Is Michigan Governor Rick Snyder Helping Arm China?

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Thousands of Michigan retirees are outraged by newly-elected Gov. Rick Snyder’s plan to tax pensions while cutting the state’s business tax. Some are beginning to wonder just who they elected to lead a state that has been ravaged by the offshoring of America’s industrial base.

A lot of Michigan’s economic might has been transferred to China. But the China threat goes beyond jobs. It involves our national security, too. If someone—anyone–had bothered to dig deeper before last November’s Michigan election, they might have been surprised by what’s below the surface. A diligent inquiry would have raised some national security questions about Michigan Governor Rick Snyder. They are questions that remain unasked and unanswered. They are questions which should be asked about people in positions of power in every state.

Michigan has been economically devastated by the gutting of America’s industrial base. Big multinational corporations now favor relocation of factory operations in the Communist dictatorship known as the People’s Republic of China.

Jennifer Granholm, Michigan’s Democrat governor for most of the decade, was profoundly ineffective at stopping the economic blood bath. So in 2010, Michigan was ready for a change in leadership.

They turned to a Republican venture capitalist largely unknown outside business circles. Rick Snyder had been a top executive at Gateway Computers. When Gateway lagged in the market, Snyder pocketed his wealth and became a venture capitalist.

Snyder raked in venture capital profits in high technology, especially nanotechnology. Nanotech involves extremely small parts and components. One of the emerging nanotech markets is for MEMS—micro electro mechanical systems. MEMS play an important role in everything from consumer video cameras to smart bombs. Therein is a story most Michigan voters have never heard about their new governor.

For those who aren’t familiar with the venture capital business, it’s a tough, hard-nosed lending resource for entrepreneurs with innovative ideas but empty pockets. Venture capitalists step in, take big risks on carefully selected companies and then ride herd on the companies in their portfolio. They always have an eye toward building these start-ups to a level of success where they can “go public” with a stock offering. Venture capitalists are anything but hands-off lenders. They are on top of everything that can impact their investment. That’s an important point to remember as we explore the Rick Snyder story.

In the gubernatorial campaign Snyder enjoyed calling himself one tough nerd. He campaigned on a theme of change and transparency about Michigan’s finances:

“Lansing needs to be more accountable, ethical and transparent.”

That comment by Snyder in one of his campaign ads almost became a mantra.

 “It’s absolutely critical that we have accountability and transparency in financial information.”

Rick Snyder’s campaign for governor of Michigan was almost a cakewalk. His opponent, Lansing mayor Virg Bernero, never stood a chance.

The only blood Bernero was able to draw was during the single Snyder/Bernero televised debate in October. Here’s what Bernero said in his opening remarks:

“I have to share with you some disturbing news. We’ve also learned that another of Mr. Snyder’s companies has created jobs in China, as recently as a couple of months ago.

“Mr. Snyder is the founder and board director of a company called Discera. That company just finished a new, state-of-the-art job creating facility. But unfortunately, that facility wasn’t built in Michigan. It wasn’t even built in America. That plant and those jobs landed in Shenzhen China.

“Here is what Mr. Snyder’s chief technology officer told the press, quote, ‘Discera is helping Chinese businesses compete and win in the global marketplace.’

“Helping Chinese businesses to compete and win? And yet you want to be our governor? What about Michigan workers? What about the 630,000 Michiganders looking for work? Mr. Snyder – how could you?”

This got the debate off to a stunning start, but the moderator recovered and turned to Snyder:

Moderator: “Do you own a company that is creating jobs in China?”

Snyder: “Discera does not have an operation in China. They’re based in San Jose, California and they’re based in Ann Arbor, Michigan.  They’re off doing cutting edge technology and they’re doing work all around the world to be successful at that, but their locations are San Jose and Ann Arbor, Michigan. That’s where their R&D has been done and that’s the technology we’ve put into use.”

Both the accusation by Bernero and the denial by Snyder were untrue. Discera has not built a plant in China, nor has it shipped factory jobs to the People’s Republic. Discera is a so-called fabless company which outsources the mostly automated manufacturing of its high tech products. Discera’s nanotech products are made by a Canadian chip foundry called Dalsa.

Snyder, on the other hand, was just plain wrong when he claimed Discera doesn’t have an operation in China. On July 19, 2010 Discera put out a press release, distributed worldwide on the Business Wire. The headline said: ‘Discera Establishes State Of The Art China Applications Center in Shenzhen.’

