National Security

Chinese bid to buy Big Apple's fabled Waldorf Astoria under scrutiny for national security risks

Gen. Chang Wanquan, the Chinese defense minister, greets Pentagon chief Chuck Hagel in Beijing on April 8, 2014.
Gen. Chang Wanquan, the Chinese defense minister, greets Pentagon chief Chuck Hagel in Beijing on April 8, 2014. Department of Defense

A major Chinese insurance firm’s pending purchase of an iconic hotel that serves as the home-away-from-home for presidents visiting New York is headed toward a likely national security review by a secretive U.S. government agency that vets controversial foreign transactions.

Every American president since Calvin Coolidge during the Great Depression has stayed at the Waldorf Astoria in the heart of Manhattan, often during General Assembly sessions of the nearby United Nations.

The famous hotel next to Grand Central Station is also the place of residence for the U.S. ambassador to the United Nations, a post currently held by Samantha Powers.

Celebrities from Frank Sinatra and Marilyn Monroe to Grace Kelly, Cole Porter and Gen. MacArthur have stayed at the Waldorf, helping turn its Art Deco property at 301 Park Avenue into one of the world’s most well-known addresses.

But it’s the regular presence in the hotel’s Presidential Suite and the ambassadorial residence of senior U.S. leaders, plus the foreign dignitaries who visit them, that experts say will almost certainly trigger a national security review.

Christopher Brewster, a Washington lawyer with Stroock & Stroock & Lavan who represents Chinese and other foreign firms seeking to buy American companies, said he expects that the pending purchase of the Waldorf will be probed by the Committee on Foreign Investment in the United States.

“There are reports that the committee is looking at the transaction, and I’m not surprised,” Brewster told McClatchy on Wednesday. “High-level U.S. government officials frequent this hotel, and there’s undoubtedly a lot of sensitive communication that occurs there.”

The committee, whose work is classified and which goes by its acronym CFIUS, has taken an increased interest in the surging number of purchases by Chinese firms, some of them state-owned and others with close ties to senior Chinese leaders.

In its most recent annual report to Congress, the committee disclosed that in 2012, for the first time, it had done more national security reviews of transactions involving China than of those involving any other countries.

The sales agreement between Hilton Worldwide, which owns the Waldorf Astoria, and Anbang Insurance Group Co. of Beijing grants Hilton management rights for 100 years.

“This agreement is typical of many other hotels with foreign owners in New York and throughout the United States,” Aaron Radelet, Hilton’s vice president for corporate communications, told McClatchy. “It will ensure thousands of American jobs and contribute billions in American tax dollars.”

Anbang, which has amassed more than 20 million customers in China since its 2004 founding, “shares our deep respect for the proud history and traditions of the Waldorf Astoria,” Radelet said.

He said the 47-story Waldorf, which was the world’s biggest hotel when built at its current location in 1931, will “undergo a major renovation” as part of the deal.

Brewster said CFIUS will likely focus on what kind of access to the hotel Anbang employees would have, in addition to the firm’s capacity for planting bugs.

“It has to be something they look at,” he said. “CFIUS exists for the purpose of scrubbing these deals to determine whether appropriate safeguards are in place to protect U.S. national security.”

Brewster added: “They could do the review and conclude that they’re quite comfortable with the protections in place, or they could require that certain extraordinary measures be taken in light of the new ownership of the hotel. It’s definitely a fair area of inquiry.”

The committee, which does not comment on its cases, is chaired by the Treasury secretary and made up of the secretaries of Homeland Security, Commerce, Defense, State and Energy, along with the Attorney General.

While CFIUS has the power to undo completed purchases, it normally acts before their completion.

The Waldorf-Anbang transaction has a closing date of Dec. 31, although Hilton or the Chinese insurance firm can extend that settlement to March 31 next year if it wishes.

A separate Chinese company, Ralls Corp., won a major court victory in July when a federal appeals court ruled that President Barack Obama had violated the firm’s constitutional due process rights in a September 2012 order voiding its purchase of an Oregon wind-farm company.

Ralls had appealed that deal’s rejection by CFIUS to Obama, and then sued the president after he backed up the committee.

The U.S. government is expected to appeal the appellate ruling to the Supreme Court.

Beijing and Washington have accused each other of spying and traded charges of computer hacking.