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Published: Sunday, 2/19/2012

Editorial

Due diligence

Toledo Mayor Mike Bell extols the participation of a Chinese investment firm in the long-delayed development of the Marina District and the operation of The Docks restaurant complex. He says he hopes for greater investment by Chinese and other foreign entrepreneurs in major city development projects.

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But the mayor's enthusiasm is not matched by curiosity about the backgrounds of the two principals of Dashing Pacific Group Ltd., or how they made their money. He has said, in effect, that as long as their checks don't bounce, he doesn't care.

Such willful ignorance could prove damaging if the investors' business values and practices should come to diverge greatly from those that prevail in this community and nation. It is not an expression of nativism to say so, even if some opposition to the Marina District deal has been tinged with racism.

A Blade special report that begins today concludes that the Bell administration has not investigated the Chinese investors, Wu Kin Hung and Yuan Xiaohong, nearly as closely as its predecessors examined other would-be developers of the Marina District. So the newspaper has done that job, hiring an investigative firm that operates in China to look into the backgrounds of the investors.

We aren't naming the company, because such exposure could jeopardize the livelihoods -- and maybe the freedom -- of its owners and workers in China. But its credibility and expertise are evident in the reports that emerged from its review.

The firm discovered that the two investors' business success in China has made them rich. Much of their ability to win contracts appears to be a function of their connections with officials of China's ruling Communist Party, although Ms. Yuan says she is not a party member.

Ms. Yuan's background is in information technology, not property development -- a fact she did not share with the mayor's office. The investigators said they encountered "unexpected obstacles" to learning more about her. She told The Blade she owns 15 homes.

Mr. Wu, the investigators say, began to make his fortune as a government bureaucrat in the fast-growing city of Shenzhen, collecting payments from land developers and contractors who wanted to do business there. When he went into business for himself, he built one of the city's tallest skyscrapers.

Shenzhen's embrace of capitalism -- albeit mostly controlled by the government -- has had negative as well as positive effects, experts say. While many people, such as Mr. Wu, prospered, other residents were forced off their land. Some took dreary manufacturing work that supplanted good-paying jobs that had disappeared in the United States.

It seems fair to ask whether the Dashing Pacific principals' other abilities exceed their talent at ingratiating themselves with powerful politicians, in China or Toledo. Their local partners say the Chinese investors have embarked on sophisticated marketing studies for the Marina District project.

Our investigators in China report that Dashing Pacific is a holding company formed to handle the Toledo investments. The investors have no other American projects. Records in Ohio and China reveal little else about the company.

Asked for in-depth interviews by The Blade, Mr. Wu declined and Ms. Yuan gave vague responses. They mostly offered platitudes about their commitment to Toledo and their compliance with Chinese laws and standards. The Bell administration evidently is content with such bland assurances, but city taxpayers are entitled to greater transparency.

From the start, the administration has handled disclosure of the investors' activities in a way that seemed more attuned to respecting their insistence on secrecy than addressing Toledoans' concerns. City officials say the Marina District sales agreement adequately protects taxpayers' interests, since the city can buy back the land at its sale price if development does not proceed satisfactorily.

But when prime public assets and millions of tax dollars are in play, values of openness must take precedence. The fact that the mayor's office has been no more forthcoming about other actual and potential Chinese investors, such as the buyers of the downtown Park Inn, is troubling. The investors might find such publicity inconvenient, but it's the way things are done in this country, if not China.

The city should not disdain any job-creating investment merely because it comes from a foreign source; that would be self-defeating xenophobia. But it has a responsibility to conduct adequate due diligence in reviewing the credentials of anyone who wants to do business with Toledo, whether he or she is American or from another country.

There still is time for the city to do its due diligence, on the Marina District project and other development ventures. But that time is not infinite, and neither is Toledo taxpayers' patience.



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