The FBI and an investment-screening panel are investigating a Chinese government-backed company's investment in an aircraft startup, The Wall Street Journal reported Tuesday.
The probe comes after accusations of improper technology transfer to China, according to WSJ.
The Committee on Foreign Investment in the U.S. (Cfius), an interagency panel that can recommend that the president stop deals on national-security grounds, is reviewing Shanghai Pudong Science and Technology Investment Co. (PDSTI) and its nearly 47% stake in Icon Aircraft Inc., a California-based maker of small recreational, amphibious planes.
PDSTI's investment is the largest of any shareholder in Icon, WSJ reported.
The newspaper said a group of U.S. shareholders has accused PDSTI of gouging out Icon and moving its technology to China.
Americans say Icon's technologies potentially has military applications, though a lawyer for the company said its aircraft don’t have military uses and didn’t see PDSTI’s investment as a national-security concern.
Cfius began its review in late November, WSJ reported. Icon's lawyer said the company was cooperating fully with the probe and expected the panel to finish its review by the end of February.
The newspaper added that the FBI has begun a separate probe into possible criminal violations related to the deal and the alleged transfer of technology.
Icon's lawyer and PDSTI representatives told WSJ they hadn't been contacted by the FBI.
The Cfius investigation into PDSTI underscores its heightened scrutiny on U.S. investment from China as the two superpowers compete to dominate technologies deemed crucial to future economic and military competition.
PDSTI insisted its investment in Icon saved the company from collapse, and the technology sharing will provide needed capital.
The Cfius review is "an example of how the Cfius process can be improperly weaponized against a good-faith investor," a source told WSJ.
Icon was founded in 2006 by a former Air Force pilot and a former product-design lecturer at Stanford University. The company builds a carbon-fiber plane with foldable wings capable of land and water takeoffs and landings, shareholders told WSJ.
The Icon website says the plane is designed for recreational use, though shareholders told Cfius that the aircraft could be modified to perform military functions, WSJ reported.
The shareholders told Cfius that Icon didn’t seek the panel's approval of PDSTI’s investment initially because the stake started out small in 2015.
By 2017, however, PDSTI had amassed a large stake in Icon, and began installing board members and executives and forming plans to transfer Icon’s technology to China.
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