Even an apparently innocuous investment by Shanghai Pudong Science and Technology Investment Inc into a US startup manufacturer of an amphibious light sport aircraft, California-based Icon Aircraft, is another casualty of the US-China trade war, after American investors in the company accused PTSDI of illegal technology transfers to China.
The Icon A5, which the company says you can get a license to fly within a week or so, is now at the center of bitter intellectual-protection legal battle in the Delaware Chancery Court between Icon majority shareholder PDSTI and American shareholders Phil Condit, a former Boeing CEO, and Icon founder and former chief executive officer Kirk Hawkins.
The defendants, PDSTI, “have illegally breached, and continue to breach, their fiduciary duties to Icon and plaintiffs in order to facilitate the expropriation of Icon’s intellectual property in aircraft design, aircraft manufacturing, and advanced carbon-fiber structures manufacturing to China,” according to the lawsuit by the minority shareholders filed on June 1.
Condit and Hawkins claim that PDSTI purposely scuttled the viability of Icon by withholding financial resources, removing minority American board members, and blocking takeover talks with Japanese conglomerate Yamaha.
“If Chinese investments are masquerading as venture capital in order to gain access to US technology, it violates this trust. As the lawsuit explains, the investments by PDSTI in Icon were never intended to make the company successful. Rather they were part of a plan to gain technology and defraud minority shareholders,” Condit said in a press release.
But the legal battle between PDSTI and Icon’s US investors only illustrates the almost complete deterioration of Chinese investment in US companies following the US-China trade war triggered by former president Donald Trump and continued under the leadership of his successor Joe Biden under the “Build America Better Again” policy from the heyday of Chinese investment into the United States during the Barack Obama administration.
CSNine founder and Icon Aircraft supplier Newton Howard spent the Fourth of July holiday promoting the Icon A5 Amphibious by first having the plane act as a float for District of Columbia shadow senator Paul Strauss during the annual Pacific Palisades July 4 Parade in California and then as a demo model in front of his Georgetown home, where he hosted a swanky Independence Day party with congressional staffers and US Department of Defense officials.
The A5, built by Icon in Tijuana, Mexico, is a US$360,000 sports plane capable of land and sea landings and whose target market is owners of supercars like the $1.6 million Porsche 918 Spyder with waterside mega-mansions in Florida and California.
The Icon A5 can fly at 177km/h with a range of 644 kilometers powered by a four-cylinder Rotax 912 engine and can be flown legally in the US with a sports pilot license, Howard said. The plane has fully retractable wings and can be easily transported in a sport-utility vehicle or light truck.
Howard, a professor of mathematics and neurology at Oxford University and Georgetown University, said he decided to include the plane as a parade float because he wanted to excite young children with applied science, as he did by placing two near-life-size replicas of characters from the science-fiction film Transformers outside his four-story house in Washington’s Georgetown area.
The shareholder dispute will more than likely negatively impact Howard’s efforts to sell the Icon A5 to the US as a type of reconnaissance vehicle through his Georgetown-based CSNine defense technology consultancy group.
Howard said Icon Aircraft is planning in coming weeks to land a military version of the A5 on the Potomac River in a demonstration to the Pentagon of the dual-use capabilities of the sport light aircraft.
However, the apparent connections between PDSTI and Icon Aircraft management make any procurement by the US military difficult if not impossible, for technology-transfer concerns.
Cracking the US defense-procurement bureaucracy is extraordinary difficult for any startup or small business like Howard’s CSNine or Ukrainian-American Igor Pasternak’s project to outfit companies like Amazon and the US military with giant airships built by his California-based Aeros Craft concern.
In fact, defense concerns based in NATO member countries such as Italy’s Leonardo SpA and the UK’s BAE Systems completely ring-fence the management boards of their US operations so they can win US military contracts.
Innovative tech startups – especially those with dual-use applications – such as Icon Aircraft or Pasternak’s Aeros Craft must rejig the old motto into “seller beware” and conduct in-depth due diligence on any prospective buyer.
Peter K Semler is the chief executive and founder of Capitol Intelligence.