Second or third-level State

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January 13, 2003 10:48 a.m.

Second or third-level State Department appointees seldom get that much attention in the press. But the crisis on the Korean Peninsula has made Assistant Secretary of State James A. Kelly an exception.

It was Kelly, as noted in the post below, who just announced that the Bush administration is now willing to make a deal not unlike the one the Clinton administration made in 1994. Indeed, almost all the major exchanges between the US and the South Koreans and the North Koreans over the last couple months have been with Jim Kelly.

Now, let’s run through some basic points about Jim Kelly.

I would argue that, broadly speaking and in the context of the Korea situation, Kelly is one the administration’s good guys. (This is at least a bit generous of me since last March Kelly personally accused me of being a practitioner of “hack journalism” during a question and answer session after a speech before the US-China Policy Foundation. I had just written an article in the New Republic sharply critical of the appointment of Kelly’s friend Douglas H. Paal as US envoy to Taiwan.) As Colin Powell’s Asia policy person, Kelly has been one of those in the administration trying to keep the administration to something like a sensible policy in North Asia. In many respects they were unsuccessful. But they were on the right side of the debate and now it’s left to them to clean up the mess the hawks made.

In any case, here are a few other issues which have come up during Kelly’s tenure and place that tenure in some perspective.

Prior to joining the administration, Kelly was the head of something called the Pacific Forum, the Hawaii branch of the Center for Strategic and International Studies, a major DC think tank.

Last year TPM’s article in Salon and another in the Washington Post revealed that Kelly had used the Pacific Forum to help Taiwan’s National Security Bureau funnel $100,000 to a former minister of the Japanese government, Vice Defense Minister Masahiro Akiyama, in return for his assistance, while in office, in helping Taiwan get included under the United States’ proposed missile defense shield. The money was for Akiyama’s support during a two-year stint at Harvard University after his forced resignation from the Japanese government in January 1998. The money was from a secret $100 million slush fund controlled by then-Taiwanese President Lee Teng-hui and used to buy influence with governments, individuals and organizations in various foreign countries, including the United States. (The details of the arrangement — and the ethical issues raised by it — are quite complicated. I encourage you to read either my piece or the Post piece for more details.)

Another part of Kelly’s background raised the hackles of DC’s China-hawks. From December 1995 to January 2001, Kelly served on the board of Dan Form Holdings, a real estate and construction company with major holdings in Hong Kong and a number of major projects on the Chinese mainland. The CEO of Dan Form Holdings was a man named Dai Xiaoming, one of the accused in the 1997 Asian fundraising scandal. In fact, Kelly served on Dai’s board at the same time Dai became a key subject of controversy.

As the Washington Post reported on May 13th, 1997 …

At a $100,000 DNC fund-raiser held by Sen. Dianne Feinstein (D-Calif.) and her husband, Richard C. Blum, in San Francisco, Huang showed up with Dai Xiaoming, a Hong Kong businessman with Beijing ties. Clinton was the featured guest.

Huang told DNC officials that Dai was a prominent California businessman who wanted to contribute $50,000 to Clinton’s reelection, though no such contribution shows up in contribution records. In fact, Dai had bought control of a Hong Kong property development concern from Lippo two years earlier, with financing from the Bank of China, Beijing’s largest state-owned commercial bank. “John misled us on that,” a DNC official said. “He really wanted [Dai] to be there.”

To the best of our knowledge, Kelly has never been asked about any of this.

Of more concern to DC’s China-hawks is Dan Form Holdings’ ties to Chen Yuan, one of the highest profile of China’s so-called ‘princelings,’ the sons and daughters of the elite of the Communist Party. (In 1994, The Economist called Chen “the most powerful of the princelings.”) By most accounts, Chen, now Governor of the China Development Bank, is the power and the source of money behind Dai. In other words, Dai is, shall we say, Chen’s man in Hong Kong. For more on the Dan Form Holdings story, see this April 5th 2002 TPM Post.

As China-hawks look at the current situation and Kelly’s role in it, that connection is sure to play into their thinking.

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