Harkin Scandal

December 21st, 2012

Harkin evades questions on Korean firm, which he has wooed with favors for decades

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Written by: Jeff Patch
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Sen. Tom Harkin (D-Iowa) again refused to answer reporters’ questions about foreign corporate influence at the Harkin Institute of Public Policy, the new academic unit at Iowa State University that bears his name and for which his wife Ruth has fundraised.

In Harkin’s weekly call with Iowa journalists, reporters with the Associated Press and the Ames Tribune asked Sen. Harkin about recent reports that the Harkins have personally engaged in fundraising for the institute despite promises that they would not do so last year and whether the institute is a charity. Reporters also asked Harkin whether he or his wife Ruth, a member of the state Board of Regents, solicited donations from PMX Industries, a subsidiary of Poongsan Corp.

Harkin repeatedly refused to answer such questions, and he accused reporters of making unspecified errors in their reporting. Harkin’s press aides also declined to respond to email inquiries by TheIowaRepublican.com about the supposed errors. Such solicitations would be a violation of federal law in Harkin’s case and a Senate ethics violation in Ruth’s case. Harkin mocked the questions and then shamed a reporter with allegations of errors that he refused to explain.

“What I’ve said about this whole institute, I’ve said before,” Harkin said. “At this point in time I’m not saying anything other than the original quote that I put out, the statement I put out. I want the best for my alma mater, and Ruth and I have always worked hard to support ISU. But I simply cannot be part of any arrangement that restricts full and unfettered academic freedom at this institute.”

The Harkins are at an impasse with ISU President Steven Leath and other university administrators, who want the Harkin Institute to coordinate ag research with other academic institutes at Iowa State. Harkin allies such as former regents’ president Michael Gartner have criticized this directive as a power-grab by corporate ag interests, but they refuse to address concerns about corporate backers of the Harkin Institute.

Poongsan is a Korean conglomerate that produces metal for the U.S. mint and ammunition for countries such as Pakistan. The company built its U.S. headquarters in Cedar Rapids in 1992 after Harkin used his influence in the Senate to circumvent the U.S. Department of Commerce to establish a “foreign trade zone” in Cedar Rapids. This backroom deal provided the foreign company with generous tariff benefits while muscling aside domestic metal producers in other states. Harkin also personally secured a $2 million earmark for the company in the 2007 defense appropriations bill.

As TheIowaRepublican.com has previously reported, the Korean firm and its Iowa subsidiary have received more than $1.5 billion in federal contracts since 2000—largely thanks to Harkin’s lobbying.

Harkin sidestepped American law to give Korean company tariff breaks to start U.S. subsidiary

Harkin has been a staunch supporter of Poongsan since 1990. The company’s South Korean CEO has handsomely rewarded Iowa’s junior senator by providing $500,000 of the $1.6 million that the Harkin Institute has raised to date. In fact, Poongsan owes its U.S. operations to Harkin’s political patronage. In 1990, Harkin muscled through a last-minute package of benefits for the Korean firm despite firm opposition in the Senate.

Harkin’s policy earmark forced the U.S. Department of Commerce to create a foreign trade zone in Cedar Rapids by Feb. 1, 1991. PMX Industries then altered its plans for a brass and steel plant in the city to take advantage of import duty breaks won through Harkin’s “unprecedented political maneuver,” according to a 1990 article in American Metals Market, a trade publication.

“The last-minute political tactic enraged domestic industry sources, who claimed it would afford the new Cedar Rapids facility the special import benefits of a foreign trade zone (FTZ) without requiring the company to meet established legal requirements,” according to AMM. “‘We think it’s an outrageous situation,’ one domestic steel industry source said.”

Former Sen. John Heinz (R-Pa.), a member of the Senate Finance Committee and a supporter of Pennsylvania’s metals industry, led opposition to the Korean deal, but he narrowly lost a vote on Harkin’s surprise amendment.

Sen. Heinz blasted Harkin’s maneuver as a blatant power grab on behalf of a foreign conglomerate. No hearings were held in the House or Senate to discuss the legislation. No opportunities existed for public comment or economic analysis by the Commerce Department, and the legislative language was inserted in an appropriations bill on the Senate floor just as Congress was adjourning for a holiday. Furthermore, Cedar Rapids didn’t even bother applying to the Commerce Department for consideration as a foreign trade zone. They (or Poongsan) simply asked Harkin for a favor.

Sen. Heinz also objected because the company was convicted of “dumping” brass mill products in the United States in 1986. The government defines dumping as predatory pricing by selling products at a loss in U.S. markets (below their market price in their domestic market) to drive American competitors out of business. With Harkin’s legislative help, the firm could avoid “dumping duties or limits on steel imports,” Heinz said, explaining that the dumping conviction is why the company sought an end-run around the Commerce Department. Heinz also noted that Polk County and Davenport had foreign trade zones but Cedar Rapids was too far from a port of entry to be established as a full-fledged zone (it could have been established as a subzone, as in the case of Forest City, Iowa).

