Icon Stockholders Sue To Block Alleged Illegal Technology Transfer to China


A consortium of some 35 minority Icon Aircraft shareholders has filed suit to block what it says is illegal transfer of technology to China by majority shareholder Pudong Science and Technology Investment Inc. (PDSTI). The minority group includes former Icon board member and former Boeing CEO Phil Condit, as well as Kirk Hawkins, former Icon CEO whom PDSTI placed on sabbatical leave in 2018 and subsequently replaced. According to the suit, the move was designed to hamper Icon’s ability to generate fresh capital and force transfer of its proprietary technology to China. Icon builds and markets the two-seat A5 light sport amphibious airplane.

According to the wording in the lawsuit, which was filed in Delaware Chancery Court (Docket No. 2021-0475), “Since becoming the controlling stockholder of Icon in 2017, PDSTI has disregarded its duties to minority shareholders, seized control of the management of the company, operated Icon as its own property, and systematically dismantled the company, thereby destroying the value of Icon and its shares, all in support of its goal to expropriate Icon’s intellectual property to China.” Also named in the suit is PDSTI board chairman Xudong Zhu, a former holder of several high-level regional and local positions in the Chinese government.

Further, the suit alleges that PDSTI scuttled negotiations with Yamaha that would have given the Japanese company a controlling interest in Icon. The minority stockholders say the move was meant to ensure the manufacturer would not be financially successful.

In a written statement, former board member Condit said, “I believe strongly that good governance is at the very heart of a trustworthy economic system. The board has a fiduciary responsibility to all shareholders and without that trust, critical investments cannot be made. If Chinese investments are masquerading as venture capital to gain access to U.S. technology, it violates this trust …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.”

Icon management acknowledged the lawsuit, but declined to comment.

Mark Phelps
Mark Phelps is a senior editor at AVweb. He is an instrument rated private pilot and former owner of a Grumman American AA1B and a V-tail Bonanza.

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  1. FYI: the CCP has acquired around half of the US aviation companies that ship airplanes or engines. Different Chinese company names are invariably used, but Chinese companies are controlled by the CCP and need their approval for foreign purchases and capital transfers.

    From an investment standpoint, there’s nothing to object to, as American investors allowed this to happen.

    However, selling technology companies to a New Cold War competitor doesn’t make strategic sense.

  2. Anything sold to China gets copied. Products, tech, data… everything. Anybody that pretends this does/will not happen is living in a different universe.

  3. I would guess numerous US businesses have found themselves in similar situations as described by Icon’s shareholders. The lawsuit is shining a light on this single instance.

  4. The definition of insanity is doing the same thing over and over and expecting a different outcome.

    The CCP throws money around not out of some notion of generosity or participation as an equal partner, but to gain material, intellectual, or strength to achieve in their stated aims. Period.

    You accept CCP money, they own you. Lock, stock, and barrel. Anything that was yours is now theirs, export laws and other intellectual property protections (patents, etc) notwithstanding. You think they are worried about appropriating (whether legally or otherwise) what they want, regardless of US laws?

    That most of these industries are led by former high-ranking members of the CCP central committee, military, or intelligence community is NO surprise. All those companies are fronts for, and report back to, the Chinese government who funds them, provides cover for them, and uses them to extract technology for their own use.

    This is not tin-foil hat rantings, btw. Just another example, and we are letting it happen.

  5. Thanks for the heads-up. Add another to my refrigerator list of those with whom I won’t do business.

    • Not that you were in the market for an underperforming amphib that costs as much as a house.

  6. Every former American aircraft and engine manufacturer now owned or controlled by the Chinese Communist Party through majority shareholder status had exhausted all non-Chinese investment opportunities. American investment, as well as other foreign investment groups decided the future of Cirrus, Mooney, Diamond, and Continental was not worth investing in. We want your money but you do not get all the technology and intellectual property that comes from majority or complete ownership? We cry foul when the investment capital that comes from the Chinese results in asset and technology transfer. Seriously? What else would you expect from the majority investment owner? Icon knew were the investment money was coming from. They made their decision to accept the investment from our Communist adversary anyways.

    Our economic system demands a return on investment. The American demand for meeting financial expectations rather than the reality of day to day business challenges that determines the real economic health of a company drives investment capital from the anyone who has the dough and willingness to spend it. Icon did not meet its own financial or performance predictions let alone satisfy domestic or more friendly foreign investment. Lots of deposits for a $185,000 airplane of acceptable performance that ICON promised. But investment money dried up with a sale price of over twice that for an airplane of far more marginal performance than promised combined with all sorts of delays for a variety of reasons. The Chinese could either buy an airplane and reverse engineer it or become the owner or majority owner. Plus, get all the technology and get some of its investment back via American buyers who persevered through certification delays, an overall porkier airplane resulting in less than promised performance, including the inevitable price increases.

