The US Senate’s investigation has found that among the top 25 companies benefiting from two funding programs for small businesses at the Department of Defense, six of them have “alarming connections” with the Chinese Communist Party (CCP). One of the companies even has executives serving as directors in investment institutions in China.
According to a report by Bloomberg on Thursday, Republican Senator Joni Ernst from Iowa criticized that the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs have two major issues: companies repeatedly receiving funding manipulate the system to monopolize new business resources, hindering innovation; and weak national security review measures allow adversaries like the CCP to benefit through funded companies.
Ernst stated in a report that there are six companies that have both of the above-mentioned problems. The report is set to be released later this week.
She said, “A few companies, known as the ‘SBIR mill’, have taken advantage of the funding programs to obtain the majority of funds. At the same time, they have unsettling connections with foreign adversaries of the United States.”
Since 1982, these two programs have disbursed over $75 billion in funding.
The company that received the most funding is Triton Systems based in Chelmsford, Massachusetts. Since its establishment in 1992, Triton has received over 900 grants worth over $365 million through these funding programs.
Triton’s website claims that it has been conducting research and development for the Department of Defense in defense, energy, and medical fields for over 30 years.
During a hearing on March 5th, Ernst questioned why Triton is still considered a “small business”? She also expressed concerns about the business relationships between Triton’s founder, Ross Haghighat, and China International Capital Corporation Limited (CICC).
CICC is a Hong Kong-based investment management and advisory company specializing in alternative investments, and its major investor, CITIC Group, is one of the most powerful state-owned enterprises of the CCP.
Records show that since 2016, Haghighat has had financial dealings with CICC. In 2016, he served as the Chairman of the Triton spin-off company’s board of directors for CICC investments; and from 2020 to 2022, he also served on the board of another entity of CICC.
Previously, several US lawmakers have publicly warned that funds from the Small Business Innovation Research Program and Small Business Technology Transfer Program may have been improperly utilized by the CCP.
On February 26, Republican leaders of three House committees announced an investigation into CCP’s “systemic exploitation” of US startup funding programs, accusing the CCP of acquiring US technology through these programs for military and technological development.
The investigation will focus on eleven federal agencies, including the Department of Defense, the Department of Health and Human Services, the Department of Energy, and the National Science Foundation. These agencies provide funding support to US startups and small businesses through the SBIR and STTR programs.
These lawmakers criticize that regulatory loopholes have made the CCP one of the main beneficiaries of these funding programs, posing national security risks to the US.
Ernst stated on Thursday that she hopes to push for reforms to these funding programs at the Department of Defense, proposing legislation to strengthen security reviews and setting a cap of $75 million on the total amount that companies can receive in funding.