Recent allegations of illegal foreign ownership of commercial properties proved unfounded in two prominent cases, triggering criticism of the state’s process for enforcing a 2023 law meant to halt Chinese stakes in Arkansas real estate.
Arkansas State Chamber of Commerce CEO Randy Zook denounced the latest inquiry, into Walmart vendor Olivet International Inc. of California, as an injustice to the company and “nearly a colossal screw-up.”
The Arkansas Department of Agriculture, under Act 636 of 2023, must refer reports of “reasonable suspicion” of forbidden Chinese ownership to the state attorney general’s office. Attorney General Tim Griffin on Aug. 13 cleared Olivet subsidiary 4811 S. Zero Street LLC of any wrongdoing in its ownership of a 378,000-SF factory in Fort Smith.
The property is the former Trane Manufacturing heating and air-conditioning plant near Ebbing Air National Guard Base. Trane announced in 2017 that it was shutting the factory down. At the time, it employed about 250 people.
Griffin found that Olivet, which has several business sites in Arkansas, “is not owned by, controlled by, or associated with any ‘prohibited foreign-party-controlled business.’”
He made the same determination about another company the Agriculture Department referred for investigation last year. On Dec. 23, he exonerated parts maker Risever Machinery LLC of impropriety in owning a factory in Jonesboro.
Risever is Chinese-owned, and perhaps merited investigation, but Zook had specific objections to the case against Olivet. Some company leaders, notably co-owner Lydia Hsu, who met with Zook, are Americans of Taiwanese descent.
Taiwan is the sworn enemy of communist China, as Zook pointed out, and was known for decades after World War II as “Free China.”
Officials at Olivet couldn’t be reached for comment, but Zook described the company as a key Walmart supplier and a leader in “reshoring” manufacturing jobs from overseas to the United States.
Hsu “is a naturalized citizen since the early ’80s and operates a very large, very successful company based in Southern California manufacturing products for Walmart, Target, Williams-Sonoma, all kinds of big national brands,” Zook said. Walmart has cited Olivet as “one of its key players in their, quote, sustainability and reshoring efforts.”
The company, which uses recycled plastic to make luggage and dozens of other products, has a national fulfillment center in Bentonville and a 722,000-SF complex in south Fayetteville.
“It was nearly a colossal screw-up, putting them through this,” Zook said. “The woman [Hsu] is originally from Taiwan. She is not Chinese. There was no reason to object to this ownership because of security concerns.
“This is one of Arkansas’ best-kept secrets,” Zook said, describing Olivet. “It’s a privately owned company and it doesn’t make headlines; it doesn’t need headlines. But it’s just a heckuva successful business that we need to support.”
Its operation in Fayetteville “literally occupies every square inch of the Old Superior Industries plant,” filled with “about 30 high-pressure plastic injection molding machines and lines, plus warehousing and raw material storage, as well as finished goods storage.”
Walmart Inc. did not respond to requests for comment for this article.
Syngenta Sanctions
The attorney general’s office wouldn’t speak on the record about the investigation, beyond pointing to Griffin’s Aug. 13 statement and noting that it had indeed found illegal ownership of 160 acres of seed company land near Bay (Craighead County) last year. The state ordered a subsidiary of Syngenta Seeds LLC to sell the land within two years and imposed a fine.
At the time, Gov. Sarah Huckabee Sanders said national and state security were at stake. “This is about where your loyalties lie,” she said.
Arkansas Agriculture Secretary Wes Ward issued a statement to Arkansas Business on Aug. 30, saying his department takes its responsibilities under Act 636 seriously “to ensure our national security and the safety of Arkansas.”
To refer companies for investigation, the statement said, the department relies on “receiving information creating a reasonable suspicion (as defined in Rule 2.1 of Arkansas Rules of Criminal Procedure) of Chinese property ownership within the state … .” The department then, he said, “is required by law to refer the issue to the Arkansas Attorney General for investigation.”
Rule 2.1 says that “reasonable suspicion” is suspicion based on facts that may not rise to the level justifying an arrest, “but which give rise to more than a bare suspicion; that is, a suspicion that is reasonable as opposed to an imaginary or purely conjectural suspicion.”
Unanswered Questions
Ward did not respond to specific questions from Arkansas Business, even though they were sent after his office asked for them in writing.
Those questions sought specifics about the system the department uses to flag a company as potentially foreign-owned, and what caused it to suspect Risever and Olivet.
Risever, headquartered in Hefei, China, provides parts to Caterpillar, Volvo, Terex and Komatsu. The state of Arkansas and Jonesboro Unlimited, a private economic development group, negotiated with the company for months before reaching an agreement for the site that eventually came under investigation.
The $20 million, 125,000-SF facility near Jonesboro opened in 2019.
Gov. Asa Hutchinson and other dignitaries attended the ribbon-cutting, which followed state incentives to lure Risever, including a $1 million grant from the Governor’s Quick Action Closing Fund.
Arkansas Business reported in January that the state no longer solicits Chinese-owned companies to locate here, and Arkansas Economic Development Commission Director Clint O’Neal went even further in an interview last month.
“Our position has drastically changed as opposed to what it was 10 years ago,” O’Neal said. “Arkansas and most states saw China as a really rich target for foreign direct investment projects. We had contracts in place … looking to build relationships with Chinese government officials, with Chinese companies.”
But in hindsight, he said, even Hutchinson has suggested that those efforts were perhaps unwise. “Had we known that the climate would have changed so much, including disputes over trade policies and just the general relationship between the U.S. and China, maybe we wouldn’t have gone in the direction that we did.”
Jeff LeMaster, communications director for the attorney general’s office, said Wednesday that Act 636 prohibits ownership of agricultural and non-agricultural land by prohibited foreign-party controlled businesses. He said the fact that the Risever and Olivet properties were industrial “didn’t factor into our determination.”
At the same time Ward referred Risever to Griffin, he also sought an investigation into Jones Digital LLC, which built a cryptocurrency mining center in DeWitt.
Last year, Jones Digital went to court to block Arkansas County from enforcing a stricter noise ordinance against the center. A judge ruled that the ordinance violated Act 851 of 2022, a since-amended law that prevented local authorities from “discriminating” against data centers. DeWitt residents at the time complained that the law, ironically, protected Chinese owners of facilities that use vast amounts of electric power and water.
Arkansas Business reported in July 2023 that a bitcoin mine near Greenbrier was tied to Gang Hu (or Hu Gang), leader of Greenland Holdings of Shanghai, which is nearly half-owned by the communist Chinese government.
According to state business records, the mines near Greenbrier and DeWitt are connected through Yizheng “Ethan” Wang. He’s listed as manager of the Faulkner County bitcoin hub and incorporator/organizer of Jones Digital.
LeMaster said Wednesday that the inquiry into Jones Digital’s ownership is ongoing.
Sign up for Daily E-news