In the debate when Bernero quoted from the press release about Discera helping Chinese businesses compete and win, he didn’t mention that the press release also noted research and development would be an important part of what Discera called its “permanent” investment plan in China. 

After the debate Snyder admitted what he said in the debate was wrong, but he tried to spin the Discera Chinese R&D center by saying, “”I didn’t know they had found a nice little office for the two or three sales reps to sit down in.”

That Snyder statement in October was totally at odds with what the company told the business community in July.

This contradictory claim was from a venture capitalist running for office. It’s important to remember venture capital is a high-risk money-lending business.

Venture capitalists like Rick Snyder are notorious for fly-specking everything the companies they have invested in are doing with their money. Yet here was Snyder professing ignorance of an operation in China by a company funded with his investment.

Did Discera mislead the business community in its July business wire press release? Or did Rick Snyder mislead Michigan voters a few months later to avoid closer scrutiny?

No one in Michigan—not Virg Bernero, not the Democratic Party, not the trade unions and certainly not the news media—made an effort to fact-check what was being done in Shenzhen with Snyder’s money.

The Pulitzer-Prize-winning Detroit Free Press, which likes to claim it has been On Guard for nearly two hundred years, is a Gannett newspaper. Gannett has a bureau in Beijing. Did the Free Press ask their Gannet colleagues in China to invest some shoe leather and check out the Discera operation in Shenzhen? The answer appears to be no.

What about the Detroit News? Crain’s Detroit Business? What about TV stations WXYZ, WDIV and WJBK, the network affiliates in Detroit? Did they hire one of the many freelance reporters in China to check out Discera’s Shenzhen operation? What about the Associated Press wire service with bureaus in Michigan and China? Apparently not.

How about organized labor, a voting bloc with much to fear from a Rick Snyder governorship? Missing in action—before the election—and after the election. Not a peep from these champions of the working class.

It’s hard to know the reason behind this collective failure to demand answers in the face of a clear campaign contradiction. But the evidence of this collective failure is clear in the questions about Rick Snyder that were not asked.

So what is the big deal about Snyder’s investment in Discera?

Snyder’s venture capital firm, Ardesta, does a lot of investing in nanotechnology, very small things. One of Ardesta’s nanotech financial interests is in MEMS – microelectricalmechanical systems. Two complex MEMS electronic devices might fit on the head of a penny with room for a third.

MEMS are what the Pentagon calls a dual-use technology. And the Communist Chinese military is working feverishly through industrial espionage to steal as much U.S. technology as they can if it can help them become world-class warriors.

Back in 2000, Snyder teamed with a bright University of Michigan electrical engineering professor named Clark Nguyen, and through Ardesta they formed a nanotech company named Discera.

It was focused MEMS applications research and development. Discera has offices in Silicon Valley’s San Jose, Ann Arbor, Michigan and now in Shenzhen, China.

Nguyen’s University of Michigan work on MEMS was largely funded by DARPA—the Defense Advanced Research Projects Agency. In other words, it was taxpayer money. Nguyen’s university research was so impressive DARPA eventually hired him to serve for awhile as their program manager for MEMS technology.

Discera became a leader in the MEMS market.

In 2006 Discera teamed up with Vectron International, a New Hampshire-based defense sub-contractor. They went to work developing nanotech parts for smart bombs and missiles.

In the spring of 2007, Wan-Thai Hsu, Discera’s chief technology officer, gave a Power-Point presentation at the so-called Semi-Con technology conference in Shanghai, China.

One of the slides he presented in China cited the ability of Discera’s MEMS oscillators to survive intense shocks in what he called “harsh environments.” The slide included a bullet point about the 100% survivability of Discera MEMS in an air-gun shock test of 30,000 Gs. His Shanghai audience undoubtedly got the message.

In August of that year, Wan-Thai Hsu was quoted in a technical trade publication as stating: “Our parts have been tested by the military for up to 50 G’s of vibration, for 14,000 G’s impacts, and for 25,000 G’s of acceleration in a centrifuge, with 100 percent reliability.”

The article pointed out Discera’s MEMS components are ideal for smart munitions. During military testing, the article said, “the explosives were removed from some warheads, allowing artillery shells to be retrieved after impact–and Discera’s oscillators were still ticking.”

