governor’s Office did not respond to questions on its role in the deal. 

Carlisle “Bix” Rathburn III, the president of the Galveston County Economic Alliance after Gartman retired, is in charge of coordinating the project with local government staffers.

In September 2007, Georgia’s Office of the Inspector General found Rathburn “abused” his authority during his time as president of Savannah Technical College, directing state funds for personal use.

Rathburn left Savannah a few months later for a job as president of Texas A&M University at Texarkana, a position that local media suggested he left abruptly in 2012, with little explanation from the school system. Rathburn did not respond to an interview request. 

In September 2014, less than two months after the land was leased and the deal appeared to be moving ahead, Perry — who predicted before the 2012 presidential election that the Chinese government would end up on the “ash heap of history” — traveled to China, where he met China’s Vice Premier Zhang Gaoli and penned a pledge to ramp up business partnerships with Chinese provinces.

The trip was funded, in part, by Americans for Economic Freedom, an organization that bills itself as a nonpartisan nonprofit but has featured Perry in ad campaigns. Al Jazeera’s investigation found that the group’s three board members listed in nonprofit filings have all been major Perry campaigners or campaign donors. Launched under section 501(c)(4) of the tax code, the group may receive unlimited donations from undisclosed donors. Perry in May 2013 vetoed a bill in the Texas Legislature that would have forced politically active nonprofits to disclose their donors. Jeff Miller, whom Perry called Americans for Economic Freedom’s CEO in a Facebook post and who is a RickPAC manager, did not respond to a request for comment. 

It remains unclear exactly who was ultimately behind funding the trip and if the methanol plant deal was discussed during the trip, but there are links between Perry and the Chinese politicians behind the deal.

On Perry’s China trip, he was flanked by Houston resident Bo Fan, president of U.S.-China Partnerships, a nonprofit that, according to corporate filings, aims to boost cultural and business relationships with China. The Houston Chinese Consulate in Web posts has indicated that it had a hand in launching the group and oversees its activity. The Houston Chinese Consulate did not respond to a request for comment. 

U.S. China Partnerships' founder and chairman, Charles Foster, told Al Jazeera that although the organization was started at the urging of "the city [of Houston], the mayor and other city officials ... we work closely with the Chinese side. In some ways, we help them do their job, because they hope to facilitate trade and business, cultural, educational bilateral exchanges. So we work closely, particularly with the Consulate General of the People's Republic of China that just happens for the southern part of the United States to be located here in Houston."

Asked if the organization helped facilitate the methanol plant deal, Foster said with a chuckle, "No, I think that would be too much to say we played any role in that. That had been ongoing for some time."

Bo, who was familiar with the methanol plant project, also said that his organization did not play a role in taking it to Texas, although he said he hopes that the investors will choose the Texas site, as opposed to an alternative that project managers identified in Louisiana. But asked about his organization's relationship with China, he, unlike Foster, said that Chinese government entities played no role. "This is purely from the U.S. side," he said. 

According to the organization’s Web archives, Bo’s wife, Yanlin Li, has been a member of a similar organization, the Houston-based nonprofit Chinese Association of Professionals in Science and Technology (CAPST), an organization that bills itself as a nonpolitical organization but that, according to a 2013 book, “Chinese Industrial Espionage,” includes among its ranks powerful members of China’s leadership and facilitates the transmission of industrial intelligence from the United States to China. The Houston Chinese consul, the book said, presides over the group’s annual functions. Li did not respond to a request for interview with and her husband by the time of publication. CAPST did not respond to a request for comment. 

Bo acknowledged his wife's involvement in CAPST but said that, to his knowledge, it is only a "professional association." "I don't know too much about that organization," he said. 

Al Jazeera’s series on Chinese politician-mogul Wang’s bid to build a $1.85 billion methanol plant in a predominantly black, underserved neighborhood of St. James Parish, Louisiana, with Jindal’s support, reported that Yao, the CEO of Wang’s U.S. subsidiary, Yuhuang Chemical, had been a member of CAPST and — despite being a Houston resident — the president of an affiliated subsidiary nonprofit in New Orleans.

On June 2, 2010, the enterprise of one of the Chinese tycoons behind the pending Texan methanol plant, Song Zhiping’s Jilin Connell Chemical Industry Co., awarded a technology licensing contract for its plant in Jilin to Houston-based KBR Inc., an energy industry engineering and construction company formerly affiliated with Halliburton. Joe M. Allbaugh, who has worked as a consultant for KBR registered with the U.S. Senate in February 2005 to lobby on behalf of the company and terminated that registration in the House of Representatives in October. Allbaugh was a Perry campaign adviser during his 2012 presidential bid.

KBR did not respond to interview requests. Allbaugh said, in an email "currently we have no relationship with KBR...great worldwide company" and that, "Sadly, all news accounts have postulated incorrectly over the past 12 years...without even asking me."

Allbaugh also added that his company, Allbaugh International Group, a consulting firm that works with businesses as well as U.S. and international government agencies, had never done business with any Chinese firms. 

Web archives show that CAPST has had several KBR employees in its membership.

The other of the two Chinese tycoons behind the project is Zhang Jun, the founder and chief shareholder of Funde Sino Life Insurance who has held local office in the southern-Chinese business hub of Shenzhen’s Communist Party. He rose to prominence in mid-2013 on social media, where his daughter Zhang Jiale’s lavish spending habits became the target of a firestorm, at a time when the new administration of President Xi Jinping stepped up an anti-corruption campaign that continues to target signs of ostentatious wealth as a potential indicator of ill-gotten gains. State media coverage around that time suddenly started portraying Zhang Jun, previously lauded as a savvy businessman, as a “mysterious” and “suspicious” tycoon whose source of wealth remains unclear and who engages in “predatory” business practices.

In June 2014, just as Zhang decided to move forward with the Texas project, China’s Insurance Regulatory Commission told state media that Zhang’s company would suffer “heavy penalties” for rampant misleading sales promotions in the company’s insurance policies and financial products — including exaggerating policy benefits and concealing investment risks — at the company’s Shanghai branch.

Song Zhiping, in addition to being the CEO of energy giant Jilin Connell Chemical Industry Co. is a delegate to China’s National People’s Congress and a local official in her native northern province of Jilin. In 2009, before Xi came to power, Song came under fire in the Chinese press when hundreds of people living near her Jilin-based plant — which produced the highly toxic chemical aniline — started complaining of crippling illness, including what The New York Times described as “convulsions, breathing difficulties, vomiting and temporary paralysis.”

What was then a popular Chinese business publication, Caijing, reported in an English-language article on May 14, 2009, that 450 people were hospitalized with gas poisoning. As with most sensitive Web news articles affecting China’s ruling elite, the Chinese version of that article has been taken down. Public health authorities then ruled that there had been no environmental malfeasance, saying that mass hysteria had taken its toll on locals. But since 2009, China has engaged in what international environmentalists have called a sincere push to rehabilitate its ecological safety measures, especially in China’s coal-producing north. It remains unclear whether the allegations made in 2009 can still be addressed, particularly amid Xi’s anti-graft campaign, which has touched on environmental abuse too.

Zhang, according to local Communist Party Web archives, traveled to Song’s province in 2012 to further business partnerships with the local government there. The details of that partnership were unclear from the post. Before the Texas deal was penned in 2014, Zhang and Song embarked on consultations for a separate energy project in the northeastern province of Liaoning, local government officials reported on their website.

Zhang and Song’s China-based companies did not respond to requests for interviews with the tycoons.