By Kaitlyn Speer | Watchdog.org, Virginia Bureau
ALEXANDRIA, Va. — It pays for a Chinese company to hire an influential state lawmaker, and vice-versa.
In April 2013, a Chinese company closed a $1.2 million contract with lawyer and state delegate Terry Kilgore to protect its interests in building a Virginia Beach arena and to help lift sanctions imposed on the company by the Bush administration in 2002, according to a contract between the two parties obtained by Watchdog.org.
Two months later, according to the state department website, the federal government lifted those sanctions from that same company.
China Machinery Engineering Corp. of Beijing plans to partner with a Virginia-based company to build an 18,000-seat arena and sports complex in Virginia Beach, to be completed as early as next year.
Watchdog.org reported a few weeks ago that CMEC is also partnering with United States Management LLC, the Virginia-based company that submitted the sports arena plan for consideration. USM is borrowing $170 million from a Chinese bank to fund the proposed $200 million cost, something that’s made possible by CMEC’s involvement. That doesn’t include an additional $52.7 million paid by Virginia Beach taxpayers.
To accomplish the plan and help lift sanctions, the company hired Kilgore and his law firm. Kilgore is not only a respected lawyer, but as chair of the House Commerce and Labor Committee, and vice-chairman of Virginia’s Tobacco Indemnification and Community Revitalization Commission,was voted the Virginia Chamber of Commerce’s most influential lawmaker in 2014.
CMEC promised to pay Kilgore $1.2 million, in two different installments, according to the contract. The contract said Kilgore would receive $600,000 within 30 days after the agreement was effective on April 6, 2013. He would receive the other $600,000 after he achieved one final goal: lifting sanctions placed on the company in 2002.
Neither Kilgore nor CMEC returned Watchdog.org’s request for comment.
The sanctions placed on the company and one of its subsidiaries dealt with chemical and biological weapons proliferation. The Under Secretary of State for Arms Control and International Security told Congress that lifting the sanctions “is important to the national security interests of the United States.”
“The client and the law office agreed to work diligently towards the resolution of a sanction matter against CMEC by the United States Government, with the removal from the sanction list,” the contract stated in a confidential addendum. “Through the mutual agreement by both parties, the client will cooperate with information requests necessary to resolve the above mentioned matter.”
It’s unclear whether Kilgore helped accomplish that lifting of the sanctions. He didn’t return request for comment, and the State Department wouldn’t talk on the record .
This type of deal as far as promoting and protecting the company is fairly typical, according to Frank Shafroth, director of the Center for State and Local Leadership at George Mason University.
“Any company (foreign or domestic) that is looking to relocate or invest for the first time in Virginia will hire a lawyer or (more often) a government consulting firm to find and negotiate for the best available property and state/local incentives (tax or otherwise) to defray its costs,” Shafroth said in an email to Watchdog.org.
Some of Kilgore’s responsibilities, according to the contract, include contacting and maintaining relationships with relevant government agencies at all levels; aiding CMEC as an adviser and consultant; providing CMEC information on federal and state laws, rules and regulations; applying for and getting all the approvals and permits required by Virginia Beach; and helping CMEC workers get entry and exit visas, work permits and residency permits.
“My reaction is that if I were representing a company working in another country, I would do my best to seek removal of sanctions on my company — whether it was a U.S. company doing work in Zambia, Libya, China, or wherever — just as one would want to limit one’s potential liability in this country,” Shafroth added.
What intrigued Shafroth, however, is the Chinese company’s interest in investing at a local level, rather than at the national or state level.
“To begin with, I am unaware of another instance in which a foreign company was involved in a local infrastructure project,” Shafroth said. “It would seem in this case that Virginia Beach would be a bit of an outlier, because the project is local infrastructure, and I am assuming that China Machinery Engineering Corporation will not be managing the facility or providing services.”
Andrea Kilmer, CEO at ESG Companies, of which USM is a part, has been in contact with CMEC for a while. She was asked by an official from former Gov. Bob McDonnell’s office to show CMEC around the area a few years ago and help them go through the numbers on a few projects. At the time, Kilmer was on the Economic Development and Jobs Creation Commission.
“At the request of the state, we spoke with CMEC about several potential projects in our area and mutually agreed that the arena would be the most viable and a good fit for our two firms,” Kilmer said in a statement.
McDonnell, as well some of his cabinet members, visited Asia twice during that period. The Virginia Economic Development Partnership even opened an office in Shanghai in 2011. CMEC was in contact with the Virginia state government for a few years, and the company had representatives visit Virginia Beach a number of times. After Kilmer and another ESG representative visited China again, the city and USM cemented plans to work together on the arena project.
—Kaitlyn Speer is an intern for Watchdog.org, Virginia Bureau. She can be reached at firstname.lastname@example.org or on twitter at @KSpeer11.