Congress warned U.S. is in the dark about foreign investment, vulnerable to Chinese takeovers

A former Commerce Department official warned lawmakers that the federal government is blind to who is bankrolling purchases of companies and critical technology in the U.S., making America vulnerable to foreign threats including from China. 

Nazak Nikakhtar, formerly a Commerce Department assistant secretary in the Trump administration, told lawmakers that companies are failing to adequately investigate funding sources for their work and the U.S. government has sometimes failed to conduct due diligence as well.

Ms. Nikakhtar was the Commerce Department’s lead representative to the Committee on Foreign Investment in the United States, which scrutinizes commercial transactions for national security risks. 

“As the former head of CFIUS at the Commerce Department, yes, we were completely in the dark, our intelligence community didn’t have adequate information, and I was frequently in the office until three in the morning using any open source information I could to get to the ultimate beneficial owner,” Ms. Nikakhtar told the Senate Intelligence Committee at a hearing this week. 

Ms. Nikakhtar, now a partner at the law firm Wiley Rein, also said in written testimony that American data and technology transfer enabled China to race ahead in artificial intelligence and China would use American production against the U.S. 

“We have had decades of unregulated supply chain and technology transfer to the [People’s Republic of China] that has systematically eroded our own supply chains and rendered us dangerously dependent on the adversary,” she wrote. “This is not a good national security strategy. We need a new strategy.”

The Office of the Director of National Intelligence did not immediately respond to a request for comment. 

CFIUS includes representatives from seven different federal departments as well as White House officials and its purview was expanded by the Foreign Investment Risk Review Modernization Act of 2018. Ms. Nikakhtar, who was confirmed by the Senate in March 2018 and served into 2021, said the federal government has not yet fully utilized the authority provided by the law.

“As Joseph Stalin is rumored to have said, ‘We will hang the capitalists with the rope they sell us,’” Ms. Nikakhtar wrote. “Whether this quote is accurate or not, it is illustrative of what is happening today.”