U.S. Sen. Hillary Clinton stood in a Washington Township gymnasium last month and publicly said President George W. Bush was forcing the American military to rely on "Chinese spare parts" by allowing the sale of a Valparaiso defense contractor.
But fresh questions are being raised in the wake of Hillary's much-publicized comments questioning why Bush failed to stop Chinese investors from moving Magnequench to China and closing the Northwest Indiana plant.
For example, if the sale of the company to Chinese investors was going to jeopardize national security, why did President Bill Clinton's administration approve it in 1995?
Magnequench made the sophisticated magnets needed to guided "smart bombs." Today, bomb-makers have to buy the magnets from the Chinese.
Kevin Griffis, Indiana spokesman for U.S. Sen. Barack Obama, said Hillary Clinton's comments about Magnequench were part of "Washington game-playing" in which "people are willing to say anything to win an election."
Clinton spokesman Jonathan Swain said the 1995 sale was approved by the Clinton administration because several American companies at the time were making the type of "rare earth" magnets that the military needed for guided bombs.
But by 2003, when the Chinese investors announced they were closing the Valparaiso plant and moving its 225 jobs to China, Magnequench was the only American company left that was still making rare earth magnets.
"Between 1995 and 2003, the landscape changed," Swain said. "The conditions were no longer the same as when the sale was first approved."
A 1988 federal law called the Exon-Florio bill allows the U.S. Committee on Foreign Investment in the United States to examine national security risks when overseas companies buy American plants.
In 1995, a CFIUS under Bill Clinton allowed the sale of Magnequench to a consortium of two Chinese and two American companies.
The McClatchy News Service reported Wednesday afternoon that one of the American firms was Soros Fund Management, owned by investor George Soros, who has contributed vast sums to Democratic candidates including Hillary Clinton and Obama.
U.S. Sen. Evan Bayh, D-Ind., a critic of the sale and chairman of Hillary Clinton's Indiana campaign, has said the 1995 was approved contingent on an agreement that the plant continue to be operated on American soil until at least 2005.
"The investors promised to maintain U.S. production of the magnets but in 2003 backed out on that promise," Bayh said in an official news release that has since been taken off his Web site.
Swain said he was surprised that the story was being reinvigorated after so many tellings in the public, and in Indiana in particular.
He repeated Clinton's criticisms of the Bush administration, which he said did not even undertake a CFIUS review in 2003 even though Bayh and U.S. Rep. Pete Visclosky, D-Ind., had called for one.
Visclosky has released all of his paperwork in 2003 in which he encouraged the Bush administration to scrutinize the sale and prevent it, if necessary.
