Gov. Scott’s huge, hidden stake in Chinese company supplying maker of Brightline trains

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott and his wife had an enormous, hidden financial stake in a Chinese railway company that supplies components to the U.S. contractor building Brightline passenger trains for All Aboard Florida, a venture the governor strongly backed.

The Scotts’ interest in Qingdao Victall Railway Group Co. Ltd. began in October 2014 when it partnered with their company, Continental Structural Plastics (CSP), to form a 50-50 joint venture called CSP Victall (Tangshan) Structural Composites Co. Ltd. At the time, the Scotts were majority owners of Michigan-based Continental.

Continental Structural Plastics, which was sold to the Japanese conglomerate Teijin for $825 million in January 2017, manufactures lightweight composite materials used in cars, trucks, and construction. Qingdao Victall and its affiliates use lightweight “composite material similar to automotive interiors” to make modular products and parts for high-speed trains, intercity trains and other transportation equipment. The partnership manufactures composite components in China.

Continental’s sale produced a $200 million windfall for Gov. Scott personally and another $350 million for First Lady Ann Scott and 11 smaller investor-partners, Florida Bulldog reported last year. The other investors were Scott family members or close associates.

Gov. Scott held his Continental investment in a blind trust and did not timely disclose his bonanza from the sale.

Scott and his spokespersons have said for years that all assets in his blind trust are under the control of an “independent” trustee and he has no knowledge of them. In fact, the trustee’s chief executive is a longtime Scott crony, and Scott himself has personally signed Securities and Exchange Commission documents reporting the sale of stocks in his blind trust.

Gov. Scott and First Lady Ann Scott last April when he announced his run for the U.S. Senate

The governor’s June 2018 state financial disclosure form does declare – without explanation – that his net worth jumped $83 million from the previous year and that he also pocketed another $120 million in outside income from his blind trust. In late July, Republican Scott disclosed his Continental investment on a federal disclosure form filed as he runs for the U.S. Senate seat now held by Democrat Bill Nelson.

Scott’s state disclosure form does not mention the First Lady’s investment in Continental. Florida does not require public officers to disclose assets beneficially owned via spouses. The governor did mention it in his subsequent federal filing.

Scott on board early

A month before the CSP-Victall partnership was formed in September 2014, All Aboard Florida chose the giant German conglomerate Siemens to build the locomotives and passenger cars for what was to become Brightline. The stainless steel passenger coaches were described as the first that Siemens would manufacture in the U.S.

Gov. Scott was on board early with All Aboard Florida’s plans to develop Brightline service from Miami to Orlando. (The train currently runs from Miami to West Palm Beach.) On June 25, 2013, Scott’s Department of Transportation announced it had agreed to give the company a 50-year lease on state lands it needed for parts of the Miami-Orlando route. “This lease is another example of how our economic policies work to create private sector jobs,” Scott said at the time.

One year later, in June 2014, Scott signed a state budget that included about $214 million in public loans and grants to build an intermodal train station that All Aboard Florida wanted at its terminus at Orlando International Airport.

In addition to the Brightline job, Siemens won contracts with Amtrak to build locomotives for use in proposed high-speed routes in California, Illinois, Michigan, Missouri and Washington. Those projects are funded in part by the 2009 federal stimulus program. The south segment of Brightline was financed by the sale of $600 million of limited obligation bonds that are exempt from Florida taxes.

Today, Aug. 29, the Florida Development Finance Corporation (FDFC) meets in Orlando to decide whether to approve another $1.75 billion in private activity bonds to finance the rest of the Brightline project. {PM Update:  Florida Bulldog reporter Ann Henson Feltgen reports the FDFC board – chair Daniel Davis, vice chair Kevin Hale and board member J. Nelson Bradshaw – unanimously approved the plan}.

U.S. Customs records show that between Feb. 1, 2015 and July 1 of this year, Siemens has been importing train car and locomotive components from Continental Structural Plastic’s Chinese partner, Qingdao Victall Railway. More than a dozen bills of lading detail shipments of nearly 50 tons of cargo described for customs as “interior sidewall lining” and “dash, cab complete.”

‘Space-age, ultra-lightweight’

The CSP Victall partnership said in promotional materials that it manufactures “space-age, ultra-lightweight” composite components for automotive and other markets at a 322,000-square-foot plant in the eastern city of Tangshan, site of a devastating earthquake that killed more than 240,000 people in 1976.

The trade journal Plastics News reported in June 2016 that Continental began looking for a partner in China in 2012. The partnership deal with Qingdao Victall “aims to capitalize on CSP’s light-weighting innovations and technology” for use in the Chinese company’s railcar components, including passenger interiors.

“There was a logical connection for them and for us,” Continental Chief Financial Officer Jon Smith told Plastics News. “They got somebody to work with that actually makes the material they need as opposed to having to buy it 100 percent outsourced…And, we got an introduction into mass transit railway systems.”

Scott injected high-speed rail into his Senate campaign against Nelson in June when he announced that Brightline President Patrick Goddard had made an unsolicited proposal in March seeking certain state-owned rights of way along Interstate 4 to construct higher speed passenger rail service between Orlando and Tampa.

In 2011, Gov. Scott rejected $2.4 billion in federal funding to build similar high-speed rail service from Orlando to Tampa proposed by the Obama administration. Scott has said it would have likely ended up “overspending taxpayer dollars.”

Brightline’s proposal, however, would be a private investment with “zero financial risk to Florida taxpayers,” Scott said.