Republicans criticize Kelly over subsidies
Candidate also knocked for ties to Chinese firm
Democratic Senate candidate Mark Kelly has cast himself as a successful astronaut-turned-entrepreneur who has made millions from good investments and generous speaking fees.
Republicans are now hitting Kelly for a record they say also is built on a company using taxpayer-subsidized seed money and capital funding from a Chinese technology company willing to censor as needed that has stoked U.S. national-security anxieties.
The attacks on Kelly, over questions first reported Wednesday by RealClearPolitics, come at a time of heightened tensions between Washington and Beijing, and as the GOP increasingly is taking a get-tough policy with China.
“Mark Kelly will do or say anything to protect his bottom line,” said Joanna Rodriguez, a spokeswoman for the National Republican Senatorial Committee. “His company spent years flaunting its ties to Chinese investors while reaping the benefits of taxpayer funding. Now when the national security threats of these types of investments are being realized, Kelly remains silent. Arizonans can’t trust him to deliver on promises or keep America safe from communist influence.”
The spokesman for an organization that is expected to play a supportive role for incumbent Sen. Martha McSally, RAriz., whom Kelly is challenging this year, also blasted Kelly.
“China has imported two things to Arizona: coronavirus and support for Mark Kelly,” said Barrett Marson, a spokesman for Defend Arizona, a political-action committee with close ties to Senate Majority Leader Mitch McConnell, R-Ky.
Kelly’s campaign maintains he isn’t beholden to China.
“It shows how deeply Washington is broken that McConnell’s campaign machine would coordinate baseless political attacks and involve sitting U.S. senators instead of focusing on the pressing and urgent needs facing Arizonans and the nation during this crisis,” said Jacob Peters, a spokesman for the campaign.
“Mark is a U.S. Navy combat veteran who served in the Pacific and has been clear that China is an adversary and threat to American interests. Mark’s experience as a pilot and astronaut enabled him to help found World View in Tucson, which has worked with the Department of Defense and NASA among others while creating jobs and generating millions of dollars in economic impact for Arizona.”
The concern revolves around Kelly’s investment ties to World View Enterprises, a Tucson-based company that uses balloons for launching lower-altitude “stratollites” for commercial and governmental mapping and surveillance. It also has planned to offer public rides to the edge of space.
Kelly has been listed as a co-founder of the company.
The company has had a bumpy path in its efforts to grow and provide a significant economic impact in southern Arizona, despite millions in taxpayer support.
Public records show Pima County officials spent about $15 million to build facilities for its operations in the hope the company would produce significant economic impact.
More than four years later, the company has yet to meet its employment targets.
It had about 125 employees before the coronavirus pandemic forced cutbacks, said Ryan Hartman the company’s CEO. He said the company plans to restore its workforce after the pandemic and continue growing.
“We are on the upswing,” he said. World View’s long-time investors include Tencent Holdings, a Chinese tech company that operates the WeChat messaging and social media service that is among the world’s largest. And like other tech companies in China, it has close working ties to the ruling Communist Party in Beijing.
Tencent has sought to expand its relations with American tech firms, a move that has raised national security concerns that the Chinese government could be surreptitiously gathering information using American technology.
Hartman said that isn’t happening, noting the Pentagon’s Defense Counterintelligence Security Agency examined the company last year to ensure its work was secure from foreign interference. The agency cleared World View to handle work for the military.
Tencent has “zero access, zero input and zero control,” Hartman said.
Kelly’s indirect ties to Chinese business interests come amid fraught relations between Washington and Beijing in the Trump era, often over trade policy. That situation is worsened by the coronavirus pandemic that is believed to have originated in China and as conservatives accuse that country of gathering intelligence on Americans through technology firms.
Kelly’s 2019 financial disclosures show he received $4,400 in salary from World View in the past year. He also reported stock holdings worth between $115,000 and $300,000 at the time.
Records show Kelly’s campaign has received at least $4,000 from World View employees and $5,000 from a Tencent executive.
Government help for World View
Beginning in 2013, when the company was founded, Kelly served as an adviser to World View on its plans to offer balloon rides 19 miles into the stratosphere for $75,000. The company has carried payloads for the space agency NASA.
But from its early days, the company has repeatedly turned to taxpayers to help fund the business.
In 2014, the Arizona Commerce Authority offered a $250,000 grant estimated to bring four jobs.
In January 2016, the Pima County Board of Supervisors approved a $14.5 million plan to finance the construction of a 120,000-square-foot building for World View on 28 acres of county land.
Under the terms of the deal, the company would pay the county rent for the building totaling $23.6 million over 20 years. World View also had an option to purchase a portion of the site.
At that point, World View reportedly had 25 employees but pitched the deal as a way to grow to 400 employees within four years. The county and the company valued the resulting deal as bringing more than $3 billion in economic development.
