Coalition for a Prosperous America Troubled by Congressional Investigation of Federal Retirement Thrift Investment Board Pension Decision

SOUTHWICK, Massachusetts, June 5 -- The Coalition for a Prosperous America issued the following news release:

The Coalition for a Prosperous America (CPA) this week sent a letter to Rep. Gerald E. Connolly (D-VA) expressing concern over his investigation of a decision to withhold federal employees' retirement money from Chinese companies. Connolly, the Chairman of the House Subcommittee on Government Operations, recently wrote to Labor Secretary Eugene Scalia regarding the Federal Retirement Thrift Investment Board's (FRTIB) decision not to invest billions of dollars in federal retirement assets in a fund that includes sanctioned Chinese companies. Connolly is now questioning the process of the decision to block such investment.

"This is a very misguided effort," said CPA Chair Dan DiMicco. "The American people overwhelmingly oppose the funding of companies that have been sanctioned by the U.S. government, especially entities that enable human rights violations or provide weapons to rogue regimes. The Federal Retirement Thrift Investment Board made absolutely the right decision to halt the transfer of federal employee pension funds to an index that includes state-directed Chinese companies posing a threat to our national security."

In November 2017, the FRTIB announced a plan (https://www.prosperousamerica.org/press_release_cpa_praise_decision_halting_investment_in_chinese_companies) to move roughly $50 billion of its overall pension program to the MSCI All-Country World Index by June 2020. That index includes a number of companies controlled by the Chinese Communist Party (CCP). CPA actively opposed (https://www.prosperousamerica.org/press_release_cpa_praise_decision_halting_investment_in_chinese_companies) the plan; the FRTIB Board subsequently voted to pause its implementation.

In a letter to Rep. Connolly, CPA praised the FRTIB decision and pointed to an equally pressing concern--the more than 180 Chinese companies currently listed in U.S. stock markets that violate securities laws. Not only do these Chinese entities refuse Public Company Accounting Oversight Board (PCAOB) access to financial records but they also do not comply with Sarbanes-Oxley or Dodd-Frank.

"Rep. Connolly is barking up the wrong tree," said Michael Stumo, CEO of the CPA. "How do Chinese companies get to play by a different set of rules than the rest of the world? Our nation would be much better served if Rep. Connolly investigated why scores of unchecked and potentially fraudulent Chinese stocks are listed in U.S. financial markets. This has been a problem for over a decade and was exacerbated in 2013. Congress must protect America's workers and financial institutions, not advocate for sending hard-earned retirement money to companies already sanctioned by the U.S. government."

The Coalition for a Prosperous America (CPA) has endorsed (https://www.prosperousamerica.org/press_release_cpa_endorses_rubio_s_equitable_act_as_safeguard_for_us_investors) the EQUITABLE Act, which would block certain companies based in China and Hong Kong from accessing U.S. capital markets.

Read more (https://www.prosperousamerica.org/press_release_cpa_endorses_rubio_s_equitable_act_as_safeguard_for_us_investors) about Chinese companies listed on U.S. stock exchanges that are shielded from the full oversight of financial regulators.

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June 2

To: The Honorable Gerald E. Connolly, Chairman, Subcommittee on Government Operations, Committee on Oversight and Reform, United States House of Representatives, 2157 Rayburn House Office Building, Washington, DC 20515

Re: Inquiry on Fed Pension Money Invested in Chinese Companies

Dear Chairman Connolly:

We appreciate the crucial work done by the Subcommittee on Government Operations to oversee whistle blower protections, the management of government operations and many other important tasks. However, we write to express our concern about your recent efforts to investigate the Federal Retirement Thrift Investment Board (FRTIB) decision to halt the implementation of the Thrift Savings Plan I-Fund to the MSCI All Country World Index - an index which includes many Chinese Communist Party (CCP) companies that are a direct or indirect threat to our national security.

The Coalition for a Prosperous America (CPA) is a national nonpartisan organization representing its domestic manufacturer, farmer, rancher and worker members. We focus upon trade and tax strategies to produce broadly shared prosperity in the US.

The FRTIB's decision was correct and warrants praise. There are over 180 Chinese companies listed on US stock markets. They represent over 5% of aggregate US stock capitalization. All Chinese companies violate US securities laws by refusing to allow the Public Company Accounting Oversight Board (PCAOB) or investors to view their financial records. Those companies do not comply with the Sarbanes Oxley or Dodd Frank Acts. They are black boxes holding potential fraud for all investors, as we've recently seen with Luckin Coffee.

Many of those companies produce military equipment for the People's Liberation Army, such as AviChina Industry and Technology Ltd. Others are part of the Belt and Road Initiative which has been called Chinese neocolonialism. Still others (Hangzhou Hikvision Digital Company) are involved with suppressing and imprisoning Uyghurs in northwest China concentration camps.

FRTIB's initial decision to allow investing in an index with CCP companies was incorrect and their recent correction should be lauded - not shamed or investigated.

The Subcommittee on Government Operations should instead investigate why the PCAOB and the SEC have allowed Chinese company stocks to be listed on US stock exchanges at all because they have not complied with US investor protection laws for 20 years.

In 2013, the PCAOB entered into a Memorandum of Understanding (MOU) with China allowing the continuation of public trading of Chinese stocks despite Beijing's violation of multiple investor protection laws. The PCAOB should never have allowed Chinese companies to be listed and should not have signed the MOU. Today the PCAOB website has pulled the MOU down and replaced it with a statement stating that China has cooperate towards an agreeable enforcement regime.

As you are well aware, the US-China conflict is becoming a defining feature of our time. There is no international agreement or norm that Chairman Xi's regime is reluctant to violate. Therefore, keeping our federal pensions safe from capital destruction should be a main focus of the FRTIB.

For these reasons, we ask your committee to investigate the decision by the PCAOB to allow CCP companies to be continue being listed on US public stock markets and the FRTIB's initial decision that would have allowed for investing in an index that includes these black box companies.

Sincerely,

Daniel DiMicco, Chairman

Michael Stumo, CEO