By PAULA TRACY, InDepthNH.org
CONCORD – An 11-page report issued by Attorney General John Formella Monday concluded that the state Department of Business and Economic Affairs did not recruit, but did assist the Chinese-based company Nongfu Spring in buying a building and land in Nashua.
“The BEA business development manager did not violate any existing BEA or State policies or protocols through his actions in helping to facilitate the purchase of the subject property or in failing to notify his supervisors of the transaction and the purchaser’s Chinese ownership until late 2024/early 2025.
“Further, the BEA business development manager did not violate any federal or state law, regulation or policy though his actions. In particular, it should be noted that the BEA business development manager, in the course of meetings he attended, received representations that Nongfu Spring was taking steps to obtain necessary federal approvals,” the report said.
The BEA violated no law, according to Formella’s report, but it did not notify federal authorities of the sale because they were told by a representative of the company that it had already secured the federal review.
Minutes after Formella’s release was issued, Gov. Kelly Ayotte released a statement and then two executive orders aimed at protecting computer systems and directing state agencies to make sure they do not get involved in any transactions involving real estate in New Hampshire with foreign principals from countries like China, Russia, Iran, Syria and North Korea. The orders also require that state agencies report any such transactions to the New Hampshire Department of Justice.
The orders also mention a recent law Ayotte signed related to such foreign investment.
Formella’s report said Nongfu Spring (based in China) reached out directly to the BEA business development manager for help verifying the overseas travel of its employees to attend business meetings in Nashua. The BEA business development manager provided a short letter of confirmation.
The notification in the spring to Nashua coincided with news about the sale and increasing concerns for national security and complaints from the company about the bad press.
The report said its proximity – fewer than 100 miles from a Cape Cod federal installation – should have prompted federal oversight over the purchase but a lawyer for the buyer said they already had that federal approval though there was no evidence presented in the report.
Given that there are few parcels on the market near a source for more than 2 million gallons of water withdrawn a day, the report said the sale price was not necessarily out of the market given the lack of other available properties to handle that sort of business and that the company was also looking at a property in Maryland.
Ayotte said Monday before issuing her executive orders that “foreign adversaries like China should not be doing business in New Hampshire, and I am taking action today to ensure it. In addition to a new law banning these types of land purchases, I will issue executive orders to ensure the Chinese Communist Party and other hostile groups are not doing business with our state government.”
The Attorney General’s Office said, “while this report was subject to attorney-client privilege and executive privilege, the Governor has waived those privileges in this case and authorized the release of this report.”
“Given the important public interest in this matter, the Governor has authorized the Department of Justice to release the attached report,” Formella said. “The Department prepared this report to provide an independent review and assessment of the facts and circumstances related to the purchase of Nashua property by Nongfu Spring. Our goal in releasing the report is to ensure transparency and provide the public with factual information about state and local involvement in this transaction.”
Neither Ayotte nor Formella immediately responded to InDepthNH.org when asked why they believe the report was confidential and required Ayotte to waive her attorney/client and executive privileges.
The Department emphasized that release of this report “is intended to inform the public and provide context regarding state and local involvement in the transaction, without offering policy judgments or recommendations beyond the conclusions contained within the report.”
EXECUTIVE COUNCILORS PRESS CASWELL ON BEA INVOLVEMENT
On Aug. 18, three executive councilors questioned the former commissioner of the state Department of Business and Economic Affairs, Taylor Caswell, on his agency’s involvement in recruiting the company to New Hampshire.
The three Councilors wrote to Caswell on Aug. 14 to ask specifically for a review of the transaction and to ask if there was involvement with the Committee on Foreign Investment in the United States.
The Executive Councilors signing the letter are Joe Kenney, R-Wakefield, John Stephen, R-Manchester and David Wheeler, R-Milford.
The three councilors issued a news release Monday saying they found a lack of communication and leadership at BEA. “Changes must be made—above and beyond those outlined in the report—to ensure the people of New Hampshire are protected and have a voice in transactions that may impact major community water utility.”
Although the report notes that BEA is currently implementing two “process updates,” they said they believe these measures do not go far enough, recommending that quarterly reports be submitted to the Executive Council detailing foreign companies that are seeking or currently engaged in activities with BEA.
“BEA must independently confirm that approval has been granted by the U.S. Department of the Treasury and/or the Committee on Foreign Investment in the United States (CFIUS) before proceeding with any work involving a foreign company. This confirmation should not rely solely on the company’s word,” the release said. And the Department of Environmental Services should have been involved.
“BEA must make every effort to encourage and conduct public hearings in cases where a major community utility or water supplier may be affected.
“We find there has been an appalling lack of communication with the public, and a troubling absence of community engagement or public hearings related to this sale—despite its significant potential impact on the water supply of an entire community. At no point in the process does it appear that public input was required, even with the acquisition of a wastewater permit, which also typically does not trigger a public hearing,” the release said.
“We cannot afford to be ‘asleep at the switch’ when it comes to foreign investments in New Hampshire.
These transactions must be vetted with the utmost care and transparency,” the three councilors said.
Their request for information came before the three of five councilors signalled to the governor that they would not support her renomination of Taylor Caswell. He resigned last week. The three did not specify this matter as a reason for their lack of support Caswell’s nomination.
Caswell responded to the three councilors this summer that he could not answer questions, as it was being investigated by the Attorney General’s Office.
GOODLANDER GETS INVOLVED
Congresswoman Maggie Goodlander, D-NH, had written a letter Aug. 5 to the Secretary of the Treasury, Scott Bessent, expressing concern about the transaction and because he is the chair of the Committee on Foreign Investment in the United States “to conduct a thorough and complete retroactive review of the transaction pursuant to the authorities provided to CFIUS by Congress, including, under the Foreign Investment Risk Review Modernization Act of 2018.”
BACKGROUND ON SALE
On Jan. 31, the industrial park property at 80 Northwest Boulevard in Nashua was purchased by a subsidiary for the largest bottled water producer in China, Nongfu Spring. NF North America is owned by that communist nation’s most wealthy individual, Zhong Shanshan, according to a Bloomberg profile.
The purchase was for $67 million when the property had been assessed by the city for $15 million and was unoccupied.
It was the understanding that the company wants to buy water from Pennichuck Water Company, which provides drinking water to a large area of southeastern New Hampshire.
Pennichuck said it had water capacity for the 2 million gallons a day but would want upfront funding for improvements to the system to accommodate it, according to Formella’s report.
But the property also is not far from sensitive national security facilities in the Nashua area that has some, including the governor, concerned.
Nashua Mayor James Donchess, a Democrat, charged that the state Department of Business and Economic Affairs was the reason that the company learned about and purchased the property.
Caswell, in an article for the NH Business Review in June, said in a statement that “BEA frequently receives inquiries from businesses exploring opportunities to locate, expand or secure financing in New Hampshire…these inquiries often come through third party intermediaries…such as consultants or site selectors, seeking general information about available commercial properties, regulatory requirements, tax structures and other business considerations. This was the case with the recent project in Nashua. While the BEA has since become aware of the projects’ Chinese ownership, no substantive assistance has been requested or provided by the agency.”
The issue of concern about hostile foreign ownership of property was a subject of Senate Bill 162 which ended up passing in the legislative budget process. It dealt specifically with the sales of certain land in proximity to existing national security properties.
Formella’s investigation included interviewing employees at the Department of Business and Economic Affairs, the City of Nashua, and the Pennichuck Corporation, Nashua’s water utility and pertinent public records and available email correspondence.