    The Chinese and the Russians have become very good at playing on our economic field with our economic rules, and receiving the economic benefits of American consumerism. That carries far more power to influence our government than the standard Cold War sabre rattling and/or shoe banging at the UN. Likewise, our economic influences within China playing within their economic rules have have become just as influential. Access to the Chinese and Russian middle class via McDonalds, KFC, Coca-Cola, Ford, GM, Boeing, Textron, etc, and a host of many other companies did not come from an all powerful US military machine pointed at them. Power, influence, and greed is a universal human aphrodisiac.

    Under current American investment practices American consumerism and US companies are always for sale to the highest bidder. The highest bidder, or often in the case of US aviation, the only bidder is the Chinese Communist Party. Too late to cry foul when you accepted their money eyes wide open. Welcome to the global community.

    • You nailed it! Short of changing US law to make it illegal for non-US Citizens to own the majority share of a US company, this is a pattern that will continue until no public corporation in the US is controlled here. Many foreign countries have laws like this.

    • I mostly agree, but there’s a nuance to this. The CCP often gets hold of assets because they are willing to pay more for them than they are worth economically. Our economic and business practices just are not designed to prevent power plays by global powers who intend to get value outside of the market place.
      Also, it wasn’t just the US consumer that devalued these companies. All those companies had the same regulatory institutions in common. Piston innovation has been mostly dead for decades. Normally, companies vie to make better products, but other than hardly changed versions of the Lycosaurs which were WW2 level tech, we have Rotax, and the Thielert/austro designs come to market with any success and only on the low power end.
      One reason for the poor acceptance of new engines is that there was really nothing new for so long the industry isn’t good at change.
      Flight schools still prefer a 50 year old platform because of this lack of improvement, and they are the gateway for new customers coming into the market.
      In this very comment section, people trying to bring new things to market receive insults and hatred for their trouble.

      Cirrus brought something new enough to market, and because BRS had a good safety story, it likely got a friendlier than normal treatment by the FAA. They also marketed direct to non pilot consumers. We can argue all we want why all the aircraft companies failed, but I believe the market for people to learn to fly is MUCH bigger than currently being served by our stymied industry.

      Blame who you want.

      • “In this very comment section, people trying to bring new things to market receive insults and hatred for their trouble.”
        No. People who pretend that vaporware is real product, receive well-earned skepticism from experienced engineers and pilots in this space. And please – find a dictionary, and look up the definition of “hatred.” Seriously. While you’re at it, look up “hyperbole.”

        • C’mon, YARS. The hyperbole is the negativism. Just the other day there were a bunch of the regular attacks on one of the companies announcing a second model talking about how it’s all vaporware while ignoring the fact that the first model has been flying successfully, with passengers for a pretty good while!

          I’m a fan of skepticism, but rarely do the comments contain great amounts of math. I’ll see if next time I can point out where I think the comments are going too far, but the general rule is if someone is spending a lot of money chasing a dream, why be negative?

  7. Many years ago I attended a seminar / networking event regarding venture capital investment. Together with a colleague we had some technology that we thought could be interesting to start a business. On the stage in front of the audience were people representing venture capital firms. The VERY FIRST THING said to everyone present was: In order to get our money 1) you can’t be the CEO of your own company and 2) don’t even think of manufacturing in the US, it’s going to be in China.

    This isn’t some Chinese Communist Party plot. Wall Street has been explicitly exporting our jobs to China for over 30 years now.

    • Wall Street does not equal Venture Capital.

      I was invited to hear pitches back in the day in order to advise. I never heard either of those remarks. I did hear just as silly flavor of the day nonsense though, so I’m not calling you a liar. For everyone in the industry who knows what they are doing, there’s five who only know buzzwords. Stupidly, buzzwords sell, so the cycle continues. Reality is though that avoiding Shenzhen is a good way to handicap your company.

      We could fix the math with better tax policies, but now they are entrenched.

  8. When 98% of everything we buy in America says “Made in China” they have the capital to pay more than it is worth because the goal is bring America down to our knees and make them the world power for the future.

    But “Hunter” said it is alright, his check cleared. So go back to sleep.