“The troubling thing about this application… is that Cedar Rapids … did not ask for help in preparing an application. Indeed, it made no application at all, despite the possibility of Government assistance, despite the Government telling it it was eligible for subzone status—a level that would meet the city’s needs as they were articulated—and despite the offer of assistance from the nearby zone in Davenport,” Heinz said, according to the Congressional Record. “Instead, the city chose to bypass the normal process and shut off any opportunity for public comment by going directly to Congress and seeking legislation, an action that is unprecedented in the years I have been following this issue.”

Harkin slips a corporate welfare research grant for PMX in the 2007 defense approps. bill

Harkin’s favors on behalf of the company didn’t end in the 1990s; they were just getting started. Poongsan is a powerful firm known as Chaebol, a distinctly Korean, family-focused conglomerate that uses foreign loans and government favors to expand its operations across the globe.

Poongsan knows how to work politicians in Korea and America to cash in on corporate welfare. Harkin, who chaired the subcommittee on defense appropriations, secured $2 million for PMX Industries in the defense appropriations bill for “continued research on how copper alloys can reduce certain types of infection.” In 2007, PMX Industries lost $26 million on sales of $570 million, according to Poongsan’s annual report—so it certainly welcomed a U.S. bailout.

“These investments bolster Iowa’s economy and help fortify America’s defenses,” Harkin said in a July 2006 press release trumpeting his corporate welfare to a Korean arms dealer that now provides advanced weaponry for Pakistan’s military. “Iowa plays an important role in strengthening our nation’s defenses, and I am proud to announce this Defense Department funding for our communities and businesses.”

Poongsan continues to receive support from Harkin even as it produces civilian-killing cluster bombs with Pakistan’s state-owned defense industry

Poongsan entered into an agreement with Pakistan Ordnance Factories, a state-owned defense contractor in the chaotic Islamic nation that sheltered Osama bin Laden, to produce K310 155mm cluster bombs. Such bombs are controversial weapons of war as they are similar to land mines in that they can indiscriminately kill and maim civilians long after a military conflict has ended. Handicap International, a recipient of the Nobel Peace Prize, estimates that 98 percent of cluster bomb victims are civilians and nearly one-third are children. Some are unusually shaped or brightly coloured, making them attractive to young children who are unaware they are filled with explosive shrapnel. South Korea maintains that it needs such munitions due to its unique situation of constant tension and the lingering war with North Korea.

Koreans protest Poongsan Corp.

Koreans protest Poongsan Corp. for producing cluster bombs.

Poongsan has received international and domestic scorn for continuing to produce such weapons in conjunction with unstable countries such as Pakistan, who then sell the munitions to other militaries or private purchasers. European countries such as the United Kingdom, Sweden and Norway forced their pension funds to divest from their Poongsan holdings when it emerged that Poongsan was manufacturing cluster bombs for Pakistan and other militaries, “violat[ing] fundamental humanitarian principles.”

Harkin talks tough on guns, ignores Poongsan’s booming business in ammo for large-capacity magazines

Harkin also used the media call to exploit the school massacre in Newtown, Conn. for his political agenda on gun control. Although he criticized gun manufacturers and sought to ban assault style weapons and guns with high-capacity magazines capable of firing hundreds of rounds per minute, he failed to address the political hypocrisy of accepting a $500,000 donation from a foreign arms dealer that produces such ammunition.

“These combat-style weapons, which can fire hundreds of bullets in a very short time, are designed for one purpose: to kill a large number of people in just seconds,” Harkin said in a prepared statement, referencing the Bushmaster rifle used in the Newtown mass killings.

Harkin supported the assault weapons ban that Congress passed in 1994, which did not cover the AR-15-style Bushmaster rifle, and says he is optimistic of new gun restrictions passing Congress in 2013.

“We have to prohibit the manufacture and sale of these high-capacity guns… these are military type weapons, and they shouldn’t be out in the general populace,” he said.

As TheIowaRepublican.com recently reported, Poongsan’s subsidiary brand, Precision Made Cartridges (PMC), is one of the largest producers of .223 rounds for AR-15 guns such as the weapon used by Adam Lanza, the mentally-ill mass murderer in Sandy Hook.

The slogan of Poongsan’s ammunition division is, “[c]reating a legend… one shooter at a time.” A bulk order of 1,000 .223 caliber PMC rounds can be purchased online for as little as $413—41 cents per bullet. Poongsan markets the bullets as a way for shooters to “enjoy high volume shooting without emptying their wallets.”

“Poongsan has sufficient capacity to provide for the South Korean armed forces and the larger market beyond Korea (including the U.S.),” according to a 2009 analysis of the company by the U.S. National Defense University. “Poongsan’s ammunition production rivals that found in the U.S. both in quality and quantity, exceeding one billion rounds per year—capacity in this case well exceeds Korean needs.”

Such a surplus allows Poongsan to provide plentiful, cheap ammunition for guns using high-capacity magazines in the U.S. market. But Poongsan is a donor to the Harkin Institute, and Harkin has dutifully remained silent about its controversial corporate activities, including its pollution of Iowa waterways and other assorted corporate misdeeds typically opposed by liberals.

Note: This post has been updated to make technical corrections.

About the Author

Jeff Patch
Jeff Patch is a correspondent for TheIowaRepublican.com. He's a communications, research and political consultant for Iowa candidates, causes and companies. E-mail questions, comments, insults or story ideas to jeff [at] theiowarepublican.com.

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