Consider the timing. Discera’s technology manager told a Chinese audience in March 2007 that the company’s MEMS oscillators work well in what he called “harsh environments,” Six months later he was quoted in a trade journal boasting about how military testing proved Discera’s nanotech MEMS components can survive being inside artillery rounds blasted out of canons.

In 2008, Vectron and Discera introduced an extremely shock-resistant MEMS-based clock oscillator. A Vectron press release said the tiny gadget is ideal for “Smart Munitions, Projectile Electronics, Missiles, Gun-Hardened and other High-Shock and Vibration Applications.”

Vectron International is an interesting case in itself. This advanced tech company is involved in selling battle-grade nanotech components to the Defense Department for smart weapons, yet it also has received a so-called “core” partner award from Huawei, the Chinese telecom giant. Huawei has been repeatedly rebuffed in attempts to sell wireless networking components in the United States because our national security watchdogs suspect Huawei is a front company for the Chinese Army. The fear is that Huawei will spy on America’s digital and wireless networks.

There is no evidence either way on what Discera has shared with China in terms of technology which is used in our most advanced weapons systems. We don’t know what Rick Snyder’s company has been up to, and that’s precisely the point. No one has demanded answers.
So let’s review. Discera, which got its start with nanotech components developed through taxpayer funding from the Defense Department and other government agencies, has teamed with Vectron International to produce a shock-resistant nano-scale component vital to advanced smart bombs and missiles. And munitions technology experts in China know it. They read all the technical journals. They heard about it in a presentation in China by Discera’s chief technology officer. Now Discera has an R&D center in China collaborating on—nanotech things.

The United States has so-called deemed export restrictions intended to protect our nation’s military secrets. The deemed export law governs release of technology or source code for products with civilian and military uses. As noted, MEMS technology can be used in consumer products like automobile sensors and MEMS devices are a key component in smart munitions.

It is highly unlikely that Discera or Vectron International sold any ready-to-use weapon’s grade MEMS components to the People’s Liberation Army of China.
But what about the knowledge, the technology research and design innovations behind weapons-grade MEMS?
Have those design secrets been shared with Discera’s Chinese employees in the company’s new self-described state-of-the-art application center in Shenzhen, China?
If not, how do we know?
What assurances can Discera give our export control watchdogs in the Commerce Department? Do we have to take their word for it?
With the establishment of an R&D center in Shenzhen, China, what’s to prevent Discera’s Chinese technologists from traveling to San Jose or Ann Arbor and accidentally-on-purpose learning tidbits about those munitions-grade MEMS that Wan-Thai Hsu noted in his Shanghai presentation?
Who is minding the intellectual property store on the secrets behind our smart bombs?

Shenzhen, by the way is where Huawei, the suspected Chinese espionage front company, is headquartered.  And Huawei just happens to be a potential big customer for MEMS-based telecommunications components.

Does Discera intend to follow Vectron’s example and become a supplier to Huawei? How will it protect its military technology in a country notorious for extorting trade secrets from those U.S. companies eager to do business there?

Rick Snyder, by the way, put venture capital money in Neophotonics another Silicon Valley nanotech start-up. Neophotonics has been named a “core supplier” to Huawei. Since venture-capital deals are often done privately it’s not known if Michigan’s governor still has any investment capital in Neophotonics.

If Shenzhen is home to a suspected major espionage front company, has Rick Snyder’s company vetted the backgrounds of the nanotech researchers hired in Shenzhen?
Could they be Chinese spies?
If not, how does Snyder’s company know that?

Has the Commerce Department’s Bureau of Industrial Security investigated Discera’s China connections? Has any committee in Congress? How does Washington know what technology insights Vectron or Discera may have shared with China?

Since Discera is using Rick Snyder’s venture capital money to establish what the company calls a “permanent” operation in Shenzhen, what does this say about how Gov. Snyder will protect Michigan’s economic interest in future dealings with China?

These are questions that should have been asked during last year’s campaign.

If the Michigan media get wind of this little expose, the smart money will be on an effort to debunk and discredit this presentation of inconvenient truth. Media managers and editors don’t like it when someone points out they failed to do their duty. Instead of pursuing the Snyder national security story, instead of asking the questions they should have asked, they’ll want to kill the messenger, so to speak.

“Lansing needs to be more accountable, ethical and transparent.” – Rick Snyder

A good place to start might be the governor’s office.

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