“We’re going to take a different direction because frankly, we need a different result,” Pima County Supervisor Ramón Valadez said of the arrangement, according to the Arizona Daily Star’s account of the deal at the time.
Two months after the county’s deal with World View, the city of Tucson gave the company breaks on fees, taxes and utility costs worth $479,000.
In 2017, the state’s Commerce Authority again offered a $1 million grant in exchange for nearly 300 jobs.
Pushback and disappointment
The deal hasn’t worked out the way anyone hoped.
The conservative Goldwater Institute sued Pima County over what they described as an improper “sweetheart deal.” That case has bounced around the state’s courts for four years.
The county eventually acknowledged the company’s hiring target of 400 wasn’t required by 2020; it was near the end of the 20-year deal.
By February 2019, the company had fewer than 100 employees after laying off 10 of them. It was searching for 14 others to hire, but World View had noted in annual reports difficulty finding the proper talent.
As part of those moves, the company also replaced its original CEO in a wideranging corporate shake-up.
While the Commerce Authority had offered up to $1.3 million to World View if it met certain employment targets, it has instead paid out about $288,000 because those goals were not met.
No passenger travel
The company’s longstanding plans for balloon rides for paying customers has remained grounded.
In June 2017, World View aborted a planned four-day, unmanned test flight after 17 hours because of a leak in its balloon systems.
The event had drawn attention from the New York Times, in part because its payload included chicken sandwiches from KFC, which had adopted a spacethemed ad campaign for the sandwich.
If that flight was a disappointment, another one six months later was something worse.
In December 2017, a balloon exploded over the World View’s facility, causing $475,000 in damages to the countyowned building. No one was hurt in the accident, but Raytheon, which is nearby, informed its employees about a “substantial explosion” at World View that triggered alarms at Raytheon.
Less than a year later, in November 2018, a World View balloon made an emergency landing in Sonora, Mexico, after what the company described as “a minor sub-system anomaly.”
Three months later, World View had laid off some of its employees and made its management changes.
Government contracts
World View’s proposed space tourism business hasn’t flourished, but it did find significant interest from the government.
In 2016, NASA awarded World View a $300,000 grant to work on trajectory controls with balloons.
World View had contracts with NASA and the Pentagon that paid the company $3.2 million in the past four years, records show. It also has a deal with NASA that includes five other companies that could be worth up to $45 million more.
In 2017, the company’s executives told the Daily Star the government’s various agencies accounted for about half its business.
Ties to Chinese investors
But it is World View’s connection to the Chinese government that has raised the most concerns from Republicans.
The company’s officials have noted Tencent as an investor since at least 2014. The investments have been made through Mount McKinley Investment Limited, a company controlled by Tencent.
Tech companies in China often operate as partners with the government. The Wall Street Journal detailed that practice in 2017.
“The Chinese government is building one of the world’s most sophisticated, high-tech systems to keep watch over its citizens, including surveillance cameras, facial-recognition technology and vast computers systems that comb through terabytes of data,” the Journal reported. “Central to its efforts are the country’s biggest technology companies, which are openly acting as the government’s eyes and ears in cyberspace.”
A recent study by researchers at the University of Toronto found that WeChat censored content earlier this year dealing with the coronavirus.
And Tencent dropped broadcasts of the National Basketball Association in October after the general manager of the Houston Rockets posted a tweet supportive of protesters in Hong Kong.
The blackout was later amended to only exclude games involving the Rockets. It was an especially consequential move because Yao Ming, who is Chinese, starred for the Rockets years ago.
While there is no suggestion Tencent or World View has done anything wrong, other Chinese technology companies have raised anxiety in the United States.
In December 2018, for example, aerospace giant Boeing canceled a contract for satellite assistance with Global IP, a Los Angeles startup that the Wall Street Journal identified as having Chinese governmental backing.
The arrangement sparked several investigations on Capitol Hill and in federal agencies, in part to determine whether there was an “attempt to skirt U.S. export controls related to national security.”
In a 2018 report for the Pentagon’s Defense Innovation Unit, technology experts noted the growing involvement of the Chinese in American tech companies and the potential threat it poses to U.S. national security.
“Chinese participation in venturebacked startups is at a record level of 1016% of all venture deals (2015-2017) and has grown quite rapidly in the past seven years,” the report said.
The Chinese investments have been in the areas where there is overlap between commercial and military interest, the report said.
Republicans have enthusiastically responded to the Chinese ties to Kelly as they are making that country a focal point of campaign rhetoric across the country.
Republican Sens. Tom Cotton of Arkansas, Kevin Cramer of North Dakota and Ted Cruz of Texas each lashed out on Twitter at Kelly over the China issue.
Since entering the Senate race in early 2019, Kelly has been one of the most prolific fundraisers in the country and has shown a consistent lead on McSally in recent polling.
Their contest is among the handful of races nationally expected to determine control of the Senate next year.