Congress members call for investigation into Vertex's ties with Chinese corporations

Congress members call for investigation into Vertex's ties with Chinese corporations

WILMINGTON, NC (WECT) - More than 50 members of Congress signed a letter on July 15 requesting an investigation into Wilmington-based Vertex Railcar Corporation and its ties to two Chinese corporations.

The letter specifically asks the Committee on Foreign Investment "investigate the pending transfer of ownership in the Vertex Railcar Corporation involving the China Railroad Rolling Stock Corporation (CRRC) and Majestic Legend Holdings ("Majestic")."

Vertex officials said they are aware of the letter and said it is "very misguided."

"We believe this is a direct result of railcar lobbyists of our competitors attempting to manipulate the system to stifle competition. Both [Peter DeFazio] and [Randy Forbes], the sponsors of the letters, represent competitors operating within their respective constituencies," said Vertex spokesperson Foster Sayers III. "Vertex is proactively reaching out to the Treasury Department, among others, to provide an introduction to Vertex and address the inaccuracies contained in the letter."

In June 2015, Vertex entered into a joint venture with China Southern Rail, which merged with China Northern Rail to form CRRC, and Majestic, a Hong Kong-registered private equity firm.

The joint venture created a partnership, with Vertex Rail Technologies owning 33 percent, CRRC owning 22 percent and Majestic owning 45 percent.

In the letter, Congress members said CRRC "is able to access subsidized financing from the Chinese government, which has already enabled the company to underbid private competitors for railcar contracts in Boston and Chicago. In effect, American railcar manufacturers and its associated industries, such as steel, are now competing against the resources of the world's second largest economy."

The letter also connected Majestic's association with Legend Holdings, the parent company of computer manufacturer Lenovo, and referenced a statement by John Carlin, Assistant Attorney General for National Security at the Justice Department, that China's cybercrimes constitute a threat to national security.

"[Congress members] concerned that critical rail infrastructure and the sensitive cargo that it carries will become increasingly vulnerable to hackers as the proliferation of Chinese state investment continues without adequate scrutiny," stated Carlin.

We have reached out to Rep. Walter B. Jones, one of the Congress members who signed the letter, for comment, but have yet to hear back.

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